From 7400 to 8700 to 8300...all in six trading days. But then again this is the new normal!
Last hour with Paulson pontificating...sound and fury signifying nothing! Dow down 450...MLPS down nearly 9. Glory!
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- joewxman
- a meteorologist with a knack for trading and investing in MLPS! I also like horse racing, enjoy cigars and a good port wine.
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6 comments:
Hmmm.... Paulson as Macbeth!
We were at the recent lows because of the risk of Armageddon ( GM and Citibank failing ).
We rallied on Obama's team being on the case, plus CITI's bailout ( and the increasing likelihood that the Automakers will be bailed out as well ).
Today we sold off because even with Armageddon off the table, the prospects for the economy going forward just stinks.
The close today was as ugly I've ever seen. Tomorrow the automakers are on the congressional hot seat.
Paulson did spreak of possibly buying residential and commercial real estate loans.
I think the treasury needs to start to buy or guarantee corporate bonds.
Hmmm.... Paulson as Macbeth!
We were at the recent lows because of the risk of Armageddon ( GM and Citibank failing ).
We rallied on Obama's team being on the case, plus CITI's bailout ( and the increasing likelihood that the Automakers will be bailed out as well ).
Today we sold off because even with Armageddon off the table, the prospects for the economy going forward just stinks.
The close today was as ugly I've ever seen. Tomorrow the automakers are on the congressional hot seat.
Paulson did spreak of possibly buying residential and commercial real estate loans.
I think the treasury needs to start to buy or guarantee corporate bonds.
HS
HS, do you really believe Treasury should start buying / guaranting corporate bonds? I can't tell from your post if you are serious. If you are, how will they finance it? How are they (we) going to pay for the bailouts already committed? As for Armageddon being "off the table," the reality is that government intervention has all but ensured that Armageddon is unavoidable.
Lee
Lee,
The corporate bond market is in total disarray.
I have a bond rated BBB-,
AOC 8.206% 1/01/27 that closed on Friday at 50.85 with a current yield of over 16%. AOC ( the stock (an insurance broker)) is trading today at $43.09 a share about the midpoint of the annual range.
Why buy stocks if you can buy bonds that give stock like returns, at less risk?
If BBB's trade at 12% to 16% then when these debts are rolled over, this will severely impair the profitability of the common stock. This is why MLPs are in the toilet as well.
Double ( or more ) the current interest rate paid by a MLP, multiply that times the total debt, then subtract that number from the current distributable income.
Earnings because of financing costs will be severely impaired.
Earnings because of the recession will be impaired.
Of course the credit crisis may pass by the time all of a company's debt will be rolled over, but it seems the market is pricing in the possibility that today's credit market will be the new reality going forward.
Fear of taking risk has driven savings into Treasuries, so we need the Treasury or the Fed to be the lender of last resort.
BTW: If the Fed didn't act as they have ( and they were imho too slow to do so ), we would be in a post Armageddon situation.
HS
i recall about 10 years ago a broker saying to me that you have to invest long term, thats how you make money.
well 10 years later and we are where we started... nowhere.
thats how you get nothing for your money
HS,
I appreciate your views and your response, but I am firmly in the camp that believes that the government has no business intervening in the affairs of free markets. Japan did that in the early '80s and hasn't yet recovered nearly two decades later. They propped up failing banks and non-banks alike (zombie banks and zombie companies) by recapitalizing the weak with assets essentially seized from the strong. It didn't work for them and it won't work for us.
As I see it, we got in the mess because of interventionist measures employed by Greenspan following 9/11 and the dotcom bubble burst. To avoid a recession he tried to "stimulate" the economy by dropping interest rates to unnatural levels and in so doing he did indeed stimulate the economy by shifting the bubble from the dotcom sector (an obvious bubble at the time), to real estate (an obvious bubble until recently).
So when one bubble burst, the goverment's response is to create another. The new bubble? Treasuries? Who in their right mind would buy 30-year Treasuries at these idiotacally low yields?
I like real stuff - like MLPs, for example - because when the markets stop deflating, the assets we can't live without will reinflate.
Nevertheless, I appreciate your views. That's what makes it a horserace... and a worthy blog.
Lee
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