Author: Dennes Lupastean, LSW Investing
Covestor model: Macro Themes
In January, the markets were quite stable compared to 2011. The Nasdaq Composite Index had a six-day positive streak—the index’s longest since a seven-day run early July–while oil futures have dropped below the $100 per barrel mark.
Much focus was on the Fed meeting this month. The Fed announced they would keep the benchmark rate low until 2014 and keep a target of 2% for inflation. The FOMC has become a bit more pessimistic about economic growth, estimating that gross domestic product will expand between 2.2% and 2.7% this year, down from a previous forecast of 2.5% to 2.9%. Fed Chairman Ben Bernanke emphasizes the Fed is pursuing a “highly accommodative stance.”
End of the year layoffs have resulted in the highest amount of unemployment claims in six weeks, though the jobs outlook has improved some in early 2012. More negative news came, as December retail sales rose just 0.1% compared to last year. Many economists forecasted much higher increases.
Durable goods orders rose 3% in December, more than forecasted and followed an upwardly revised 4.3% gain in November. Excluding transportation, new orders increased 2.1% and excluding defense, new orders increased 3.5%.
On the other hand, new home sales unexpectedly declined by 2.2% in December, capping the worst year for builders in records going back to 1963. The median price of a new house declined 12.8%, the biggest drop since February 2009, from December 2010 to $210,300.
Thirty year fixed mortgage rates are at all-time lows, averaging 3.89%. Just one year ago, a 30 year fixed mortgage was at 4.71%. Data for this particular loan goes back nearly 40 years.
The U.S. international trade deficit jumped 10.4% in November; the biggest gain since May, to $47.75 billion, a much higher gap than forecast. Exports fell for a second straight month, down 0.9% at $177.84 billion, and imports were 1.3% higher at $225.59 billion.
One of my major holdings, BreitBurn Energy Partners, announced that it priced its private offering to eligible purchasers of $250 million principal amount of 7.875% senior notes due 2022 at an offering price equal to 99.154% of par. The proceeds from the note offering will be used to repay a portion of its borrowings under its bank credit facility and for other general partnership purposes.
The company announced a cash distribution of $0.45 per unit for the fourth quarter 2011, or $1.80 per unit on an annualized basis. This is an increase from the third quarter distribution of $0.435 per unit, or $1.74 per unit on an annualized basis.
Meanwhile, Golar LNG Limited has announced the purchase of Gandria and reactivation of Hilli. The company has acquired the remaining 50% share interest in Bluewater Gandria N.V., which owns the Gandria LNG carrier. The agreed all-in price was $19.5 million and the company plans on reactivating the Moss type carrier in the spot trading market.
Golar in addition has agreed to reactivate the LNG Carrier Hilli, which is a Moss type carrier built in 1975. The vessel is currently at Keppel Shipyard undergoing a $15 million upgrading project. Proposals for chartering of the vessel have already been received.
