• October sales dropped for big-name retailers Macy’s Inc. (M), Target Corp. (TGT) and Gap Inc. (GPS) a result of continuing job losses and widespread credit drought that took the spirit out of consumer spending. Same-store sales climbed 2.4% at Wal-Mart Stores Inc. (WMT), as tight-budget shoppers searched for cheaper prices, Bloomberg reported.

• A day after forecasting a 5% to 10% annual revenue drop, Cisco Systems Inc. (CSCO) said it will invest $100 million sales to small businesses, Reuters reported. Despite a weaker global economy, Cisco said it sees a window to expand sales of routers, switches and other equipment.

• Blackstone Group LP (BX) posted its biggest quarterly loss, shedding $502.5 million in the third quarter, or 44 cents a share, Bloomberg reported. Blackstone is the world’s largest private-equity firm who went public 18 months ago, right before the credit crisis depleted the value of its holdings and made acquiring financing more difficult.

• The International Energy Agency said that import prices for crude oil will “likely” average $100 a barrel from 2008 to 2015, MarketWatch reported. The opposite happened Thursday, as December crude futures fell $3.51 to $61.77 a barrel. The official IEA 2008 Energy Outlook will be released on Nov. 12.

• Mattel Inc. (MAT) said yesterday (Thursday) it is cutting about 1,000 jobs worldwide. The maker of Barbie and Fisher Price products said the positions equate to 3% of its global work force and will reduce its professional and management staff by 8%. Mattel last month reported fiscal third-quarter profit rose less than 1% to $238.1 million.

• DirecTV Group Inc. (DTV), the nation’s largest satellite TV operator, yesterday (Thursday) announced third-quarter earnings rose 14%. The company reported net income of $363 million, or 33 cents per share, up from $319 million, or 27 cents per share, a year ago. Revenue rose 15% to $4.98 billion. Revenue in Latin America jumped 49% to $658 million.

• Fidelity Investments said yesterday (Thursday) it is cutting nearly 1,300 jobs this month, with more layoffs coming early next year. The layoff notices, set to go out later this month, amount to about 2.9% of Fidelity’s total work force of 44,400. A second round of cuts is planned for the first three months of 2009.

• The number of U.S. workers filing new claims for jobless benefits fell by 4,000 last week to 481,000, the Labor Department reported yesterday (Thursday). The department revised up its estimate for jobless claims the week prior to 485,000. The four-week moving average of claims, a less volatile measure, was unchanged at 477,000 last week.

Source: Global Investing Roundups Friday, November 7th, 2008

Today, 88 businesses qualify for this exemption under the government’s rules. They are all publicly traded. The government calls these stocks “master limited partnerships” (MLPs) or “publicly traded partnerships” (PTPs).

Eighty-five percent of MLPs are in the energy business. Two-thirds of these energy companies operate pipelines. The rest run miscellaneous “midstream” energy businesses – things like refining, compressing, pumping, and field gathering. Only 15% of MLPs are outside the energy sector.

You likely know several MLPs already. Kinder Morgan used to be part of Enron. It’s an MLP. And though you’ve probably heard of Blackstone Group and its private-equity operations, you may not know Blackstone is also structured as an MLP. Carl Icahn’s business – Icahn Enterprises – is an MLP, too. (For a full list of MLPs, see the website of the National Association of Publicly Traded Partnerships at www.naptp.org.)

I like MLPs as an investment. One of the secrets of income investing is avoiding tax. When you avoid tax, you generate higher returns without taking on more risk. Besides, MLPs invest in infrastructure. The population of the United States grows every year. Population growth supports 8% average annual MLP market growth.

But here’s the thing: I think MLPs are going to beat almost all other income investments over the next two years for another reason altogether:

Canada.

The income-trust market in Canada is almost identical to the MLP sector in the United States. Canadian income trusts pay no tax, they distribute all their earnings in dividends, and they operate mostly in the commodity and energy sectors.

In other words, MLPs compete directly with Canadian income trusts for investment.

Millions of income investors, pension funds, retirees, and other dividend hogs have enjoyed these trusts’ high dividends over the last 20 years.

But on October 31, 2006, the Canadian government changed the law. It ended the Canadian income-trust structure. Existing trusts have until January 1, 2011 to convert back to corporations, begin paying corporate taxes again, and cut their dividends.

MLPs are the perfect substitute. Yield hogs will turn their attention to MLPs as the 2011 deadline approaches.

Right now, MLPs are paying 7.4%. A 10-year Treasury note pays only 4%. The “spread,” or difference, is 3.4%. This spread is the largest it’s been in five years. That means MLPs are as cheap as they’ve been since 2003.

North American Pipeline MLP Yields Versus
10-Year Treasury Bonds

If nothing changes, MLPs will keep generating 7.4% dividend yields. Add that to 8% industry growth, and we’ll make total annual returns of 16% – matching returns of the last 18 years.

But when you take into account the demise of the Canadian income trusts… I think MLP investors could easily see 25% annual returns over the next couple of years.

Good investing,

Tom

P.S. I’ve found the best way to invest in MLPs. It’s a basket of these investments, it pays a 6.5% dividend yield… and you can buy it at a discount to its net asset value. Here’s something else: You won’t have to worry about tax paperwork associated with MLPs because the SEC considers this investment a regular stock for tax purposes…

I recently published a report on this investment for readers of my advisory The 12% Letter. Click here to learn more about The 12% Letter.

Source: Canada’s Loss Will Make These U.S. Stocks Soar

• U.S. producer prices rose almost twice as much as forecast, the Labor Department reported yesterday (Tuesday). Wholesale prices surged 1.1% in March, led by rising energy and food prices, which jumped 2.9% and 1.2% respectively.

• U.S. Bancorp (USB) announced yesterday (Tuesday) that first-quarter earnings fell 4% as a result of losses connected to the mortgage crunch but said its credit problems will continue to be manageable. The Minneapolis-based bank said it earned $1.09 billion, or 62 cents per share, down from $1.13 billion, or 63 cents per share, during the same period last year. Revenues were $3.87 billion, up 14% from $3.39 billion in the first quarter of 2007, the Associated Press reported.

• Johnson & Johnson (JNJ) reported a 40% jump in first-quarter profit, mainly due to the weak dollar boosting foreign revenues and a charge that depressed results a year ago, the Associated Press reported. The company reported net income of $3.6 billion, for the first three months of the year, up from $2.57 billion a year ago. Though, the year-ago quarter included a charge of $807 million for research and development related to the acquisition of Conor Medsystems Inc.

• China’s $200 billion sovereign wealth fund, China Investment Corp. (CIC), purchased a 1% stake in BP PLC (BP), worth about $1.97 billion, Bloomberg reported. Last year, CIC spent upwards of $8 billion on stakes in The Blackstone Group (BX) and Morgan Stanley (MS).

• February retail sales in Brazil rose 12.2% from the prior year, marking the fastest pace since 2004. The statistics boost expectations that its central bank will raise interest rates in the red-hot economy from 11.25% to 11.50%, Bloomberg reported.

• Shares of Crocs Inc. (CROX) dropped 43% yesterday (Tuesday) with a $7.68 decline to close at $10.11 after the Niwot, Colorado-based colorful shoemaker lowered its profit guidance and announced it would eliminate 600 jobs at a Canada plant.

• After the close of trading yesterday (Tuesday), Intel Corp. (INTC) reported first quarter profit dropped 12% due in part to spin-off costs. First-quarter net income declined to $1.44 billion, or 25 cents per share, from $1.64 billion, or 28 cents, the year prior, the Santa Clara, California-based chipmaker announced in a statement.

• Washington Mutual Inc. (WM) reported a $1.14 billion loss yesterday (Tuesday) due to a growing number of customers that have fallen behind in their mortgage payments, Reuters reported. WaMu, as the Seattle-based lender is called, said the quarterly loss equaled $1.40 per share, and compared with profit of $784 million, or 86 cents, in the first quarter last year.

• Boeing Co. (BA) delayed the delivery of its 787 Dreamliner again yesterday (Wednesday), this time until the third quarter of 2009. It’s the third postponement in six months. The company said it would deliver just 25 planes next year, less than a quarter of what had originally been planned.

• Citigroup Inc. (C) is planning to sell $12 billion of loans at a loss to Apollo Management LP, Blackstone Group LP and TPG Inc., a person briefed on the matter told Bloomberg News. The loans are part of the $43 billion in financing that Citigroup agreed to provide for leveraged buyouts last year before credit markets froze.

• United Parcel Service Inc. (UPS) cut its profit guidance for the year from between 94 and 98 cents a share to 86 or 87 cents. The company, which carries products that amount to about 5% of gross domestic product each year, cited lower volume and higher fuel costs as the biggest reasons for declining profit.

• The world’s largest air carrier, American Airlines – principal subsidiary of AMR Corp. (AMR) – canceled 1,000 flights yesterday (Wednesday) to reinspect jets. The cancellations affected more than 45% of its scheduled flights, Bloomberg reported, and stranded an estimated 11,000 travelers. The company said to expect more flight cancellations this week.

• Citing rapid growth in China and increasing demand for loans, Industrial & Commerce Bank of China (IBCB) said it expects first-quarter profit to soar 50%. IBCB is the world’s largest bank by market value. So far this year, ICBC has gained 5.2% in Hong Kong this year, compared with a 13.8% drop in the benchmark Hang Seng Index, Bloomberg reported.

• Hershey Trust Co., primary shareholder in The Hershey Co. (HSY), announced its Chief Executive Robert Vowler would retire in April 2009, Bloomberg News reported. Vowler has held the position for 12 years. Vincent Rudisill, the trust’s chief investment officer, will assume CEO duties.

• Crude oil for May delivery hit a new intraday high yesterday (Wednesday). It increased $2.37, or 2.2%, to close at $110.87 on the New York Mercantile Exchange. Earlier in the day, it hit a new intraday high of $112.21 a barrel after the Energy Information Administration announced U.S. stockpiles of crude fell to 316 million barrels in the week ended April 4, MarketWatch reported.

• U.S. wholesale inventories increased 1.1% in February, more than had been forecast. The increase was due to a 0.8% decline in sales for the same period. “Supply is starting to run ahead of demand and that could mean slower growth and also slower inflation further on down the line,” Jonathan Basile, an economist at Credit Suisse Holdings in New York, told Bloomberg News.