MAYBE TODAY?
With Asia (ex Japan) doing well last night we wake up to stock futures up sharply this morning with the dow futures up over 100 points. Will it last? Who knows! The market changed directions intraday yesterday 25 times which is incredible when you think about it and ususally happens when we are putting in some sort of tradeable bottom which is all this will be if it happens. Still a vicious rally is very much a possibility and if it materializes it could be another opportunity...to sell!
Not much on the board this morning otherwise. No news items and no upgrades or downgrades. Crude is up a little this morning after putting together a couple of up days. Nat gas was under 4 yesterday and has yet to come off the floor. MLPS which were down a little yesterday should follow along and if the market rally is something to sink your teeth into, then i would look for mlps to outperform the market.
Working this morning so i will post later.
joseph cioffi's Source Page - Associated Content
6 comments:
Just out of curiosity, are any of you folks buying MLPs these days? I was going to say on "dips," but a look at the two year chart distorts the notion of a "dip." Nevertheless, to the extent you have fresh capital to invest, would you add to your MLP portolio now? Expiring minds want to know.
Lee
I wish I could say yes. But with so much uncertainty, the risks appear to outweigh benefits. I confess to having bought more XTEX, LINN, MWE and CEP. I am ahead on LINN, but the rest of the stuff has turned to dust. And even though MWE and CEP have gone out of their way to reassure markets about the stability of the distributions, the market doesn't buy it. So, why should we? I've been burned too badly to try to outguess this one.
steve
I've been adding small positions from time to time.
This market had high hopes for the Obama Team, and was dissappointed by Geithner, throw in a horrible economy... and we sold off...especially banking stocks.
Well now Citibank made money in Jan-Feb (Uncle Sam took the losses) and perhaps the world isn't coming to an end ( just Yet ).
There's some good news in the pipeline... TALF for March 26, Uptick rule change ( according to Barney Frank), and perhaps revision of M2M. Most importantly msrkets have explained to Pres. Obama, that if you aren't market friendly, we're withdrawing out capital from markets.
Hopefully Obama get's the message.
IF not next quarter's AIG losses (now Uncle Sam's) tied to CDS contracts on Bonds might educate Pres. Obama on the folly of ignoring markets.
To those who think that tax collection doesn't matter and the Government can just print money... well they can... but no one is forced to buy treasury debt either.
That would be a lesson Obama doesn't want to risk.
With some good news we might test 750-780 on the S+P.
MLPs imho need 2 things to rally:
1) Stable or Rising Oil price ( as in a colapsing oil price would indicate colapsing demand)
2) A perception that the banking system is not colapsing ( MLPs need heir credit lines and access to capital to roll over debt ).
HS,
I agree with your analysis. Here is an article just published on MW regarding energy demand forecasts:
Oil falls as U.S. agency forecasts lower prices
By Polya Lesova & Moming Zhou, MarketWatch
Last update: 2:33 p.m. EDT March 10, 2009NEW YORK (MarketWatch) -- Crude-oil futures erased earlier gains, reversing course after the U.S. government issued a lowered forecasts for oil prices that predicts ongoing economic troubles will cut into demand.
The pullback comes one day on the heels of the contract closing at a two-month high.
According to the Energy Information Administration's monthly report, oil will average $42 a barrel this year and $53 next year. A month ago by contrast, the EIA, the Energy Department's statistics arm, had said that it expected prices to average $43 and $55, respectively.
On the New York Mercantile Exchange, crude for April delivery was down $1.30, or 2.8%, at $45.77 a barrel at last check. Earlier, the contract had surged to an intraday high of $48.32, powered by speculation the Organization of Petroleum Exporting Countries intends to cut production quotas at a meeting later this week.
"The market was way overbought and ahead of itself," said Phil Flynn, vice president at Alaron Trading.
Flynn called the government's price outlook "a sober reminder that demand is still bad and may not recover anytime soon."
"The lower demand expectations kind of rained on the parade of bullish optimism," he added.
Even so, the U.S. forecast fits in with a steady drumbeat of gloomy economic forecasts that has dominated the market mood in recent days. In one of the latest, the managing director of the International Monetary Fund said the global economy will contract this year.
Dominique Strauss-Kahn's comments followed a similar prediction from the World Bank, which said in a March 8 report that the international economy was likely to shrink for the first time since World War II.
"The global economic contraction continues to depress energy demand," the EIA said in the monthly report.
World oil consumption is projected to decline by 1.4 million barrels a day in 2009, the EIA said in. That's roughly 200,000 barrels a day more than the EIA had projected a month ago.
Stocks, however, ignored the bad news, at least for one day. U.S. stocks rose after Citigroup said it was profitable during the first two months of 2009 and Federal Reserve Chairman Ben Bernanke said he expects the economy to rebound later this year if the government's efforts to stabilize the banking system bear fruit.
The U.S. dollar, meanwhile, turned lower. The dollar index (DXYUS Dollar Index Future - Spot Price
DXY) , which measures the currency against a trade-weighted basket of six global counterparts, moved down to 88.202 from 89.177 late Monday.
Dollar weakness typically boosts dollar-denominated commodities such as oil, because it makes them cheaper for holders of other currencies.
Energy traders also keyed on what the U.S. government will report on petroleum inventories Wednesday. Expectations are for a decline in crude stockpiles last week.
More output cuts?
Saudi Aramco, Saudi Arabia's state oil giant, will maintain cutbacks on April term crude supply to Asia at up to 15%, similar to volumes to be shipped for March, traders from Asian refineries and one global oil major said Tuesday, Dow Jones Newswires reported.
The oil cartel has implemented a reduction in output of 4.2 million barrels a day since September, equivalent to about 5% of global oil demand. OPEC will meet in Vienna on Sunday.
"We are seeing the usual mixed signals ahead of the OPEC meeting," said Edward Meir, an analyst at MF Global.
The more hawkish camp will likely succeed in pushing through another cut of 500,000 to 1 million barrels a day, Meir said.
Nimit Khamar, analyst at Sucden Financial Research, said that oil prices may be vulnerable to a sharp pullback if OPEC doesn't cut output further.
"If cuts are agreed, then they are likely to be in the region of 500,000 barrels," Khamar wrote in a research note. "With economic conditions still looking glum, more supplies would need to be removed from the market to keep up with declining demand.
"Until we see this happen a sustained rally beyond $50 is unlikely."
Also on the Nymex, April reformulated gasoline fell 0.6% to $1.3272 a gallon, while April heating oil gained 0.4% to $1.2207 a gallon.
Natural gas for April delivery also lost ground, down 0.7% to $3.84 per million British thermal units.
Supply data details
The Energy Information Administration will release its closely watched data on U.S. petroleum supplies at 10:30 a.m. Eastern on Wednesday.
Analysts expect a drawdown of 1 million barrels in U.S. commercial crude stocks for the week ended March 6, a Platts survey showed Monday. For the prior week, the EIA reported that crude inventories, excluding the Strategic Petroleum Reserve, fell by 700,000 barrels.
Analysts also project a decrease of 1.2 million barrels on the week for gasoline stocks as well as a buildup of 700,000 barrels in distillate stocks, according to the Platts survey. Refinery utilization will likely be unchanged at 83.1%.
Also on tap, the American Petroleum Institute will release a separate inventories report at 4:30 p.m. on Tuesday.
The Washington-based trade association of the oil and natural gas industry differs from the EIA in the criteria it uses to track inventories.
Polya Lesova is a New York-based reporter for MarketWatch.
Moming Zhou is a MarketWatch reporter based in New York.
Lee, and Others,
I am still pretty new at MLPs, so am still in the accumulation phase: Purchased KMP and LINE back in Oct, at great prices, for the Nov 08 distributions. Purchased TPP,CPNO, and MWE in Jan 09 for the Feb distributions; all three are currently losers on a cap gain/loss calculation, but again, I bought them for the distributions which presumably will continue indefinitely. Finally, bought NRGY a week ago, thinking the price may have been at a low due to market conditions and time to the next distribution cycle; currently up about 5% from the week ago price.
I have no intentions at this time to sell any of the MLPs I own. All are for income generation.
General questions for anyone who is willing to comment: Do you buy MLPs for income or for capital gains? Maybe both? Finally, if you hold an MLP until distributions drive your cost basis to zero, would you continue to hold it even though you have to declare the income or would you sell at that time, and why?
Thanks,
JCarroll
Jcarroll1948,
I have been a MLP investor for about 15 years.
Traditionally MLPs were slow-medium growth + income vehicles that were valued by their yeild IE
10 year treasury + x%. The X determined by the investability of each MLP.
Typically Kinder Morgan's X might be 2.5% added to a treasury yield of 5% would add up to an expected yeild of 7.5%. If markets bid the price up to the point KMP was 6.5%... you could sell, if KMP sold off to the point that the yeild was 8.5% you could buy.
That worked well for 12 years or so.
Except for the very rare MLP that eliminated distros IE Star Gas, MLPS paid a high and dependable distro that was increased 2% to 7 % annually. Many investors ( including me) viewed MLPs as Treasury substitutes.
The dependancy of MLPs on banks( who themselves might be insovent) for lines of credits and loans, the corporate bond market ( for longer term financing), and if these sources are unavailable equity financing has driven MLPs to yeilds that were unimaginable even 10 months ago.
When solvency and delution ( low priced equity financing ) fears exist, then any belief that MLPs are income vehicles that can be treasury substitutes are proven wrong.
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