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Wednesday, July 27, 2011


Whether you agree with his politics or not you have to agree that Rick Santelli of CNBC really understands the bond markets. And he said something yesterday that made a lot of sense to me. He said that if US debt is downgraded to AA from AAA, bond funds who, for example, need to keep a portfolio with an average grade of say AA, will probably hold their treasuries and sell lower grade bonds to keep their funds in balance. In other words they will change the rules. And in the end money will continue to go to US bonds as the country of choice. So this fear of spiking interest rates in US treasuries is probably overblown. However if selling emerges in lower grade corporate bonds and high grade junk, i will bet there will be selling in MLPS. And should that happen in size, we may be handed a pretty important buying opportunity. Im thinking of laying in some buy orders and prices say 10 to 15% below whatever the Friday close is. And btw yesterday's 3 point decline in the index could be due to this idea.

This morning we have earnings from TC Pipelines (TCLP) which the company says are pretty good. Alliance Resource (ARLP) keeps hitting the cover off the ball and hikes the payout. And Amerigas(APU) has a good quarter and nudges guidance higher for the rest of the year. As usual with mlps i would expect a buy the rumor sell the news reaction. Not much in the premarket. TCLP has stock for sale below yesterday's close.

No upgrades or downgrades on the tape this morning. Stock futures are pointing for a lower open. Rates are higher. Oil is lower and nat gas is higher.

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