MARKET MLP DIVERGENCE GROWS!

Back home from vaca so its back to something resembling normalcy. Not normal is what we continue to see going on in MLP land and frankly while i think outperformance is great, i am becoming a bit concerned overall as to what this chart is trying to tell us. This is a three month chart of MLPS VS YIELD VS THE DOW and i think in the years i've been blogging i have never quite seen something like this. The mlp index is up nearly 5 percent in the last 3 months while the dow is down nearly 10 which is a 15% outperformance. Notice that all this has occured as 10 year yields have collapsed below 3 which is of course the opposite of what conventional wisdom told us was going to happen (dollar going to zero..rates going to the moon). Now outperformance is fine but i would feel a whole lot better if the overall market were at least flat rather than down. Clearly money continues to flow to yield and MLPS offer 6-8% of yield vs 2.9% on the 10 year and near 0 on short term instruments. I am beginning to worry how much fast money is going in here and i am also worrying about all these new etf's and 2x leverage etf's in mlp land that work fine as things go up but one day when things go down...they may go down very fast.
This 2 year chart is very telling. Is it any accident that over this time frame that the overall market is down..mlps are up 20% and yields are down 20%? And what happens when the day comes that rates actually turn up? While these are questions to ponder lets get back to the very short term. MLPS are coming into the next distribution cycle and thats probably a big reason why MLPS are continuing to catch a bid in here and will probably continue to do so until the ex distribution cycle begins.

Linn Energy (LINE) is in the news this morning as it is buying up more assets in East Texas and they are doing it with internally generating cash flow. Nothing else on the corporate front. Stock futures are higher but off the highs of the morning. The dollar is down, rates are flat, energy is basically flat and trading on either side of unchanged.

So lots to ponder this morning. Friday we say the dow down 260 and the mlp index basically unchanged. It was also option expiration. The open looms large as always.