Monday, February 28, 2011

REMX, the Rare earths ETF is shining, far outpaces gold

REMX is the rare earth ETFs. With China controlling most of the global production, rare earths have been pumped up quite a bit lately. They are in the same level of Lithium (due to electric cars), except that there are vast supplies of Lithium (please take a look at SQM, the great Chilean company).

REMX started trading in late October 2010. Since then, it is up 23%.

In particular, REMX has outpaced gold since inception, in spite of the near record prices for gold:

REMX is a Van Eck Global ETF.
  • Gross Expense Ratio: 0.63%
  • Net Expense Ratio: 0.57%

Top holdings:

Van Eck says: Rare earth/strategic metals are industrial metals that are typically mined as by-products in operations focused on precious metals and base metals. Compared to base metals, they have more specialized uses and are often more difficult to extract. Currently, approximately 49 elements in the periodic table are considered rare earth/strategic metals. They include such elements as cerium, manganese, titanium and tungsten. Strategic metals are used in a variety of technologies including jet engines, hybrid cars, steel alloys, wind turbines, flat screen televisions and cellular phones. Rare earth metals, a subset of strategic metals, are a collection of 17 chemical elements that are essential in many of today’s most advanced technologies, with particular applications in electronics.

Thursday, February 24, 2011

Oil soars: straddles return +142%

We posted these just 2 days ago. While gold did not move that much, oil certainly did.

These were computed with the StraddlesCalc tool. The beauty of straddles is that the investor can benefit whether the stick moves up or down.

With Saudi Arabia in talks to boost oil production, oil will continue to be volatile and may drop significantly, or rise further, just perfect for straddles.

Tuesday, February 22, 2011

Remember Chile After the Earthquake? New Zealand's earthquake and ETF

New Zealand suffered a devastating earthquake today, very sadly with tens of people killed and massive property losses. As a result as well, the New Zealand dollar and stocks have dropped significantly.

While the damage still needs top be assessed, in general, these stock losses are not justified. The example is Chile, which also suffered a devastating earthquake in February of last year. ECH is the ETF for Chile.

Since just after the earthquake until the peak, ECH rose over 40%. Earthquakes provide massive government stimulus to the economy.

The ETF for New Zealand is ENZL. It is down about 4 % today:

It's MER is an attractive 0.55%.

Top holdings and sectors:

ENZL is currently trading at $28.42.

Monday, February 21, 2011

Silver is skyrocketing on troubles in Mideast: Miners ETFs

Please see the the price of silver today:

That is a big jump to almost $34. f silver leads gold, then all miners will life when the markets open (silver)

We track all miner ETFs live here.

Friday, February 18, 2011

ETFs for the new currency wars: Brazil vetos G20, Canadian dollar new high

Brazil has just announced that it will veto France's proposal for currency controls at the G20. France basically is happy to see the Euro devalued while emerging nations currencies, about the only coutnries who can buy something these days, continue to rise.

In the meantime, the Canadian dollar continues to rise, hitting fresh highs. The ETF is FXC:

We track all currency ETFs live here. Please see the returns since 2009. +42% for the Aussie dollar ETF, +34% for the Brazilian Real ETF, +22% for the Canadian ETF

Thursday, February 17, 2011

Huge drawdown in natural gas: UNG attractive for March

The latest natural gas storage figures showed a massive drawdown of 233Bcf. These is the latest chart, note how the lower 5-year average channel is about to be pierced:

 The dreadful UNG responded in kind, as bizarre as ever:

March 5 calls are going for 0.32, very attractive at this point (in spite of the underlying ETF)!)

However, note that there is still contango, and please do read the alternative here.

Wednesday, February 16, 2011

Forget UNG: A much better ETF to play a natural gas rebound

As we have been reporting, contango is back in full force with its usual dire effects on UNG. For investors, who think that natural gas prices will rebound at some point, there are much better ways to invest using ETF.

Please take a look at the charts of FCG versus UNG:


In this period, UNG is down over 45%, while FCG is up over 17%.

3- years:

In this longer time frame, UNG is down a staggering 90%, while FCG is up 7.50%.

So what is FCG? It is the First Trust natural gas companies ETF. These are the top holdings, and percentages:

SandRidge Energy, Inc. 4.12
Chesapeake Energy Corporation 4.00
Cimarex Energy Co. 3.73
Devon Energy Corporation 3.59
SM Energy Co. 3.55
Suncor Energy, Inc. 3.52
Range Resources Corporation 3.44
Stone Energy Corporation 3.43
Exxon Mobil Corporation 3.43
EOG Resources, Inc. 3.41

The First Trust ISE-Revere Natural Gas Index Fund is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the ISE-Revere Natural Gas IndexTM

  • The ISE-Revere Natural Gas IndexTM is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas.
  • The Index is constructed by establishing the total population of stocks listed in the U.S. of companies involved in the exploration and production of natural gas and then eliminates stocks whose natural gas proved reserves do not meet certain requirements.
  • From this universe, all candidate stocks are ranked using four different methods including Price/Earnings ratio, Price/Book ratio, Return on Equity and the correlation to gas futures prices. To meet index eligibility, a stock must also satisfy market capitalization, liquidity and weighting concentration requirements.
  • Then rankings are then averaged and the top 30 stocks based on final rank are selected for the Index.
  • The Index is rebalanced on the application of the above model on a quarterly basis.

Tuesday, February 15, 2011

Poor UNG suffers again: natural gas contango is in full force

Readers here know about the correlation between contango and UNG. UNG suffers because it needs to swap its contracst every month, so contango is a silent destoryer of wealth.

The effects are clear in the last 3 weeks:

The news is very bad for UNG holders. These are the current rpices:

April prices are 1.42% higher than March's. Buyer beware!

Monday, February 14, 2011

Chinese ETFs roar: China overtakes Japan as world's no. 2 economy

It is official now.  China is the number 2 economy in the world, surpassing Japan who lost its 42-year ranking .

Figures released today indicated a Japanese contraction in the last quarter due to weak consumer spending and a strong yen. Japan's GDP dropped by an annualised 1.1%  in  December.

In contrast, China grew nearly 10 percent in the same period.

Japan still remains around 10 times richer on a per-capita basis.
  • Japan's nominal GDP: $5.474 trillion
  • China's GDP: $5.879 trillion. 
 We track all Chinese ETFs live here. The top performer since Jan 2010 is CZM, a 3X bull ETF.

Saturday, February 12, 2011

Crazy gas prices lately? Protecting yourself and profitting with the gasoline ETF

As readers may have noticed, gasoline prices have had huge volatility recently. Yesterday the gas prices at my local station dropped 5%, a coupe of hours after I filled up of course.

Investors can profit or protect themselves against these price variations by using ETFs. A ETF for gasoline is UGA. It has shown considerable volatility.

The long term trend has clearly been up:

The volatility shows on on intra-day charts:

A very simple strategy to protect against increases in the price of gasoline is by buying UGA. UGA has gone up 16.9% this year.

In general, investors do not need downward protection, as that is simply reflected when they fill up. It's a very simple strategy.

We track all oil ETFs live here.

Thursday, February 10, 2011

Natural gas: contango is back in full force; terrible for UNG

We reported last that natural gas prices were in contango again. The situation continues now, and is even worse as front month prices have collapsed again.

From March to July the difference is a contango of 5.7%.

UNG needs to sell all its futures contracts every month and acquire new ones for the following month. In the process, it acquires fewer contracts for the same amount of money. As the process continues in the future, UNG loses money by doing nothing.

It is quite interesting that when we detect (and report here) backwardation, UNG rises, and when we detect that contango is back, UNG collapses.

Keep an eye on this. This is buyer beware.

Tuesday, February 8, 2011

Analysis of gold, silver, and rare earths

INO released a video today discussing gold, silver, and rare earths.

Before you look at the video, they ask an interesting exercise: Write down which market has the strongest trend - up or down. Then rate the markets. Number 1, Number 2, Number 3.
Once you see the video it will become clear to you how we rate these markets. It might surprise you. Watch video  (or access their tools, 2 month bonus).

We track all precious metals ETFs live here.

Monday, February 7, 2011

Oil ETFs allowed for quick profits on Egyptian situation, regardless of price direction

We posted straddles for oil ETFs last Friday, using thwe USO and the UCO ETFs. This was a play ion the Egyptian situation that allowed us to profit regardless of direction, as ling as the price of oil went up or down.

Indeed prices came down today.

Here is the current status:

Profits of 15% and 17%, not bad for one day.

Friday, February 4, 2011

Very high oil prices and oil ETFs: profitting from oil rising further or crashing

The current Egyptian chaos coupled with the very low U.S. dollar have pushed oil prices to over $100/barrel. These volatile situation are prime candidates for straddles, where, the investor may profit whether the underlying stock or ETF goes up or down,.

There are a couple of strangles and straddles for two popular ETFs: USO and UCO.

They were computed within the free StraddlesCalc tool. The amounts indicated are the percentage move required for the position to achieve profitability.

Tuesday, February 1, 2011

Natural gas: bad news for UNG lovers; contango is back in full force

As readers know, we follow the contango/backwardation situation closely as it significantly affects UNG prices. Contango causes losses on UNG, by doing nothing and without requiring natural gas prices to drop. Is is a very bad condition for UNG as it needs to all its contracts every month.

This is the status as of 2:15PM today:

While this is not good news, actually, bad news for UNG holders, prices have been very volatile and this situation changes day after day. However, it has been a while since it was this consistently bad. There is contango in every singe month of 2011. From June to March for example it is +2.62%.

Anyone wishing to buy UNG, stay tuned and do your due diligence.