Financials are in chaos: Profiting from banks and financials going up - or down

XLF is the popular financial ETFs in the U.S. It has gone nowhere in the last 6 months or so, however, the situation with financials is nearly chaotic, Europe, Bank of America, Portugal and so on, so, volatility is to be expected.

Below are straddles for XLF for both December and January 2011. These allow an investor to profit if the underlying (XLF) goes up or down, as longs as it mkoves the necessary amount.

That move required is about 5% in December and 8% in January. Computed with StraddlesCalc tool.

This is not advice at all, please do your own due diligence. Options can easily cause 100% loss.

Petrobras finds yet more light oil in the Amazon: Brazilian ETFs soar

Petrobras, PBR on the NYSE, has annonced that it has foudn yet more light sweet oil in the Amazon. A long duration test in the Amazon has confirmed the accumulation of light oil (46 API) and natural gas in well 1-ICB-1-AM (called "affluent Chibata No. 1") in Tefé (AM), 630 km from Manaus.
According to the company, the test data indicates a well production capacity of 2.5k barrels of oil per day, "which is considered an excellent result, in the case of this kind of watershed in Brazil,". Petrobras holds 100% of royalties and production of this well.
The test was started in September and is expected to last one year.

There are six direct Brazilian ETFs that trade in North America, you can track them live here. Brazilian ETFs have soared in recent weeks, this is the performance since July:

 Note: Some of these ETfs were not yet trading in July, hence, they do not show on the chart.

Great news for UNG and HNU ETFs: natural gas now in backwardation

Please see the current situation in natural gas contracts as of 11AM this morning:

Not only contango is gone, but prices are now in backwardation until May 2011, with little difference till August 2011. This is great news for UNG and HNU holders, as ow backwardation may work in their favor. Prices of natural gas may still fall, but the ETF will benefit on contract rollovers, as opposed to lose money as before.

Natural gas keeps rocking, prices jump, UNG and HNU ETFs blast higher

Following the death (at least temporary) of contango for the first half of 2011, UNG and HNU (2X ETF) keep moving higher today.

HNU has moved 31% higher since November 15th, and UNG is higher by  15%.

Prices jumped at noon when inventories were reported, showing an unexpected drawdown of ng:

 ETF charts:

Both have broken their short term resistances.

Natural gas: contango still dead, profiting from UNG going up or down

Natural gas continues to shine after contango died . With no contango until July or so, the popular UNG is now almost a real ETF.

With UNG very close to a perfect $6 strike, these are the current straddles for December and January.

Investors would profit if UNG moves the indicated amount. Computed with the free StraddlesCalc online tool


Please do your due diligence. Options may cause 100% loss.

Coming soon to make investors lose more money: leveraged and reverse VIX ETFs

Actually they are ETNs.

When you thought they issuers of bizarre ETFs designed to make mom & pop investors lose their pants and shirts, then comes new financial inventions: leveraged VIX ETNs.

Please see all our posts on their VXX to see how dreadful it is.

It comes it all kinds of flavours, 1X, inverse, 2X.

Read the filing here.

"VIX Short-Term Futures™ Index due December 4, 2030 (the “Inverse VIX Short Term ETNs”), the VelocityShares Daily Inverse VIX Medium Term ETN linked to the S&P 500 VIX Mid-Term Futures™ Index due December 4, 2030 (the “Inverse VIX Medium Term ETNs” and collectively with the Inverse VIX Short Term ETNs, the “Inverse ETNs”), the VelocityShares VIX Short Term ETN linked to the S&P 500 VIX Short-Term Futures™ Index due December 4, 2030 (the “Long VIX Short Term ETNs”), the VelocityShares VIX Medium Term ETN linked to the S&P 500 VIX Mid-Term Futures™ Index due December 4, 2030 (the “Long VIX Medium Term ETNs” and collectively with the VIX Short Term ETNs, the “Long ETNs”), the VelocityShares Daily 2x VIX Short Term ETN linked to the S&P 500 VIX Short-Term Futures™ Index due December 4, 2030 (the “2x Long VIX Short Term ETNs”) and the VelocityShares Daily 2x VIX Medium Term ETN linked to the S&P 500 VIX Mid-Term Futures™ Index due December 4, 2030 (the “2x Long VIX Medium Term ETNs” and collectively with the Leveraged Short Term ETNs, the “2x Long ETNs”)."

We still await leverage potash ETFs, inflation ETF,  interest rate ETFs, bailout ETFs.

Natural gas today: contango is still dead, UNG up again

Another day, and still no contango for the early months of 2011 in natural gas contracts. As of 12PM:

We disregard December as UNG contracts have already rolled over. Prices only start climbing about June 2011.

With this weight off its back, UNG continues to respond quite kindly, up about 8% for the week.

UNG and HNU jump on the end of natural gas contango for early 2011

As we reported this morning, contango is no more for natural gas for the early months of 2011.

This morning, both UNG and HNU were down after inventiory reports. The situation has sharply reversed and both jumped higher. UNG moved higher 4.5% (intra-day) and HNU (2X ETF) 9%.

 HNU:

Contango/Backwardation as of 3PM:

Natural gas curve flattens: contango ends, UNG becomes a real ETF

Natural gas storage inventories were released today, showing a slight injection of 3Bcf, bringing the amount in storage to 3.843Tcf. This is just0.3% higher than last year. What is more important is the derivative (or slope) of the curve is near zero. In other words, the injections are flattening.

This is critical, because any slightly larger injection can create rumors of overflowing of the storage capacities, causing the prices to drop further, and any draw down, could make prices spike

These effects are mainly psychological. UNG reacted today with a slight drop of about 2% by 10:50AM

Contango no more

All the more important is that there is no more significant contango on futures contracts, so UNG will not suffer from its usual degradation. As of 10:55AM:

There is a 4.6% between December 2010 and Jan 2011 contracts, but UNG has already rolled over this month (see rollover dates). between Jan and Feb the difference is almost nil, and between February and March there is backwardation of 0.5%.

UNG has become a real ETF, for the time being. Stay tuned.

Rubin: U.S. Bond Market Could Implode

Former Treasury Secretary Robert Rubin, warned today about the risk of an "implosion" in the bond market, citing the soaring federal budget deficit and the Fed's QE programs are putting the U.S. in "terribly dangerous territory."

He says that QE2 "has a lot of risk," adding that the international reaction "horrendous."

The Trigger

Rubin, had previously issued a similar warning about the bond market in October. He further says (see Yahoo) that  "Congress' vote on raising the deficit ceiling next spring could be the trigger for a rout in the Treasury market".

He says that China will not dump U.S. treassuries, because that would be "a financial version of the Cold War concept of Mutual Assured Destruction" "But he is worried about selling by the government's of Singapore, Hong Kong and Malaysia. "They could say ‘the Chinese are stuck but we're not,'"

There are many long and short bond ETFs on the market. For a list that we track live, please visit here.

Oil tumbles: profitting from oil going up or down through the UCO ETF

 Oil took a big hit this morning following the inventories report. With the UCO ETF being very near a 10 strike price, below are straddles for both November and December.

These allow an investor to profit whether oil goes up or down, as long as it moves the amount indicated. November's are of curse only 2 days away, so they are extremely dangerous.

Computed with StraddlesCalc.

Options are dangerous and may cause 100% loss. Please do your own due diligence.

CYB, the Yuan ETF, has very cheap April 2011 options

These are the April 24 CYB calls today:

Since CYB is trading at $25.32, the 24s are in the money, and trading at $1.40 or $1.45. The added premium over intrinsic value is just $0.08 to $0.13. Those options will be profitable if CYB goes up by 0.03% to 0.051%.

Note that options may also cause a 100% loss, shall CYB drop below $24. That would mean the Yuan dropping (!) 5.2% until May 2011. Please do your own due diligence.

This is the Yuan since the Chiense government has allowed its appreciation:

What you see is in the inverse, i.e, the Yuan priced in U.S.Dollars. Enjoy!

Bond ETFs Are Crashing

Muni bonds amd muni bond ETFs are collapsing today. It was about time, and expected.

Please take a look at MUB:

We track all bond ETFs live here.

Investing in bond ETFs: tracking live all bond ETFs

Investors have been flocking to bonds in the last year or so to seek income (yield), and for safety. There are now tens of BOND ETFs on the market.

We created  a new site to track them live: Bonds Live.

The top performers in 2010:

TYD, the 3X Bull ETF for the 10-y treasury. Since this is leverage ETF, and leveraged ETFs are terrible performers in the long run, it is a indication that something is a miss in bond land. Some may call it a bond bubble.

Note also the bad performance of muni ETFs since July.

Image captures:

Sugar plunges, drops the most in 22 years; SGG ETF down over 10%

This was definitely not a sweet day. Raw sugar futures in New York fell the most in 22 years and refined-sugar prices also dropped by a record in London.

Raw materials tumbled on concern that demand for crops will ease in China as it it set to increase interest rates. To compound matters, the  ICE Futures U.S. raised margins on contracts by 65%. Europe also announced plans to increase sugar exports.

Biggest drop ever

Refined-sugar futures for March delivery fell $91.50 per metric ton, -12%, the biggest drop ever
Raw-sugar futures fell 3.45 cents, also 12% to settle at 26.21 cents on ICE. The single-day drop and this week’s drop of 17% were the most since July 1988.

SGG, the sugar ETF which had had a very sweet performance this year, dropped 10.2% today:

We track all commodity ETFs live here.

G20: Brazil insists on replacing the weak U.S. Dollar by a basket of currencies as reserve currency

Guido Mantega, the Brazilian finance minister, reiterated on Friday his call replace the dollar with a basket of currencies as reference-currency. He says it is a moment of weakness for the U.S. currency, and holding dollar reserves "loses money."
"The natural tendency is that as other economies emerge, a new system of currencies should appear. But it's not an easy or quick thing to do. But keeping in reserves in dollars loses money".
"The diversification of currencies is possible. But it is not easy because global trade is used to the dollar. The general trend of multilateralism," Mantega defended.
"Once the rulers in the world economy were two or three countries, but today there is a change. It is not so now" he added.

The easiest way to trade currencies is through the ETFs. The Brazilian real is the currency that has appreciated the most out of the G20 (ETF: BXF). You can track them all here.

Gold is dropping like a brick today: the top gold and silver ETFs

Spot gold, which was trading over $1,420 earlier this week, has taken a big tumble and now trades at $1,380:

Gold ETFs will react accordingly today. We track them live here.

Loom at the amazing perforkance of AGQ, the ultra silver ETF: +317% since 2009.

Given that, as expected, the G20 agree not to agree on anything and interest rates will not rise any time soon, this might be a very good opportunity to get back into gold for the medium term.

Natural gas storage injection was +19Bcf, slightly below expectations of +24Bcf

While the amount injected was +19Bcf, slightly below the expected 24Bcf, natural gas storage still remains significantly higher than average, and actually outside (above) the 5-year average channel.

The current amount in storage is 3.84Tcf.

Will UNG rise or drop now? Well,  contango is still there. Jan 2011 prices are $4.24, while the current December contracts are priced at $4.06. That's a 4.4% differential.

Here are the current straddles. Current UNG price is non optimal, but it's doable since there's plenty of volume in UNG options (in the thousands).

If UNG moves 6.7%, those will become profitable. That means UNG above $6.20 or below $5.44. That's  a tough one.

Computed with StraddlesCalc.

Yen rout makes for highly profitable FXY straddles

The current ongoing Yen rout is making for highly profitable FXY straddles. Here are the FXY straddles from November 4th:

 Computed with StraddlesCalc Tool

Naturas gas keeps rocketing higher, but so does contango

Please consider the chart of the December 2010 futures contracts (24h):

UNG also reacts accordingly:

However, the January 2011 prices have also risne, thus has contango, so we know what will happen to UNG.

January 2011 contracts:

The contango Jan 2011 to Dec 2010 is now 3.8% (note: 4.3% as of 3PM)

Yen continues to collapse; major drop on FXY ETF

This is the 24-h chart of the Yen:

Last traded at 82.57, a drop (for currencies) of about 3% from 2 days ago. This is massive.

FXY puts will be doing very well today.

G20 meeting creates havoc: Watch out: the yen, on the move, dropping hard

The Yen is the a story today. After dropping about 1% yesterday (a big move for currencies), this is the Yen at 7:20AM, now trading at 82.21:

FXY, the en ETF,  will continue dropping hard in response if this stays as is after the markets open.

China Blasts U.S.; Yuan Hits Record Level

Today China reported a very large $27.1B trade surplus for October. Chinese authorities allowed the Yuan to appreciate significantly, to the strongest level against the dollar since 1993. The move may be seen by some as a gesture to placata critics ahead of the G20 meeting, just like the massive gains of the US dollar yesterday.

 

The ETF to use is CYB, which will move the opposite way to the above chart.

We track all currency ETFs live here. These moves will do wonder for our currency straddles.

In the meantime, however, the world continues to pound the U.lS. for QE2, just ahead of the G20 meeting in South Korea, a meeting, for which the final declaration has already been written.

China continues to criticize the U.S. for QE2. Zhu Guangyao, Chinese Vice Finance Minister:

“We have $10 trillion of hot money flowing around,”  told reporters in Beijing on Nov. 8. The U.S. “has not fully taken into consideration the shock of excessive capital flows to the financial stability of emerging markets,” he said.

China also announced measures to contains the inflow of capital.

South Korea happens to have $293B of foreign exchange reserves, over 10X what it had in July 1997. This is what Lee Myung Bak, South Korean President, had to say:

“The international community united as one spirit during the crisis,”  “There are doubts over whether such cooperation can be achieved now the global economy is entering a recovery phase, with each country growing at a different pace.”

FXY: Yen ETF Collapses today

FXY, the most popular Yen ETF had a real collapse today:

The question is whether this is the Bank Japan at work, or if it is window dressing by the U.S. ahead of the G20 meeting in Seoul (to avoid more criticism of the USD devaluation).

We are short FXY via puts since 10AM today.

OPEC says oil will not drop because the U.S. dollar is too low

OPEC met yesterday and basically said that oil prices will not be dropping because the U.S. dollar has dropped too muhc.

Shokri Ghanem, chairman of Libya's National Oil Corporation:

"While the price is inching up, we think the terms of trade are going against OPEC countries and the increase in the price did not even compensate for the loss in the dollar value and the increase in the price of commodities," .
Qatari Oil Minister Abdullah al-Attiyah said the oil market was stable and that countries would have to live with higher prices."

He has also said that $70 to $90 per barrel "was very reasonable for consumers and producers", as did Saudi Oil Minister Ali al-Naimi.

We track all oil ETFs live here.

Oil keeps rising: UCO ETF straddles +125%

As the US dollar continues to sink, oil keeps on rising, making our UCO straddles quite profitable:

The Kiss of death for VXX: Reverse splits and artificial life support for ETFs

As expected, VXX is higher by about 4X today, or +300% (4X = 300%, all leveraged ETFs get this math wrong by the way when they say they are 200% leveraged. 200% is 3X).

Actually, VXX is +295% on pre-market, as the market is rising, and therefore, volatility is dropping.. The reason is that it underwent a reverse 1:4 split.

No doubt many investors will jump in joy when they their VXX jumped 300%.

However, reverse splits used to be the kiss of death for stocks. It simply means they have dropped to low that they need to resort to artificial means to stay live. Funds dropped them when they drop below $5 or so.

Lately, however, reverse splits are acting like artificial support for leveraged ETFs, who also tend to drop to zero over time. However, since leveraged ETFs do not represent anything real, they can keep doing reverse splits forever.

Or until investors vote with their feet. They can only milk the same cow for so long. We hope.

A reverse split for UNG is only a matter of time.

Invest in Chile: New all-time high on the ECH ETF

Chile is firing on all cylinders. ECH, the main Chile ETF has reached a new all-time high today:

Note that we track all global ETFs live here. The ECH return since January 2009 is an impressive +162%.

Top holdings include the fabulous SQM:

Enersis SA	8.95%
Empresa Nacional de Electricidad (chile)	8.57%
Banco Santander-Chile	5.07%
Sociedad Quimica y Minera de Chile SA Soqimich	4.99%
Aes Gener SA	1.93%

These are also tracked in our ADR live page.

Gold reaches new record high: GLD ETF straddles +166% return

As spot gold reached a new high today, courtesy of the Fed's QE2, or GLD straddles from October 28 are doing extremely well, with an ROI of +142% and +166%, so far.

These were computed with the StraddlesCalc tool.

Spectacular spot gold chart:

URA: New uranium ETF rocks, jumps in price

We mentioned URA, the new uranium ETF, last week. Today, URA has jumped 7%:

QE2 discontentment grows: China increases pressure on U.S.

China has increased pressure on Washington because of the latest Federal Reserve measures to boost the U.S. economy. Vice Minister of Finance saying that speculative flows that result are a shock to global markets.

"As a major emitter of global currency, for the United States to launch a second round of 'quantitative easing' we feel they have not recognized their responsibility to stabilize global markets and they have not thought about the impact of excessive liquidity in emerging markets" said Vice Minister of Finance Chinese, Zhu Guangyao, on Monday.

Zhu said that China intends to have "frank discussions" with the U.S. on its plans to print money.

Two new Brazilian ETFs launched: consumers and financials

 Global X has added yet two new ETFs to cover Brazil: BRAQ and BRAF. They are attractive because they hold many companies that do not have ADRs that trade in new York.

 Note that we track all the spectacularly performing Brazilian ETFs live here.

BRAQ:

Brazilian consumers 

• MER: 0.77%

Brazil’s  consumer  sector  is  expected  to  take  an  increasingly  important  role  in driving economic growth. According  to IBGE  and  BMI  forecasts  for  private  fnal  consumption,  the consumer sector growth rate is expected to outpace the country’s overall economic growth rate. The government has steadily increased the national minimum wage over the  last few years. This has  led to a rapid reduction in extreme poverty and in turn created a larger consumer base for the food, drink, and retail sectors. The 2014 FIFA World Cup, followed by the Olympic Games in Rio de Janeiro in 2016 are also set to promote investment into sectors that traditionally beneft from major sporting events, including beer, soft drinks and retail, with these events representing an opportunity for Brazil as both an  investment and tourist destination. A steady decrease in unemployment since 2004 combined with growing  real wages  and  size of  the middle  class have contributed to higher disposable incomes and should continue to do so. Retail sales are expected to grow 9.5%  in 2010, on  low unemployment rate, expanded household income, and strong availability  of  credit.  Falling  poverty,  swelling middle  class, and rising affuence of consumers also contribute to growth in retail spending.

Top holdings:

• Lojas Renner S.A. 5.13%
• Gafsa S.A. 5.06%
• JBS S.A. 4.81%
• Lojas Americanas S.A. 4.81% 
• Companhia Brasileira de Distribuição 4.76%
• Souza Cruz S.A. 4.74%
• Multiplus S.A. 4.74%
• Companhia de Bebidas das Americas 4.70%
• Anhanguera Educacional Participacoes S.A. 4.64%
• BRF Brasil Foods 4.57%

BRAF:

Brazilian financial companies

• MER: 0.77%

The amount of commercial  lending among Brazilian banks  far exceeds corresponding lending activity in other Latin American countries. Loan portfolio values in Brazil in Q3 2009 were fve-fold greater than that of second-ranking country, Mexico. Dealogic reported 156 Brazilian M&A deals worth $37.8 billion in Q1 2010, nearly double  the $19.1 billion over 81 deals posted  in Q1 2009. Estimates  indicate  that M&A activity continues  to grow quickly and totals for 2010 will be high. Itaú Unibanco predicts fnancial investments will surge to a rate of growth  around 22% each  year out  to 2020. The  civil, urban,  and  commercial expansion planned in advance of the 2014 FIFA World Cup and the 2016 Rio Olympic Games will have an impact on this growth in part. Historically,  the  Brazilian  government  began  revolutionizing  its
banking system under the Proer Restructuring Program in 1995. The program implemented a set of measures that allowed the Central Bank to enhance the oversight of fnancial Institutions, whereby weak  fnancial  institutions  were  required  to  either  increase  their capital,  transfer  shareholder  control,  or  be  acquired  by  another bank. As  result,  the  strength  of  the  Brazilian  fnancial  system  was  enhanced. Instruments were developed to avoid future fnancial crises. As a refection of this strengthening, the number of checking and savings  accounts  in  Brazil  has  been  increasing  steadily  since  the early 2000’s.

Top Holdings:

• Itaú Unibanco Holding S.A. 10.29%
• Banco Bradesco S.A. 10.47%
• Banco do Brasil S.A. 10.09%
• BM&FBOVESPA S.A. 4.27%
• Cielo S.A. 4.35%
• Redecard S.A. 4.03%
• Banco Santander (Brasil) S.A. 5.20%
• Cyrela Brazil Realty S.A. EMP 4.89%
• PDG Realty S.A. 5.00%
• MRV Engenharia 5.46%

Going Nuclear: New Uranium ETF Launched

Good news for investors wishing to invest in uranium companies. GlobalX has just launched a new ETF, ticker URA, that invests in uranium miners. The ETF invests in a global pool of companies including uranium miners, refiners, and equipment makers.

Top holdings:

 

 

 The Global X Uranium ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global Uranium Index.

The Solactive Global Uranium Index tracks the performance of the largest and most liquid listed companies that are active in some aspect of the uranium mining industry such as mining, refining, exploration, or manufacturing of equipment for the uranium industry. A specific capping methodology is used at the time of the semi-annual index review to seek to assure compliance with the rules governing the listing of financial products on exchanges in the United States. The index is calculated as a total return index in USD and adjusted semi-annually. The index is maintained by Structured Solutions AG.

 The management fee is 0.69%.