Wednesday, June 29, 2011

Now Chinese Warnings About Defaults in China

We track all Chinese ETFs live here.

China Daily reports that local governments in China had an overall debt of 10.7 trillion yuan, or about a staggering USD $1.65 trillion, by the end of 2010. These figures came from China's top auditor on Monday, in a report to the National People's Congress, in which he also warned that some were at risk of defaulting on payments.

"It was the first time the world's second-largest economy publicly announced the size of its local governments' debts. The scale amounts to more than one-quarter of its GDP in 2010, which stood at 39.8 trillion yuan".

"Concerns are rising that the problem of local government debt could destabilize the financial system of the country if it is not managed properly, especially after the central government's tightening of the housing market, which could affect local fiscal revenue that is highly dependent on land sales and make debt repayment more difficult.

In addition, China's ambitious plan to construct 36 million affordable homes during the coming five years, including 10 million in 2011 and 10 million in 2012, added to worries about increasing capital tension and rising non-performing loans in commercial banks".

"Fitch Inc, a major international rating institution, lowered its outlook of China's long-term local-currency rating to "negative" from "stable" in April, saying there is a "high likelihood of a significant deterioration" in banks' asset quality within three years.

Bad loans could rise to between 15 and 30 percent of the total, with concern about the quality of lending compounded by growth in off-balance-sheet credit, Bloomberg cited Fitch as saying".

Friday, June 24, 2011

The Euro on the brink: profit either way, up or down, with the FXE ETF

The Greek comedies or tragedies are pushing the Euro to the brink. Below are straddles for the most common Euro ETF, FXE, for both July and August.

These allow an investor to profit either way, up or down, as long as the underlying (FXE) moves the indicated amount - either way.

Computed with the free StraddlesCalc tool.

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

Thursday, June 23, 2011

IEA Releases oil reserves: Oil crashes down, Oil ETFs

This was bound to happen. They had to bring oil down one way or another.

The IEA will release 60M BBLS over coming month a rate of 2M barrels per day, for 30 days, then will reassess..

Release of crude stocks will bridge production gaps stemming from Libya crisis, 132M bbls of production have been lost due to Libya disruption.
IEA believes that the impact of the supply disruption has been worse for developing economies. 2M bpd will be available over the next month.

Please take a look at a capture off our oil tracking live site.

Disclaimer: we bought USO puts yesterday. USO is off 4-5% today.

Wednesday, June 22, 2011

Natural Gas Contango Today; Inventories Tomorrow; Opportunity Now

Natural gas inventories will be released tomorrow, offering an opportunity to natural gas - and UNG - investors. More on this later.

Today's contango situation:

The contango on July for August contracts is 0.7%, and August to September is 0.54%. These are low contango numbers, and in general bullish for UNG. However UNG has lost its owner billions of dollars, so investor beware.

Stay tuned.

Tuesday, June 21, 2011

Moody's Upgades Brazil Again: Brazil ETFs

Moody's rating agency has just raised the rating of the bonuses of the Brazilian government from Baa3 to Baa2, "considering that the performance of sovereign credit is consistently rated in the high margin Baa, that recent policy adjustments that should result in a macroeconomic environment more sustainable, and the prospect of improvement in fiscal indicators and growth in the medium term". "The rating outlook for the Brazilian still positive".

In its statement, the agency states that the positive outlook for the rating of Brazil captures the possibility of a new rise in rank in the next 12 to 18 months. "This will happen if:

1) economic growth to continues in moderate at lower rates - but more sustainable
2) the authorities wanted and successfully met the goals and short-term budget.

We track all Brazilian ETFs live here. The screen capture above is from this Live Tracking site.

Friday, June 17, 2011

Natural gas and UNG take a beating: attractive for quick profit

UNG is trading around $11 today. Here are July straddles, whcih allow an investor tom profit either way, up or down

The position will be profitable if UNG moves the indicated amount, in the worst case, about 7.4%.

Computed with StraddlesCalc tool.

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

Monday, June 13, 2011

Gold drops: ETFs

Gold has dropped since Friday, over the weekend and today:

We track all gold and silver and PM ETFs live here.

Wednesday, June 8, 2011

Meredith Whitney's New Strong Warning on Bonds, Like Navigating Dark Pools; Bond ETFs

Meredith Whitney says she stands by her call that hundreds of billions of dollars of U.S. municipal bond will default.

She said to CNBC: "Sadly, that's the size we'll be looking at,"  She added that seeking a strict timeline misses the point and that defaults are only part of a larger issue about state and local finances.

The municipal bond market is valued around $2.9T.

Ms. Whitney said that the market could see 50 to 100 defaults by local governments.

Now she pointed out the "dire" state of government budgets,"unfunded liabilities are threatening their finances", and many states may have to sell or privatize assets to raise cash.

She cited off-balance sheet debt expenses and unfunded pension liabilities that are problems that must be dealt with by the states.

"State governors agree with me," "It's the muni bond market that doesn't."

Dark Pools: Also worrisome, she says muni bonds is like jumping into a dark pool with "terrible" disclosure.

There are many bond ETFs that track bonds and treasuries. Please see our tracking live site.

Partial screen capture: