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Monday, August 08, 2011


It should be no surprise that everything this morning is down this morning from stocks to energy etc. No surprise that gold is up around 50 bucks, But what might be a surprise to some is the fact that Bonds are up/yields are down at least in the pre open here. The fight to quality is far outweighing the S&P move last Friday after the close. Or perhaps the bond market figured it out that it was coming and moved up yields 10 to 15 basis points last Friday. So rates this morning are still hovering near their lows of the move. And if things get really ugly out there we will probably see the 10 year make a stab at the 2008 low of 2%

So now the question is what will mlps do today. Well no doubt they open lower. That's the easy part. The question is how is the downgrade going to be perceived by holders of lower grade debt. Will they average down to keep the same ratios of US Treasuries; in which case they will have to sell the lower grade corporates to keep the balances the same? This means we could see added pressure to MLPS today. This may create a trading opportunity much like Friday where the mlp index intra-day fell to 322 before rebounding back by 20 points.

All of this action this morning leads me to the conclusion of what a sham this all is. The US (unlike Greece) can't default. If worse came to worse we can just print money to pay the debt. Meanwhile the ECB which has a difficult time making any decision (other than who is buying the espressos) is in markets today supporting Italian and Spanish bonds. And Paul Krugman who has been in fits over the fact that its the fault of Republicans for being unreasonable, actually likes the idea of the ECB action.

Back to MLPS, Transmontaigne (TLP) announces earnings this morning which were good and Targa Resources (NGLS) also announces earnings. They probably won't have much impact on opening prices since they will be lower anyway. MLPs are going down at the open and we will watch the 320 level as the place where last Friday's climax low took place and whether it holds. Stock futures are off the morning lows. Overnight we saw dow futures down 300 points. I will be taking some stabs at a few trades today by laying buy orders well under current prices on the strongest MLPS. But keep an eye out for whether lower grades get sold hard in the face of portfolio rebalancing in which case it will be very hard to figure where the bottom is. And i think there is a chance that after the initial opening selling is done, a rally attempt or several rally attempts will ensue and maybe one of them will hold.

By the way Memeorandum provides all the latest news and commentary coverage.

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