THIS ONE'S FOR LOU!
Regular reader and occasional poster "lou" suggested this video as we close a week which i think was more like staying at this bed and breakfast. (squemish should be careful!)
And of course you might disagree but lets not have an argument!
After the week we've had i think we should all have a good weekend.
joseph cioffi's Source Page - Associated Content
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Let's face it, the G-7's statement was short of specific action that will be taken NOW. Sort of telling the passengers on the Titanic after it hit the iceberg... not to worry because all future Liners will be equipped with enough lifeboats. So.... if we can get bast the credit and derivitive disaster news... Baron's had a upbeat article on MLPs.
I won't post a link, because if you have a Baron's online subscription, it's on the front page, if not it won't work.
HS
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How to Energize Your Portfolio
By DIMITRA DEFROTIS
Master limited partnerships look inexpensive. And with their double-digit yields, why worry if they don't bounce back right away?
IT MAY TAKE YEARS for the shotgun marriage of Washington and Wall Street to pay off for taxpayers, who are footing the wedding bill. But some partnerships -- master limited partnerships -- are offering double-digit returns today.
MLPs, as they're called, typically invest in energy assets, such as oil fields and natural-gas processors. Most of their profits are passed along to their investors as juicy tax-deferred distributions, and the yields for many now hover near 11%. That rich payout reflects the double whammy that has hit the group -- the recent drubbing of the overall market and the sharp selloff in energy names that had preceded it, as oil prices receded from record levels.
AFP/Getty Images
Through Thursday, the Alerian Capital index of MLPs was down 44% this year. The good news is that as MLP prices fall, payouts rise, offering a glorious security blanket in this credit morass. And Citigroup thinks its list of 36 MLPs could produce 12-month total returns of 84%.
INVESTORS DO NEED A selective eye. Some MLPs have sold off because they're highly leveraged, while others have slid because they're directly affected by volatility in commodity prices -- which has been substantial lately. But pipeline owners, flush with income from recurring transport fees, have been unfairly dumped with their brethren.
Says Seth Glickenhaus, chief investment officer at Glickenhaus & Co., a New York money-management firm: "MLPs are getting to levels that are very, very interesting. I think their cash flows are going to continue, and at these prices you are getting very nice yields."
Where could MLPs go from here? "They have lost more than half their value in many cases, and I would say they could go up 25% easily," Glickenhaus ventures.
There has been negative sentiment about MLPs this year as hedge funds unwound energy positions. In addition, Lehman Brothers, which filed for bankruptcy in mid-September, was a lender and adviser to a handful of MLPs. As Lehman and others shed assets, lowering their value, arbitrage plays including MLPs suffered.
Glickenhaus likes three pipeline partnerships: Enterprise Products Partners (ticker: EPD), Energy Transfer Partners (ETP) and Boardwalk Pipeline Partners (BWP). Citigroup thinks the pipeline group can generate total returns of nearly 63% in the next 12 months.
Boardwalk, of Owensboro, Ky. -- which has the lowest ratio of long-term debt to capital among Glickenhaus' picks (38%) -- owns natural-gas storage fields and operates two gas pipelines in the Southeastern U.S.
At its recent quote around 16, Boardwalk looks reasonably priced, at an enterprise value (debt plus equity) of 11 times earnings before interest, taxes, depreciation and amortization -- near the Alerian index's average.
Table: Robust Profit PipelinesBoardwalk's shares have fallen by 48% over the past 12 months; its yield is near 11%. Citigroup expects Boardwalk to produce total returns exceeding 41% over the next year. The partnership's relatively low ratio of long-term debt to capital should serve it well in the current economic environment.
Another outfit with fee-based cash flow, El Paso Pipeline (EPB), offers a 9% yield and should produce 10% compound annual growth in distributions over the next five years, according to Wachovia Capital Markets research. El Paso Pipeline's debt level is reasonable at 54%, and Wachovia thinks the stock is worth almost double its recent price near 13.
One big plus: General partner El Paso Corp. (EP) recently dropped $971 million in pipeline assets into the partnership. A Wachovia report praised the deal, financed via a private debt placement and issuance of new units, saying it "reaffirms EPB's commitment to the MLP business model, and gives management credibility in delivering...to EPB unitholders."
For individual investors averse to filing the tax forms required annually of MLP owners, another option is owning the MLP general partner, says Timothy Call, chief investment officer at the Capital Management Corp., a Richmond, Va., investment-advisory firm. Call thinks that demand for U.S. natural-gas pipelines will increase, boosting returns for interstate operators like those controlled by OneOk Partners (OKS). But Call prefers shares of its general partner, OneOk (OKE), the Tulsa, Okla., natural-gas utility with a large stake in OneOk Partners.
THE BIGGER FISH, OneOk, buys, transports, stores and distributes natural gas. It yields 6.4%, which isn't too shabby, and its shares recently fell to a 52-week low near 26. Despite the gloom in the financial markets, analysts' 2009 earnings estimates are $3.49 a share, giving the stock a price/earnings ratio of just below eight times expected profits.
The Bottom Line
With many MLPs down 40% in the past 12 months, yields have jumped to about 10%. Citigroup sees the average partnership producing a total return of 84% over the next year.Another option: exchange-traded MLP funds. Two trade at a discount to their net asset value. The BearLinx Alerian MLP Select Index (BSR) has a 10% yield. The other, the MLP & Strategic Equity Fund (MTP), which holds a basket of energy MLPs and dabbles in forward contracts, yields near 14%.
Of course, even if the stock market stabilizes, sentiment against MLPs could stay negative if oil and gas prices waver.
But the partnerships mentioned here look inexpensive, generate steady income and offer upside potential even amid fluctuations in oil and natural-gas prices. And the idea of being paid while waiting for the stock to rise should energize some investors.
WASHINGTON (MarketWatch) -- The global financial system is on the brink of a meltdown and additional steps must be taken immediately by the richest nations to calm jittery bankers and investors, the International Monetary Fund warned Saturday.
Soooo this is how IMF Managing director Dominique Strauss-Kahn tries to calm things down.
HS
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"Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," said Dominique Strauss-Kahn, IMF managing director.
http://www.marketwatch.com/news/story/global-leaders-race-clock-imf/story.aspx?guid=%7B44FEA396%2D12FB%2D4643%2DAEDA%2D4E49E9055338%7D#comments
I like the part in the Barron's piece where they say "Citigroup sees the average partnership producing a total return of 84% over the next year".
Good news on Lehman CDS settlement? DTCC suggests that the horror story circulating about the final net cost to insurers of Lehman Debt might be in the order of 6 billion, not 400 billion that has been widely reported. This won't be known fo sure until there is settlement ( I think on Oct 21, 2008 ), but the fears of the credit freeze is real, and the group of 7 ( or 20 ) needs to do something dramatic to stabilize markets Sunday night.
"-- The payment calculations so far performed by the DTCC Trade Information Warehouse relating to the Lehman Brothers bankruptcy indicate that the net funds transfers from net sellers of protection to net buyers of protection are expected to be in the $6 billion range (in U.S. dollar equivalents)."
HS
http://www.marketwatch.com/news/story/dtcc-addresses-misconceptions-about-credit/story.aspx?guid=%7B7B5C1B13-9F34-44C0-971B-16EEF9FC0D64%7D&dist=hppr
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Full article:
DTCC Addresses Misconceptions About the Credit Default Swap Market
Last update: 3:28 p.m. EDT Oct. 11, 2008
NEW YORK, Oct 11, 2008 (BUSINESS WIRE) -- The idea that the industry lacks a central registry for over-the-counter (OTC) credit default swaps (CDS) is grossly misleading and has resulted in inaccurate speculation on a number of matters, including the overall size of the market, its role in the mortgage crisis, and the size of potential payment obligations under credit default swaps relating to Lehman Brothers. The extent to which such speculation has fueled last week's market turmoil is difficult to determine. The facts are these:
Central Trade Registry
-- In November 2006, The Depository Trust and Clearing Corporation (DTCC) established its automated Trade Information Warehouse as the electronic central registry for credit default swaps. Since that time, the vast majority of credit default swaps traded have been registered in the Warehouse. In addition, all of the major global credit default swap dealers have registered in the Warehouse the vast majority all contracts executed among each other before that date.
Size of the Market
-- Reported estimates of the size of the credit default swap market have so far been based on surveys. These surveys tend to overstate the size of the market due to each party to a trade separately reporting its own side. Thus, when two parties to a single $10 million dollar trade each report their "side" of the trade, the amount reported is $20 million, which overstates the actual size by a factor of two since both reports relate to a single $10 million contract. When examining the outstanding amount of actual contracts registered in the Warehouse (not separately reported "sides") as of October 9, 2008, credit default swap contracts registered in the Warehouse totaled approximately $34.8 trillion (in US Dollar equivalents). This is down significantly from the approximately $44 trillion that were registered in the Warehouse at the end of April this year.
Percentage of the Market Related to Mortgages
-- Less than 1% of credit default swap contracts currently registered in the Warehouse relate to particular residential mortgage-backed securities. Mortgage-related index products also have some components relating to residential mortgages and, as a whole, also constitute a relatively small fraction of total credit default swaps registered in the Warehouse.
Payment Obligations Related to the Lehman Bankruptcy
-- One of the many central servicing functions of the Trade Information Warehouse is to calculate payments due on registered contracts, including cash payments due upon the occurrence of the insolvency of any company on which the contracts are written. Calculated amounts are netted on a bilateral basis, and then, for firms electing to use the service, transmitted to CLS Bank (the world's central settlement bank for foreign exchange) where they are combined with foreign exchange settlement obligations and settled on a multi-lateral net basis. Currently, all major global credit default swap dealers use CLS Bank to settle obligations under credit default swaps. It is expected that all major institutional players in the credit default swap market will use the same process for settlement by the end of 2009.
-- The payment calculations so far performed by the DTCC Trade Information Warehouse relating to the Lehman Brothers bankruptcy indicate that the net funds transfers from net sellers of protection to net buyers of protection are expected to be in the $6 billion range (in U.S. dollar equivalents).
DTCC has long supported the U.S. and global capital markets as a critical part of their operational infrastructure. We stand ready to play a constructive role in whatever overall regulatory environment ultimately emerges for the credit default swap market. We do believe, however, that whatever environment emerges should be based on assessment of the facts as they stand, rather than speculation.
About DTCC
DTCC, through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC's depository provides custody and asset servicing for more than 3.5 million securities issues from the United States and 110 other countries and territories, valued at US$40 trillion. In 2007, DTCC settled more than US$1.86 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas.
DTCC Deriv/SERV LLC, a wholly-owned subsidiary of DTCC, provides automated matching and confirmation for OTC derivatives contracts, including credit, equity and interest rate derivatives. According to major market participants, over 90% of credit derivatives traded globally are electronically confirmed through Deriv/SERV. The Trade Information Warehouse, a service offering of Deriv/SERV launched in November 2006, is the market's first and only comprehensive trade database and centralized electronic infrastructure for post-trade processing of OTC derivatives contracts over their lifecycles, from confirmation through to final settlement.
For more information on DTCC and DTCC Deriv/SERV, visit www.dtcc.com.
SOURCE: DTCC
I'm not going to predict a short term bottom here for the Dow + S+P but, there is a video on Bloomberg that I can't link (because I don't know how) entitled:
"Barton Biggs Says U.S. Stock Markets Are `Uninvestable'"
Basically when a market pro (with maybe 50 years investing experience ) has thrown in the towel in disgust... that has either a bullish contrarian call or a extremely bearish call of a horrid market that has much more downside to go .
HS
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