Tuesday, July 27, 2010

The tale of the poor natural gas ETFs

Unlike UNG which focuses in one month contract, UNL invests on the next 12 months of natural gas contracts.

"...reflect the changes, in percentage terms, of the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the average of the prices of 12 futures contracts on natural gas traded on the New York Mercantile Exchange consisting of the near month contact to expire and the contracts for the following 11 months, for a total of 12 consecutive months contracts"
Does the approach taken by UNL work? Not quite. Please see below:

The losses have to do not necessarily with the price of natural gas contracts, but with the contango as every month these ETFs sell their contracts and buy next month contracts, thereby losing sometimes more than 20%.

The chart below shows the price of the front month price of natural gas itself:

Note: You may receive buy or sell alerts on these ETFs by clicking on their links: UNG, UNL.

Friday, July 23, 2010

Chile is firing on all cylinders: ECH +12% vs SPX -10% in 3 months

The ETF for Chile is ECH. Chile has been firing on all cylinders following the February earthquake. In the last 3 months, ECH is up +12.2%, while the SPX is down over 10%:

Tuesday, July 20, 2010

Commodity ETFs: Cocoa soars; chocolate anyone?

Cocoa reached its highest level yesterday as somone bought all of Europe's stock, all 241,000 tonnes of cocoa beans.

We track all commodity ETFs live here.

The Telegraph reports:

"The purchase was enough to move the entire global cocoa market, sending the price to the highest level since 1977, and triggering rumours and intrigue in the City.
It is unclear which person, or group of traders, was behind the deal, but it was the largest single cocoa trade for 14 years. The purchase was enough to move the entire global cocoa market, sending the price to the highest level since 1977, and triggering rumours and intrigue in the City.

Analysts said it was very unlikely that a chocolate company, such as Nestle or Kraft, or even their suppliers, would buy such a huge order in one go and that is was probable that one or a number of speculators, possibly hedge funds, had attempted to corner the market. By doing this, they would have control of the entire supply in Europe, forcing the price yet higher.”

Monday, July 12, 2010

Brazil 2014 WC: The Party Starts

EWZ is the most popular ETF for Brazil.

We also track all Latin-American ADRS live here.

Agencia Estado in Brazil reports that President Luiz Inacio Lula Da Silva will sign a decree allowing the 12 cities that will host 2014 World Cup matches into debt beyond the limits authorized by the Fiscal Responsibility Law.

The law restricts municipalities' spending to 60% of the collection. The decree will allow them debt equivalent to twice of what they collects.

With late bids and many works not yet started, the change in the law will facilitate public spending and allow for less bureaucratic approval. The federal government will declare a period of four years except the Fiscal Responsibility Law, and allow the debt to the works aiming at the World Cup are held. It is estimated that contracts worth a total of $50B will be the subject of bids in the next four years due to the World Cup.
There are already constitutional questions as to whether the President can sign such decree.
Zero taxes
In addition to increased borrowing capacity, the states and the federal government will not collect a penny in taxes from FIFA. This is a requirement by FIFA, a hugely profitable entity, for allowing the World Cup.
Rio has already begun to celebrate the World Cup. Yesterday, a huge banner was unfurled at the city's symbol, the statue of Christ the Redeemer. At the feet of the 38 meter statue the banner read, "Welcome to Brazil 2014 World Cup."