95 POINTS FROM
TOP TO BOTTOM
An astounding move really in the last five weeks. 95 points or 33% in mind boggling speed. 8 point one day down moves on no news. Historical times we are seeing here kids.
Some pre open bids showing up so it appears we are setting up for some sort of rebound. Stock futures are mixed this morning but we have energy prices rebounding . No corporate developements. No upgrades or downgrades. I suspect that if markets rally today on rate cuts or rate cut hopes,we should be able to get back 1/2 of yesterday's losses.
Btw i stand corrected as i went back to the long term chart and yesterday took us back down to early 2004 levels and not 2000 that i posted. Its still miserable either way.
joseph cioffi's Source Page - Associated Content
3 comments:
Waiting for the Buyers M*_JoshP | 10-06-2008 | 06:29:04 | Post #2572506I wish someone would ring the bell--loudly--and announce that this crisis is over, but it sure didn't happen today. At one point the S&P 500 was down more than 8% before staging enough of a rebound to cut that loss in half. DividendInvestor's roster held up pretty well in the face of this onslaught, with one huge exception: the Harvest's midstream MLPs all lost between 7.6% (Energy Transfer ETP) and 19.9% (Buckeye GP Holdings BGH) of their value.
This confirms a notion that was discussed in several corners on CNBC today--the idea of a "buyers' strike." There are, by all accounts, several trillion dollars of cash on the sidelines that could be invested in the stock market, and many trillions more in sovereign wealth funds and the like abroad. But the old "buy the dips" process has completely broken down; every new commitment of capital to stocks in this environment seems to be met with sharp and almost instant losses. No wonder they've pulled back.
This phenomenon hits the MLP sector harder than most, because of the very limited audience of buyers. There's very little else out there by way of explanation for recent price declines. With hedge funds being forced sellers, it's basically up to individual investors (folks like us) to absorb the units being sold.
But just look at the prices today's sellers are taking! In the past I've mentioned the spread between MLP yields and 10-year Treasury bonds as a reference for relative value; historically, MLPs have offered yields averaging about 2.3 percentage points higher than the benchmark 10-year bond. In previous crises, this spread had expanded to as much as 4 or 5 points. As of today's closing prices, however, the basket of MLPs I watch yielded a whopping 7.3 points more than the 10-year bond. Double-digit yields are not at all uncommon, and quality no longer seems to count for much.
I'm prepared to continue holding the Harvest's MLPs through this and even worse declines if necessary. While we acknowledge the financial stress and uncertainty that almost all American businesses face at this point, we continue to believe that these MLPs will continue to pay and even raise their cash distributions in the months and years to come. And, as a group, the Harvest's MLPs are already trading at prices that are roughly half of what we think they're worth while churning out average current yields of 10.5%.
I certainly can't rule out additional declines in price. I don't know when the forced selling will end, or at what level buyers will finally emerge in force. Nobody rang a bell at the top of the market, and I'm not waiting for anyone to ring a bell at the bottom either. But I am highly confident that when a bottom is established, the subsequent recovery in prices stands to be swift and substantial. Today's gap between price and value in the midstream MLP sector (established very specifically through rising cash distributions) is too wide to persist indefinitely.
The recent experience of MLP prices is extreme, but the same phenomenon applies across the marketplace today. It's impossible to tell when or where stock prices will bottom across the board, and there is indeed an awful lot to worry about--credit crunch, falling earnings, recession and so forth. But I'm not ready to part with my stocks at prices that discount dire financial scenarios that are unlikely to materialize. I don't believe the world is coming to an end, or that otherwise solvent, liquid and profitable businesses will slide into liquidation. So today I called the "courage to do nothing" into action yet again, making no trades in either the Builder or Harvest accounts. As last week's activity makes clear, I'm prepared to trade when the fundamentals dictate--but I never sell solely on the basis of a falling stock price any more than I'd buy solely on the basis of a rising price.
So here's one more way of looking at the situation: We've gone from bargains to bailouts and now we're back to bargains again. At some point, the prices of solid, reliable dividend-payers will attract buyers sufficient to end the onslaught of selling. I plan to be around for the end of this bear market and the bull market that will inevitably follow.
I subscribe to Morningstars Dividend Investor and received this yesterday in an email from the portfolio manager.
AggiePilot73
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Ben Stein didn't think that subprime was a huge problem last year, but he is dead right imho with this article.
HS
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http://finance.yahoo.com/expert/article/yourlife/112984
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How to Ruin the U.S. Economy
by Ben Stein
Posted on Monday, October 6, 2008, 12:00AM
1) Have a fiscal policy that creates immense deficits in good times and bad, burdening America's posterity with staggering burdens of repaying the debt.
2) Eliminate regulation of Wall Street and/or fail to enforce the regulations that already exist, instead trusting Wall Street and other money managers and speculators to manage other people's money with few or no regulations and little oversight.
3) Have an energy policy that disallows producing our own energy and instead requires that we buy energy from abroad, thus making our oil prices highly volatile and creating large balance of payments deficits, lowering the value of the dollar and thus making the problem get progressively worse.
4) Have Congress mandate that banks and other financial entities lend money to persons they know in advance to have poor credit ratings or none at all.
5) Allow investment banks, insurers, and banks to bet their entire net worth and then some on the premise that borrowers known to be improvident will in fact repay those loans.
6) Allow the creation of large betting pools called "hedge funds" that can move markets and control the outcome of trading, thus taking a forum for savings and retirement for families and making it into a rigged casino game that exists primarily to fleece suckers like ordinary working men and women.
7) Have laws that protect corporate officers from being sued for misconduct but at the same time punish lawyers in the private sector who ferret out such misconduct and try to make accountable the people responsible for shareholder and investor losses. If one of those lawyers gets particularly aggressive in protecting stockholders, put him in prison.
8) Appoint as head of the United States Treasury Department a man whose whole life was spent on Wall Street, who became fantastically rich through his peddling of junk bonds at his firm while the firm later sold short those same sorts of bonds.
9) Scare Americans into putting up $750 billion of their hard earned money to bail out the billionaires and their friends who created the market for loans to poor credit risks (The "subprime" market) and the unbelievably large side bets on those loans, promising that such a bailout would save the retirement savings of Americans, then allow the immense hedge funds to make the market crater immediately afterwards.
10) Propose to save the situation by surtaxing the oil industry, which is owned by our fellow Americans, mostly in their retirement plans, thus penalizing Americans for investing in companies that efficiently and legally produce an indispensable product.
11) Insist that the free market requires that banks and insurers with friends of the Secretary of the Treasury be saved but allow other entities not so fortunate to fail, thus creating total uncertainty and terror among financial institutions, and demolishing all of the confidence built up in financial circles since the days of FDR.
12) Then have the Republican candidate say he would keep on the job the Treasury Secretary who facilitated the crisis, failed to protect the nation from the crisis, got the taxpayers to pony up to save his Wall Street buddies, and have the Democratic candidate, as noted, say he would save the day by taxing the stockholders of energy companies.
There, that should do it.
The dow rally didn't even last until 10.00 o'clock.
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