Saturday, February 27, 2010

Chile Earthquake



Some things are much more important that markets or trading. Having no communications with the area we can only hope that people will be coping. I have managed two contacts (SMS via 3rd party and an email) with very close family and friends in Santiago and the news is good, but have not been able to contact anyone else I know in Concepcion. They are totally cut off and there is much destruction.

Although the country is relatively prepared for earthquakes, people there will be without water and electricity for many days. It is just awful.

UPDATE, Sunday Feb 28.

Managed to established a skype talk with my cousin in Santiago. For anyone interested in what happens during such violent earthquakes, people in the south have no access to electricity and more importantly water. In Coronel, near Concepcion people we know who live in high-rises joined whatever food they have and are sharing it. However, they drink water from the swimming pool. It is chaotic and there is looting and it is very dangerous to drive on streets. The Army tries to control the situation, but when people cannot eat or drink there is only so much that can be done until the water arrives. Being a seismic country, the country prepares for this but the damage is extensive. Even in Santiago some places still have no electricity. Phones still mostly do not work. Some texting is possible somehow.

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Friday, February 26, 2010

Quest Uranium: Best Performer on the TSXV, +4,900%

I have written about Quest Uranium (QUC.V) a few times as I am holder of this company since inception (article). The stock has performed very well in the last couple of eyars.


Today BNN interviewed its CEO. It turns out that Quest was the best performer of the TSXV in 2009, with an ROI of 4,900% (50X) since Jan 2009 (till today). The company last year announced major find of rare earths. According to the CEO, there is much more to come. The big deal with rare earths is that China has stopped all exports, hence the big interest.


I obtained these shares as a result of a spin-off of another company, don't even remeber whcih one. The shares have been sitting in my RRSP account since then.


Sometimes you get lucky, but we'll happily take it.

Chart (look at the recent volume):


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Profit From the Devaluation of the Yuan: China Conducts Yuan Appreciation Stress Tests

Newspaper 21st Century Business Herald, based in Guangzhou City reported today that China is carrying out stress tests on labor-intensive industries to assess the effects a stronger yuan.

This marks a rare discussion in the Chinese media about the real possibility of recovery of the Yuan, amid growing speculation that Beijing may be about to allow the return of currency appreciation. According to initial results of the tests, which focused on exporters of textiles, shoes and toys, each percentage point of appreciation of Yuan would take one point from their profit margin. That would be a serious blow to profitability, since often the net profit margin of exporters is only 3% to 5%, the newspaper said.

The Yuan’s value has been kept at about 6.83 per dollar since July 2008, following a 21 percent advance over three years, as policy makers intervened to help exporters weather a global recession.

Investors interested in currency ETFs can check our Live tracking site. CYB and CNY and two ETFs that track Chinese currency. Since January 2009 they have returned less than 2%, reflecting the pegging of the rate.

Yuan forwards strengthened the most in two weeks after a local newspaper reported that the government is assessing the likely impact of currency gains, fueling speculation appreciation will be allowed to resume.

Yuan's utures contracts indicate that yuan will rise 2.5% from the current spot rate. However, Yuan forwards underestimate the pace of gains in China’s currency, which may strengthen as much as 7% in 18 months, according to Wells Fargo & Co.

Nick Bennenbroek, head of currency strategy at Wells Fargo in New York, said that the central bank may allow the yuan to resume appreciation around the middle of the year and will then seek an annual 6 to 8% advance against the dollar.

Reported by Agencia Estado (in Portuguese).

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Thursday, February 25, 2010

Banco do Brasil Profit is Highest In History For Any Brazilian Bank

For those investing in Brazil, ITUB is the largest one that trades on the NYSE. However, it was the country's largest bank, Banco do Brasil, that recorded in 2009 a book profit of R$10.148B (USD $5.3B), the country's largest ever bank profit. BB only trades on the Pink sheets, under symbols PINK:BDORY - yet. However, ITUB serves as a good proxy.

Profits were up 15.3% compared to the same period last year. The result surpasses the gain of the ITUB was R$10.06B (see table at bottom of page).

The return on average equity in 2009 was 30.7%, below the 32.5% recorded in 2008. The total assets of the BB reached the end of December from $ 708.549 billion, an increase of 36%. This volume of assets confirms the federal bank as the largest financial institution in the country.

The loan portfolio of the federal bank at the end of December was R $ 300.829 billion, indicating a growth of 33.8% over the volume of loans in December 2008. In the fourth quarter of 2009, the bank recorded a net profit from recurring $ 1.819 billion, indicating a growth of 11.9% compared to the same period of 2008. Contributing to this result was the largest volume of loans and revenue from services.

Considering the recurring profit, return on average equity was 22.5% in the fourth quarter, down from 24.5% in the same period of 2008.

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Gold To Drop Until Early/Mid March

INO just issued a new video on gold. The video shows that gold is making lower highs and lower lows, which does not bode well for its near term price. Moreover, the cycle from high to low (between highs) is around 20 days. INO believes gold has another couple of weeks of sideways to down action.

Track GLD ETF, and note that we track miners live.



Watch video "Making Sense of Gold"

Video also shows the Donchian Channel:

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Capital Is Fleeing Greece, Run on Banks

The Wall Street Journal reports that capital is fleeing greece as rich Greeks are withdrawing their money from banks and sending it abroad. They fear government scrutiny on their assets and a run on the banks. Such run would occur if the country turns to the I.M.F., according to private bankers and other people with knowledge of the situation, who say that number of customers are asking to move funds out of Greece (mostly to Cyprus, Luxembourg and Switzerland).

The country has long strugggled with underground economy and undeclared and unpaid taxes. The current fiscal situation means that that underground economy will be a prime attack target. The government suspects that 30% of income is not taxed.

"Part of the government's austerity package for this year is a declaration of war on income that hasn't been taxed. While the government hasn't ironed out details, that's prompted fears among wealthy individuals that there will be new taxes on bank accounts".

"Clients of private banks also fear that Greece may be unable able to raise the €54 billion it needs this year to pay back maturing bonds and will therefore have to turn to the IMF for help.
"Some of our clients are concerned about a run on the banks if the IMF gets involved," said another private banker, this one from a foreign bank. "They believe the situation in Greece will get worse before it gets better. There is also very little clarity from the government about its intentions on new tax measures."

"We estimate that €8 billion has moved out of Greece to accounts abroad since December. It's money from bank accounts, stock sales, property sales and other sources," he said, adding that that represented a substantial chunk of the €30 billion under management in Greek's private banks".

Finance Minister George Papaconstantinou urged Greeks with money abroad to repatriate their money and said the capital will be taxed at a 5% rate. He said those who choose to keep their money abroad should declare their deposits and pay a tax of 8% for the first six months.
Thereafter he threatened that Greece will use all laws at its disposal, such as double-taxation agreements, to ask foreign banks for information on Greek account holders.

"For us this is the first step towards taxing all accounts in Greece," said the chief financial officer of a major Greek shipping company. "The line is minimum deposits here and moving all assets abroad,"

"Money will flow back into Greece when the situation returns to normal. This won't happen for at least a year and there is not a lot of trust for the Greek banking system right now," he added.

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Wednesday, February 24, 2010

China's Growth To Drop to 2%; Top ETF Performer is CQQQ, The Chinese Version of QQQ

Bloomberg Tokyo reports that China’s economic growth will plunge to near 2% in 10 years, following the collapse of a “debt- fueled bubble". This in turn, will cause a regional recession. The article quotes Harvard University Professor Kenneth Rogoff, former chief economist at the International Monetary Fund:

“You’re not going to go a decade without having a bump in the business cycle,” “We would learn just how important China is when that happens. It would cause a recession everywhere surrounding” the country, including Japan and South Korea, and be “horrible” for Latin American commodity exporters".

Note that we track all China ETFs live here.


The top performer on that list is CQQQ, the Chinese version of Nasdaq QQQ.

Rofoff adds that “Their response to the latest financial crisis clearly raised the risk that they have a debt-fueled bubble in the economy,”.

For him, land is “the best bet” as it is “the most common source” of crises. Real estate values in Shanghai and Beijing have “taken a departure from reality.

"A collapse would depress output gains to 2 to 3 percent, a “very painful” period which would persist for about a year and a half, Rogoff said. The slowdown won’t lead to a Japan- like “lost decade,”

"Chinese policy makers are trying to cool lending that helped property prices in 70 cities climb at the fastest pace in 21 months in January. The government aims to reduce new loans to 7.5 trillion yuan this year from a record 9.59 trillion yuan in 2009. The People’s Bank of China raised the proportion of deposits that lenders must set aside as reserves twice this year to cool the economy.

“If there’s a this-time-is-different story in the world right now, it’s China,” Rogoff said in the speech at a forum hosted by CLSA Asia-Pacific Markets. People say China “won’t have a financial crisis because there’s central planning, because there’s a high savings rate, because there’s a large pool of labor, blah blah,” he added.

“I say of course China will have a financial crisis one day.”

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Tuesday, February 23, 2010

Silver is Not Like Gold, Headed Lower or Sideways

INO has a really interesting study on silver (watch). The charts out of their tool show clear cycles, and because the last high was not taken out their conclusions is that silver is currently in a trading range. In fact they think silver will continue to erode or stagnate.

These are the cycles:





The video also explains that silver is not gold at all. Watch video.

Gold and silver are not that related. The one to be at when gold was going higher was... gold.

To trade silver, the best ETF is SLV. Here is the same type chart (since 2006), using the same tool, for SLV (I added Fibonacci levels):



To run the tool yourself on any stock, they have a risk-free money-back guaranteed trial, this link gives 2 months bonus.

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The Brazilian Building Boom Is Only Beginning, Stock To Watch

Gafisa, GFA on the NYSE, is the phenomenal Brazilian builder whose stock has climbed 247% since January 2009. Please see our live tracking of latin-american ADRs:


(please click to enlarge)

While its performance has been extraordinary, the question is whether its performance, and whether actually the Brazilian building boom is sustainable. Comments, in general are quite favorable. Newspaper O Estado de Sao Paulo provided comments and interviews.

It turns out that Brazilians have never bought as much property as they did in 2009, and the trend is that new records will be beaten this year. The country is in living a boom in real estate, however, many analysts say that it is only the beginning since there is a housing deficit of between 6 million and 8 million units.

The industry experienced its best time in recent history. Brazilian banks are looking at alternative ways to fund the expansion. Today, most of the money (about 70%) comes from traditional national savings (The Caderneta de Poupanca), but experts say this source is expected to be exhausted by 2011.

Last year, 302,700 units were financed by savings deposits in a total of R$34B (US $18.9B).

Luiz France, director of Mortgage Itaú Unibanco (ITUB on the NYSE), who also heads the Brazilian Association of Real Estate Credit and Savings lists the factors that explain the recent performance and prospects:

  • legislation changes promoted in 2004. That established the mechanism of liens, which facilitates the repossession of property in case of defaults
  • the long delays in funding for up to 30 years, which allowed the reduction of monthly payments.
  • the stability of the economy.
On one hand, these more stable conditions have paved the way for lower interest rates. On the other hand, increased the purchasing power of the population (as shown in the rise of millions of Brazilians to class C), which reduces the cap. Another factor is the latest government program, "My House, My Life".

In this environment, private banks, which have always been reluctant to invest in real estate, now show great appetite. On average, they predict a 30% to 40% increase in loans this year. In 2009, according to central bank, credit for housing increased by 41.5% against 14.9% of total loans. "We see the mortgage as a driver of overall credit expansion," says José Roberto Machado, the executive director of the Real Estate Business Santander Brazil. According to him, globally, real estate financing accounts on average for 65% of the loan portfolio of the bank. In Brazil, only 5%.

Antonio Barbosa, director of HSBC Mortgage, said that the institution's goal is to increase participation in the segment in coming years. "We want to grow above the market average," he explains. The focus of the bank is in Barbosa calls "differentiated service".

As for Bradesco, the speech is similar. "We want more market," says Nilton Pellegrino, director of the Department of Loans and Financing. The goal is to harness that "there is no citizen in Brazil does not want to have his or her own property."

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Why The NY Fed Prevented AIG Bailout Documents From Being Released. GS Had $17B in CDOs. Would It Have Survived?

Bloomberg reports a shocking article today.

At the congressional panel hearing last month Representative Darrel Issa presented a 5 page document showing and itemizing the mortgage securities on which banks had bought $62.1B in credit-default swaps from AIG. This has apparently slipped below the radar. Incredibly, it is so outrageous.

Says the article:

"These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released".

"The document Issa made public cuts to the heart of the controversy over the September 2008 AIG rescue by identifying specific securities, known as collateralized-debt obligations, that had been insured with the company. The banks holding the credit-default swaps, a type of derivative, collected collateral as the insurer was downgraded and the CDOs tumbled in value.
The public can now see for the first time how poorly the securities performed, with losses exceeding 75 percent of their notional value in some cases. Compounding this, the document and Bloomberg data demonstrate that the banks that bought the swaps from AIG are mostly the same firms that underwrote the CDOs in the first place".

“It’s almost too uncanny,” Calacci says. “If these banks had insight into the underlying loans because they had relationships with banks, originators or servicers, that’s at the least unethical.”
The identification of securities in the document, known as Schedule A, and data compiled by Bloomberg show that Goldman Sachs underwrote $17.2 billion of the $62.1 billion in CDOs that AIG insured -- more than any other investment bank. Merrill Lynch & Co., now part of Bank of America Corp., created $13.2 billion of the CDOs, and Deutsche Bank AG underwrote $9.5 billion.

These tallies suggest a possible reason why the New York Fed kept so much under wraps, Professor James Cox of Duke University School of Law says: “They may have been trying to shield Goldman -- for Goldman’s sake or out of macro concerns that another investment bank would be at risk.”


One can only say "wow". What would ahve happened to GS had AIG not been bailed out. Why was Mr. Paulon was so desperate to get these bailouts going at the time?

Just too outrageous.

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Monday, February 22, 2010

The U.S. Dollar is Erratic: Profiting From the USD Going Up or Down

The US Dollar continues to act erratically in the last couple of weeks. It depends on so many factors and so many unknowns than rather than trying to guess its future direction, investors may use straddles instead.

With straddles, profit can be achieved regardless of direction, as long as the underlying stock moves the necessary amount.

Here are straddles (strangles) for the popular UUP ETF. The moves required where computed with our StraddlesCalc Tool. We show two months: March and April.




The maximum moves required appear to be quite small, but please remember that we are dealing with currencies here, and they normally do not move that much. However, these are not normal conditions. Here is the chart of UUP over the last 6 months:



A move of about 3% means a dollar move of $0.74, either $22.92 or $24.41. As you can see from the chart UUP has reached the lower range, but not the higher range in the last 6 months.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Top 10 Global ETF To Buy and To Sell: Brazil, Indonesia, and Israel Rock

We computed the relative strength of all global (country) ETFs. This provides a very good measure of what is overbought and oversold for a given timeframe.

Here they are:

Top 10 Most Oversold, Long Term:



The most oversold ETFs is FXP, the well-known ultra short China, followed by IXC, which represents the global energy sector. GULF, Middle East, continues to be high on the oversold list.

Top 10 Most Overbought, Long Term:


BRF is the relatively new Brazil small cap ETF, it continues to do very well as it is overbought on the monthly time frame. Next most overbought is IDX, Indonesia. Interestingly, the ETF that cover Israel, EIS, is in thrid position.

You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

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Sunday, February 21, 2010

Credit Markets Are Showing Serious Warnings Signs

Bond vigilantes are battening down the hatches across the world, "bringing the most dramatic credit rally for a century to a shuddering halt". So says the U.K.'s Telegraph today, in an article today by Ambrose Evans-Pritchard.

Gavan Nolan, an analysts with Markit's, says that the Markit iTraxx Crossover index, which measures yields on lower-grade debt, jumped by almost 130 basis points since mid-January to 514, or nearly 34%. In addition, the main index of investment grade bonds has jumped by a third to 93. "This is the biggest move since the financial crisis in early 2009". "The index is a leading indicator so it is a warning signal. This is being driven by volatility in sovereign debt, with Greece being the biggest issue at the moment but tightening in China could be a bigger negative catalyst in the long-term".

According to Moody's, market ructions have led to a "material" rise in borrowing costs over the last month, prompting the cancellation of debt issues by several companies. Sixteen companies wordwide have pulled debt issues worth a $7.3B since mid-January, including Canada's Bombardier, the Dutch energy group New World Resources, Italy's Snai betting group, and UK's Travelport.

"The world has woken up to the real possibility of a double dip. These are nervous times," said Dr. Suki Mann, a from Societe Generale.

"The sudden halt in bond issues is disturbing since companies have been relying on capital markets to raise money as an alternative to Europe's fragile banks. The ECB said on Tuesday that 42pc of small businesses in the eurozone had reported worsening credit conditions in the second half of last year, despite the emergency stimulus of the authorities.

Conditions appear to be deteriorating. Bank loans to companies contracted at an annual rate of 1.9% in November and 2.3% in December. Consumer credit also fell. The Bundesbank fears that disastrous earnings last year will cause scores of German companies to breach loan covenants, triggering a wave of downgrades that further damage German banks and potentially setting off a second wave of the credit crisis.

New Basel III rules intended to force banks to raise risk-adjust capital levels may be making matters worse. The rules are causing weaker banks to cut lending, throwing the 'credit multiplier' into reverse.

Andrew Sheets, a credit expert at Morgan Stanley, said corporate bond spreads have not spiked as far as Greek or southern European sovereign yields, so they may rise higher as the price of risk comes back into alignment. "What's changed over the last two weeks is that valuations have become too rich compared to broader sovereigns," he said."

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Friday, February 19, 2010

Exclusive Stiglitz: 2nd Stimulus Needed, Economy is Very Weak; In the US It is Better to be Speculator Than to Work for a Living



BNN had an exclusive interview with Joseph Stigliz, Nobel prize winner.

He has a very good point, one I have been wondering too If we spent the money in infrastructure and education, the long term debt will be reduced. You will get further growth down the line, generating higher tax revenues. Why waste money on auto makers and bankrupt financials when you an build lasting and economy enhancing projects?

  • Stiglitz is advising the Greek government
  • Economy is very weak, cannot focus on deficit now.
  • US Financial structure encourages risk taking and contributes to the problems. It is better to be a speculator than to work for a living.
  • Big banks are implicitly subsidized.
  • We also have problems with too big to fail hedge funds.

Watch video.

Stiglitz is the author of author, "Freefall: America, Free Markets, and the Sinking of the World Economy."

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Euro Straddles: ROI +115%

Here are the FXE (Euro) straddles results as of 11AM:



Computed with StraddlesCalc Tool

You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool.

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Fed Raises Rates Causing Oil To Drop: Profit From Oil Going Up Or Down

The Fed has raised the discount window rate to 0.75%, causing a major boost to the US dollar and a corresponding drop in the price of oil. Will this be temporary or is it true that oil is still well overpriced at $75?

Here are straddles that allow investors to profit from oil going up or down, regardless of direction, as long as the underlying security moves the minimum amount.

Our favorite vehicle for these is UCO. USO is also shown. I theory UCO moves close to 2 times what USO moves. In reality this is not quite so, but its low price makes it attractive.


(please click to enlarge)

Computed with StraddlesCalc Tool. The aActula move needed may be smaller if there are still several days to expiration, as is the case now for March and April.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Thursday, February 18, 2010

The Perfect Portfolio For Conservative Investors (Not Day Trading)

INO is giving a "Perfect Portfolio" Webinar this Friday, Feb. 18. The seminar covers in detail a hypothetical portfolio for a conservative strategy.

"This set-up is "perfect"for those of us who don't want to look at our brokerage accounts every day. The Perfect Portfolio seminar covers 4 ETF's and looks at each and also covers the strategy used to trade them. In order to register for this free web seminar which is available to all readers free, simply visit this link.

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German Tax Payers Will Not Pay for The Mistakes of Greece: No Euro Should Go To Greece

"In Germany, politicians say that the German taxpayers will not pay for the
mistakes of Greece.

Horst Seehofer, leader of one of the parties forming the coalition of
Angela Merkel, insisted: "No euro should go to Greece."

Greece needs 53 billion this year to cover its hole."


Reported today by Brazilian newspaper O Estado de Sao Paulo.

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The Carry-Trade at Full Steam: Using Yens to Invest in Brazilian Real

Japanese Fund manager Japan Toshin will offer next week to retail investors a fund through which they can invest in the Brazilian currency and other emerging market assets, according to a report published by Brazilian newspaper O Estado de Sao Paulo.


More than 80% of Toshin funds are targeted at emerging markets, with Brazil and Asian countries being the main targets. The offer to be launched next week is officially estimated at U.S. $43B. This projection, however, is always made well above the capture actually expected as the fund owners have a higher cost if the limit set is exceeded.

Japanese interest rates are currently at 0.1%, while Brazil's are at 8.75%, and expected to rise soon.

Chart of global rates:

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Wednesday, February 17, 2010

Euro FXE Update: ROI +40% In One Day - Currencies used to be Boring, Now They Are Wild

Who would have thought that boring currencies could return 40% in 1 day. Here are updated straddle results for FXE, as of 2:50PM:



The Euro could have gone anywhere, that's the beauty of straddles.

Currencies are just chaotic, a sign of the times.

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Profit From The Euro Going Up or Down

FXE has rebounded sharply, apparently due to concerns over Greece greatly diminishing. Those concerns are still quite valid in my opinion. What will the Euro do, will it rise further, or fall down again?

Here are straddles (strangles) for FXE for February and March. With straddles an investor can profit regardless of whether the underlying stock goes up or down, provided it moves the minimum necessary amount.



Computed with our StraddlesCalc Tool. The actual move required may be smaller, particularly for March options. The February versions, although requiring only a move of about 1%, have the risk of both ending up worthless if FXE ends up between $137 and $138. This is a very risky move for this month.
Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Tuesday, February 16, 2010

Goldman Sachs Chief Global Analyst: Chinese Currency to Appreciate Very Soon

Appreciation of the Chinese currency could occur soon, says Jim O'Neill, head of global economic research at Goldman Sachs, in interview to AE (in Portuguese).



"I personally believe that we are nearing the time when they will consider moving the currency" said the executive, who coined the term BRIC in 2001 to designate the group of large emerging Brazil, Russia, India and China.

We track foreign currency ETFs live here. In particular, CNY, CYB, track the Yuan and Renminbi. here is their comparison chart.



O'Neill says that the Chinese do not want to appear to the world that they are following what has been said to them, with regards to the issue of managing their currency, especially with regards to the United States, since the two countries have a delicate relationship in this arena. The executive estimates that the management of monetary policy has been complicated by persistent speculation related to a revaluation of the currency. However, in light of concerns of overheating and inflation in the country, O'Neill believes the interests of domestic and international policy in the country are closer than they had been a long time:

"I think they are considering allowing a renewed appreciation to leave speculation behind and can concentrate on the underlying priorities. These priorities, he exemplifies, are to strengthen domestic consumption, the cost of part of exporting component of the economy, and improve efficiency in energy use.

O'Neill sees the increase in reserve requirements implemented on Friday, the second since the beginning of the year, as a direct consequence of the strength of the Chinese economy. Economic growth was from the beginning of the year, and is still around 12%, a rate "consistent with an economy overheating," he pondered. He estimates that the equilibrium level of Chinese growth is between 8% to 10%. In the evaluation of the executive, the Chinese are satisfied with stimuli that they successfully implemented this same time last year and do not want to slow the economy dramatically. "They want to just stop being over-heated.

No asset bubble

The economist does not believe, however, that there is an asset bubble in the country. For example, he points out, the government is adopting a series of measures to prevent price increase in the local housing market. The Economist points out that raising interest rates for loans of one year, which is considered the reference rate of the Chinese monetary policy, is meaningless if there is a movement in the currency.

"I believe that will not raise rates until they are really ready to accept that the currency needs to appreciate what can happen at any time. I would not be surprised if it happens tomorrow or the next few weeks, " he added.

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Monday, February 15, 2010

The Top Leveraged ETFs In The Market To Buy and To Sell (And Also Affected by Greece and the Euro Zone Woes)

The Germans want to throw Greece out of the Euro zone. The situation in Greece is affecting leveraged ETFs.

We track 71 leveraged ETFs that trade in the US. Here are the relative strength indicators of all f them for three time periods, daily (short term), weekly (medium term), and monthly (long term).

Short term, top oversold:



URR and ULE are the top two most oversold in this time frame. Not surprisingly, both are ultra long Euros.

Short term, top overbought:



The two top overbought are, again, not surprisingly, ultra short Euros, EUO, and DRR.


Long term, top oversold:



In the longer timeframes, the two top oversold ETFs are the infamous FAZ (short financials) and GLL (short gold).

Top overbought:



The top overbought in this timeframe are UGL (long gold) and UGE (long consumer goods).

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

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Sunday, February 14, 2010

Roubini Says The Problems of Greece and the Euro Area Are a Sign of Things to Come: Sovereign Risks To Spread to U.S., U.K., and Japan

In a teleconference with investors, Nouriel Roubini, professor at the University of New York, says he sees a new wave of losses. He was adamant: "The problems of Greece and the euro area are a sign of things to come,". This was reported today by Brazilian newspaper O Estado de Sao Paulo.

Perhaps on a media offensive lately, Roubini adds:

"There was a socialization of the losses of the financial system and housing market, and now there are huge budget deficits and public debt almost doubled, so we see sovereign risk serious not only in Greece but also in Portugal and Spain, and spreading in the future to the United States, Britain and Japan."

The article mentions that, as we know, Roubini is not alone. Kenneth Rogoff, Harvard professor and former chief economist of the International Monetary Fund (IMF) issued a warning as well stating that Greece is just the beginning of a second wave of bankruptcies. After the financial turmoil of 2008, now it is the excessive indebtedness of the governments of advanced countries that will undermine the economy. Rogoff examined 800 years of financial crisis to write his book "This time is Different: eight centuries of financial folly", with Carmen Reinhart. "There are several other countries on the radar: Ireland, Portugal, Spain,". Outside the euro zone, Romania, Hungary and the Baltic countries would be other nations that are quite fragile.

He concludes that the pattern is repeated throughout history: after banking crises like the one in the world in 2008, after Lehman Brothers, there is always a wave of sovereign debt crises. To save the financial systems, governments enter into debt. A few years later, there is a wave of crises and sovereign debt defaults. That is, after a crisis in the financial system, there comes a crisis of sovereign debt.

Niall Ferguson, writing in the Financial Times last week, swelled the chorus of pessimists. "It started in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to think that the crisis of sovereign debt under way will be confined to weaker economies in the euro area. This is more than just a Mediterranean problem. This is of a fiscal crisis of the Western world, "wrote the influential professor of economic history at Harvard University.

Rogoff and Carmen in January published a study that serves as a continuation of his book Growth in Time of Debt. Even in countries where a sovereign default is not likely - Great Britain, USA and Japan - the debt has increased so much that these nations will have anemic growth for years. According to Rogoff, when the debt approaches 90% of GDP it acts as a brake on growth. "These countries have growth below potential over the years." According to the economist, the level of indebtedness of the countries most affected by the crisis has risen 75% since 2007.

Greece and Italy have debt exceeding 100% of GDP and Japan, over 200%. By 2014, Great Britain, USA, Italy, Germany and France will have debts between 90% and 100% of GDP, and in Japan, the debt will exceed 240% of GDP.

The U.S. is not near anything like a default. And with Europe more unstable, more investors should park their money in U.S. securities, facilitating the financing of the monumental debt of $ 12.5T. Still, the situation in the medium term is scary. According to recent projections by the White House, the budget deficit this year should be within 11% of GDP. The Chinese have significantly reduced the purchase of U.S. bonds. In 2006, they bought 47% of newly issued securities, in 2008, 20% and last year, only 5%. Morgan Stanley estimates that the yield of the 10 years tresuries will rise from 3.5% to 5.5% by the end of the year. And last week, the Moody's warned that the AAA rating (highest possible) in the U.S. should not be regarded as assured.

Fitch in its report of December 2009, said that to maintain the AAA status, countries must "implement credible plans for fiscal consolidation and need to generate primary surpluses to maintain investor confidence, in addition to maintaining low and stable inflation".

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Friday, February 12, 2010

Gold is Now in a Trading Range

INO's latest educational video explains the current situation with gold, and shows that it is now in a trading range. The monthly and daily alerts are BUYs, but the weekly is a SELL.

Lots of information in the video.

Watch video.

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Roubini: Another Hard Landing Coming, Dollar Will Not Weaken Much From Now On, Where Will the Growth Come From? It Won't



After China has tightened lending again, Nouriel Roubini was on CNBC today just putting it all on the table. It's a lot of cold water for those who think the economy will recover nicely.

Some points:

  • The question is whether China will have a soft landing or a hard landing. There were two episodes of China tighteninglatelty, in 2004, when there was a soft landing, and in 2007, when there was a hard landing. He thinks this time it will be like 2007.
  • The reported 5% GDP growth was due to inventories
  • US growth will slow down in 2nd half of the year as stimulus dies down
  • Dollar will not weaken much, where is the growth coming from?












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Societe Generale: Euro Zone Headed For Break-Up

Societe Generale SA strategist Albert Edwards says that the overvalued Euro is suffocating Southern European countries by low competitiveness. This situation will lead to the break-up of the euro bloc.

The report by Bloomberg says that the problem for countries including Portugal, Spain and Greece is that years of inappropriately low interest rates resulted in overheating and rapid inflation.

Year of Deflation Needed

Edwards says that "even if governments could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable break-up of the euro zone.”

We may want to reconsider all that recent talk about unity and not allowing Greece to default.

That unity talk surfaced again today. Tommasso Padoa-Schioppa, a former European Central Bank executive board member and Italian finance minister, "said today there was no possibility of a partition of the euro-zone". “I don’t think there is any prospect for such an event and I don’t think it makes much sense to talk about it,”.

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Greece is not Alone, Japan and USA are Also Close to the Edge

Japan and the U.S. are close behind Greece. That's the opinion by some elsewhere in the world. Well-known journalist Celso Ming comments on today's O Estado de Sao Paulo:

"The preparation of a package to aid Greece by the great powers of the European Union, especially Germany and France, is already confirmed. The only unknown is exactly what is inside. In any case, the strong imbalance in the finances of Greece is recognized and that something must be done to not infect the euro and the whole European block.

The problem is that Greece is not alone. Maybe it is the worst case. But other countries, even outside the European Union - and not as small as Greece - are in very similar situation. Japan and the United States are very close to the precipice and this is not people interested in taking advantage of any kind of financial speculation that touted concerns about it.

Two weeks ago, the president of the European Central Bank Jean-Claude Trichet, considered it necessary to warn that the situation in these countries is not very different from that of Greece and Portugal. This was not just an attempt to make the EU the focus of the spotlight. The poor financial conditions of some big powers are no less worrisome.

This means that, once solved the case of Greece, the capital-hander will look for another source of speculation to see how you can profit from it".

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Thursday, February 11, 2010

Is Greece Tomorrow's Brazil?

Journalist Josue Leonel had a great piece on Brazilian newspaper O Estado de Sao Paulo. While developed nations can be considered doomed as there will be no real growth here for many years, the growing developing economies also have their share of issues which must be acted upon by governments. If not, many other Greek tragedies will unfold. Something to keep in mind.

"One of the novelties of the crisis unfolding since 2008 is that it changed sides compared to ones in the past. In the Asian crisis of 1997, for example, the epicenter was Asia and the contagion hit especially developing countries, recently baptized as "emerging", such as Brazil. This time, geography has changed. The epicenter of the crisis was the U.S. and the impact was harder in the rich countries of Europe and Japan, and peripheral countries in this area, like those of Eastern and Southern Europe, are the hardest hit.

More recently, Greece has emerged as an economy threatened with collapse, while other representatives of "old Europe", as Portugal, Spain and Ireland are also the target of speculators. Brazil seems to navigate through less turbulent waters. Thanks in part to the maturity of structural reforms particularly in the 90's and to the cumulative effect of 20 years of economic liberalization, but also because the country is now the beneficiary of the impulse provided by China, which increased global demand for commodities to a new level and gave the producers of basic commodities a unique position in the game of global forces.

While this current arrangement by the Chinese force prevails, it is possible that the Brazilian economy continues to perform better than the world average. No wonder, therefore, the enthusiasm of large international financiers such as Mohamed El-Erian (Pinco) and Mark Mobius (Templeton) with the opportunities in the South American giant.

It should not be overlooked, however, that many of the shortcomings pointed out by analysts for the countries of southern Europe today are similar to those pointed out by Brazilian experts, especially those of more liberal view of the economy. When figures for Brazil today are compared with those from Greece, the differences are striking, and generally favorable to Brazil. In the current picture Brazil appears much better. When you imagine all the variables defining its evolution, however, is difficult to ensure that the Brazilian economy will not face similar problems in future.

Greece shocks investors with a public deficit of 12.7%, almost four times larger than the nominal deficit of 3.3% registered in Brazil in 2009. This is the current picture and should not change much in coming years in the Brazilian case. However, this apparent fiscal austerity in Brazil has been carried out since the late 90's by a strong increase in taxes and an inflated revenue by economic growth, not the control of expenditures. By contrast, spending on civil service, for example, rose well above inflation in recent years.

As reported on Tuesday the newspaper O Estado de S. Paulo, the public server payroll increased from 4.54% to 5.11% of GDP from 2006 to 2009. While the government talks about limits to the inflation adjustments, new projects in Congress extend the costs. These costs, once approved, become irreplaceable, because the law prohibits wage cuts, while the increase in revenues, as seen by last year's example, has no guarantee that will be repeated in the future.

The budget becomes inertial on the expenditure side, but never on the revenue side. In Europe, governments are often criticized for the high expenditure of the State, that, to be funded, require a very high tax burden by the standards of other rich countries of the Americas and Asia. In Brazil, the load, estimated at 35% of GDP, is also considered high. For entrepreneurs, the cost of taxes is amplified by the heavy bureaucracy, another common point between Brazilians and Europeans. For ordinary people, high taxes mean much more than evidence of any electronics that costs two or three times more here than in New York or Miami. Due to the low quality of public service, the middle class has to resort to expensive private services of health, education and even security, making the load "real" exorbitant. Thus, it is possible to imagine that, politically, to use tax increases to remedy any tax problems in the future will become a task, at least more difficult.

Saved the proper proportions, the pension deficit is also among the item of public accounts which bring together Brazil and Greece and other Europeans. Not surprisingly, the Greek government has announced it will adjust the average age for retirement to 63 years in 2015 as part of measures to reduce the fiscal deficit. Today, the average age for men is 65, but for women it is 60 and the European Union pressing the country to reduce this gap, it would generate wide deficit, because women live longer men. The Brazilian situation is similar ad in some respects worse. Here you can retire based on time of contribution, which lowers the actual age of retirement by 10 years or more. Brazil already has a high pension deficit and tends to increase gradually with the continuous increase in life expectancy, now at 72 years. The Greeks live their social security crisis with a muhc gerater life expectancy, 79.5 years.

Compared to the Greeks, Brazil is betetr in terms of current account deficit. In Greece, this deficit is 11.9% of GDP, while Brazil expects 2% to 3% in the foreseeable future. The Brazilian deficit, however, is on an upward trend. It was $24 billion in 2009 and, according to research firm Focus, will double to $ 48 billion this year and reach $ 59 billion in 2011.

That is, the movie is not as good as the picture.

The fact that Brazil has a floating exchange rate itself, while the Greeks use the common currency of the euro area, lends greater flexibility to external accounts. If the deficit worsens, the dollar goes up and boosts exports, and vice versa. This fluctuation, however, has a cost. The higher dollar can help drive up inflation and the market is forecasting a rise in interest rates which emphasizes an issue inherited from the most unstable periods in the Brazilian economy: a high concentration of debt into floating-rate securities (SELIC).

Other parallels between Brazil and Greece are less favorable to Brazil. One is that, in extreme cases, Greeks and other inhabitants of the least wealthy of Europe have the safety of having very powerful potential saviors, such as Germany, France, the European Union and European Central Bank. Here in Mercosur there are more members asking for help than there are rescuers. It was for no other reason that the markets have been so patient for so many years with the Europeans and waiting for the deficits to reach the levels demonstrated today.

In Brazil, fiscal and current account deficits higher than today, but much smaller than those of European countries, were enough to cause acute crises in the past. Aside from the energy crisis of 2001, almost all the crises of the Brazilian economy, of moratorium of 80 years to maxidevaluations of 1999 and 2002, had the components or the fiscal account deficits - or both.

That is, the tragedy suffered by the Greeks today is not totally foreign to Brazil. Its ingredients also existed and exist here, but are still of little threat.

The good news is that we have time to act. The bad news is we do not talk seriously about it".

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Wednesday, February 10, 2010

U.S. Banks Exposure To Weak European Countries: $176B

With information from O Estado de Sao Paulo.

The biggest U.S. banks have a total of $176B in exposure to four European countries whose debt problems are of concern. According to a report by Barclays Capital, 73 large U.S. banks have exposure of $82B to Ireland, $68B to Spain, $18B to Greece and $8B to Portugal.

Concentration in the 10 largest banks

The report states that the level of exposure is relatively low and suggests that banks face limited risk because much of the amount has collaterals. "Most of this exposure, including secured transactions at low risk as repurchase agreements, is concentrated in the 10 largest U.S. banks.

"Overall, exposure to these four countries represents approximately 5% of total foreign exposure of U.S. banks,"

Only two major U.S. banks - JPMorgan Chase and Bank of New York Mellon - disclose exposure to each country. Citing the annual reports of banks, JPMorgan has $ 18.4B in exposure to Spain and BNY has $ 2.32B in exposure to Ireland.

"Concern about the credit of Ireland, Greece, Portugal and Spain is high," notes the report. "Lately it has affected the spreads of banks, which remain volatile and sensitive to the tolerance of the market risk,".

Although "The direct risk of large U.S. banks related to Ireland, Greece, Portugal and Spain to be modest," Barclays said that "the sovereign risk is regulatory risk supplanted as the main focus of the bondholders of the banks."

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Red Bull Formula One Car

Foemula One means billions of dollars business. Red Bull team presented its car for the 2010 season today:


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Greece: Straddles to Profit From the Collapse of the Euro

Analyst John Mauldin reported on Greece and the Euro, basically portraying a no-way out situation, one where the options are to kick Greece out, a default, or other equally devastating exits.

One where the Euro would collapse.

"What could a political solution be? The answer here is simple: there is none. So if Europe wants to save Greece from hitting the wall towards which it is now heading, the European commission, the ECB and/or other institutions (IMF?) will have to bend the rules massively. In turn, this will likely lead to a further collapse in the euro. But for us, an important question is whether it could also lead to a serious political backlash. Indeed, at this stage, elected politicians are likely pondering how much appetite there is amongst their electorate for yet another bailout, and for further expansions in government debt levels. The fact that the intervention would occur on behalf of a foreign country probably makes it all the more unpalatable (it's one thing to save your domestic banking system ... but why save Greece?)."

"If Greece is bailed out, Portugal and Ireland will ask "Why not us?" And Spain? Italy? If Greece is allowed to flaunt the rules, what does that say about the future of the euro? Will Germany and France insist on compliance or be willing to kick Greece out?"


The Euro has taken a bad beating lately, whether it recovers or collapses, straddles allow an investor to profit either way.

Here are February and March straddles (strangles) for the popular FXE ETF that tracks the Euro:



Many thanks to 'Crash' for pointing out an error on the Feb options. Straddles have been updated with prices as of 9:35AM.

Computed with StraddlesCalc tool, which shows the maximum moves needed to achieve profitability.

This is not advice. Options are dangerous and may cause 100% loss. Please do you own due diligence.

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Shocking U.S. Spending vs Revenue Chart

From the White House Office and Management and Budget:


(please click to enlarge)

Shocked...

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Brazilian Gafisa's Public Offering Raising $0.5B


(please click to enlarge)

Gafisa, GFA, is one of the darlings of the Brazilian stock market, having skyrocketed 198% since Jan 2009.

The table above shows the return of the Brazilian ADRS, taken from our live tracking of all latin-american ADRs site.

The company is working a new share offering that is being well received by analysts who follow the construction sector. They see in operation the a way for the company to reduce its leverage and ensure growth in a promising scenario for the Brazilian housing market.

The company expects to raise R$900M to $1.1B, USD $0.47B to USd$0.58B from its primary offering, which should be completed in the first quarter, said chief financial officer, Alceu Duilio Calciolari on a conference call with analysts on Tuesday.

35% of the funds will be used for the purchase of land, 25% for working capital, 20% for new projects, and 20% for partnerships and strategic acquisitions. "A stock offering will give us the opportunity to comfortably fund our business objectives in the coming years, while enhancing our current capital structure," said Gafisa's, Wilson Amaral. Last year, Gafisa expressed in June its desire to issue new shares to strengthen its cash up to R$700M. In July, however, the company withdrew its offer due to market conditions at the time. In December, the company announced the issuance of R$600M in debentures.

Several other builders eventually issued shares in 2009, including Cyrela Brazil Realty, Rossi Residencial and PDG Realty. That left Gafisa at a level lower than its competitors. Gafisa in December had net debt and obligations of investors with R$2B. "The leverage of the company is very high, and this can only be equalized if there is a capture like this," said analyst Christian Hees, Brascan brokerage firm. "There is a great need for new resources, and expectations for the sector are very good. Gafisa can no longer be left behind," Hees said.

According to Brava Investments, Gafisa chose to announce the offering of shares only after the quarterly earnings release and with already consolidated figures for the Tenda Construction acqusiition, so that the market had access to updated information. "The time (for a stock offering) is not the best, but the Bovespa at 64,000 points is at a good level," said a member of the staff analysis of Brava, referring to the recent turbulence in global equity markets.

The effective value per share in the provision of Gafisa will be fixed according to market conditions during the pricing. According to the chief financial officer of Gafisa, the targetted company releases of between R$4B to $5B in 2010 is feasible even if the stock offering is not successful. However, according to Brascan, the company already assumes that it will succeed in the stock offering.

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Tuesday, February 9, 2010

Gartman: Commodities To Drop, European Union Set To Implode



Dennis Gartman says a market correction is coming and explains the benefits of sitting on the sidelines. He also says he's shorting commodities, as prices will fall, therefore you should buy... restaurants.

He does not believe the world is coming to en end, and thus is not so keen on gold.
Last but not least, he says the European Union is set to implode. Problems are structural and will last a long term. Germans remember how tough it was to bail out East Germany, they will not bailout others. He is short Euros agains CAD and AUD.

We follow all currency ETFs on the market live here.


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Report: Goldman Sachs Helped Greece Hide Deficit - Through Derivatives

German magazine Spiegel reports that Goldman Sachs' creative accounting helped the Greek government to hide their true deficit, through the use of... derivatives that legally circumvented the EU Maastricht deficit rules.

But in the Greek case the US bankers devised a special kind of swap with
fictional exchange rates.

However, at some point in the future these currency swaps will mature and will inflate the country's already huge deficit.

The number crunchers at Eurostat, the European Union's statistical office, are very annoyed withGreece. Investigative reports state that important data cannot be confirmed or has been requested but not received.

Says the article:

"Creative accounting took priority when it came to totting up government debt. Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent.

The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.
Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.

Fictional Exchange Rates

Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.
In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.

At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.
The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment".

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Stiglitz: The Prospects of Sound Recovery of The Banking System are Very Bleak


Bloomberg reports that Nobel laureate Joseph Stiglitz thinks that the prospect of a default by the U.S. or the U.K. is an absurd notion constructed in financial markets. However, the says that banks recovery prospects are very bleak.

Speaking in London, Stiglitz says that both the U.S and the U.K. deserve to keep the Aaa rating and the likelihood of a default is very small, particularly in the U.S. "because all we do is print money to pay it back,” “The notion of a default is so absurd, it’s another reflection of the absurdities in the financial markets.”

Moody’s Investors Service (rating agency) says the grade may face pressure without more action to cut the budget deficit, Stiglitz said the economy requires more stimulus right now.
More stimulus needed

“What we need now is a second round of stimulus,” as well as action to aid over-indebted homeowners; “if we don’t, the heavy level of indebtedness is going to press down on the economy.”

Europeans countries under attack

“Europe should show some solidarity to the countries that are being attacked,” adding that there are some very big bumps in the road ahead for financial markets.

While banks are generating profits, “very little of it comes from lending, a lot of it comes from speculative arbitrage,” “The prospects for a sound recovery of the banking system are very bleak.”

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Monday, February 8, 2010

If the U.S Were a Corporation Its Credit Rating Would be Junk

Marc Faber's colorful interview with Bloomberg: If The U.S. Were A Corporation, Its Credit Rating Would Be Junk. Watch directly at Bloomberg TV or below:

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Profit From Trading Currency ETFs

Today we look at two popular currency ETFs: FXC (Canadian dollar) and BZF, Brazilian real. These have become quite popular after the near-collapse of the US dollar in 2008, and it is easy to see why.

We track all currency ETFs live here.

Here are the charts showing the monthly buy and sell alerts for both ETFs (please click to enlarge):





By following the red (sell) and green (buy) triangles, you can have good idea of the results.

These are the results of the alert signals for $10k initial investment in each of the ETFs.


(please click to enlarge)

  • BZF's ROI is +45.05%, compared with a loss of 1.99% for a buy and hold strategy.
  • FXC's ROI is +37.26%, compared with a gain of 5.95% for buy and hold.
Again, as shown in other back testing results, the tool has worked quite well for currencies.

If you wish to try the tool on any stock or ETF, please use this link (and get 2 months free).

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Teck Reports Today: Straddles to Profit Up or Down

Tecl Resources Ltd., TCK, reports earnings after the close today. The stock has gone up in anticipation and is trading around $33.03, about 4% higher than Friday.

These are February straddles to benefit in case of surprises:



Computed with StraddlesCalc Tool. If the stock moves roughly 9%, then the position swill be profitable.


Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbol in the Technical Trend Analysis Tool.

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Sunday, February 7, 2010

Top 30 Most Attractive ETFs to Buy and To Sell out of 800+ ETFs

The recent market drop had caused significant changes in the valuation and the relative strength values of ETFs.

We computed the relative strength levels of all ETFs on the market. These values provide a very good indication of overbought and oversold levels.

By looking at the daily, weekly, and monthly values an investor can select the appropriate investment horizon, short term, medium term, and long term respectively.

Here they are ordered by RSI daily (short term), for 60 ETFs, 30 oversold and 30 overbought.

Top 30 Most Oversold:


With a daily RSI of 6.24, which is near a record low in recent memory, EMB is the most oversold in the short term, it represents Emerging Markets Bonds.

Next is the PNXQ, which I only mention because it is a rather interesting ETF that tracks NASDAQ Q-50 index, designed to track the performance of the 50 securities that are next in line to replace the securities included in the NASDAQ-100 Index. PNXQ is very illiquid.

Following those we have EU, a Euro tracking ETF. This is a sign of the recent troubles and concerns over European nations.

Top 30 Most Overbought:



In the most overbought category we have EUO, which is an ultra short Euro ETF.

2nd most overbought at the moment is ZSL, an ultra short silver.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Here are all the ETF names and their average trading volumes (as reported by Google):


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Saturday, February 6, 2010

Chocolate Anyone? The Top Commodity ETFs to Buy, (Chocolate ETF is Oversold)

There is no better excuse to buy chocolate now.

We computed the relative strength levels of all commodity ETFs and ETNs on the market. These provide a very good indication of overbought and oversold levels.

By looking at the daily, weekly, and monthly values an investor can select the appropriate investment horizon, short term, medium term, and long term respectively.

Here they are ordered by RSI daily (short term):

(please click to enlarge)

Most oversold are

  • NIB: Cocoa
  • PWND: Is wind a commodity? Well, PWND is oversold.
  • RJZ: Metals
  • JJU: Aluminum
  • JJT: Tin

There are no overbought ETF in the short term, in fact in any timeframes. Investor beware.

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Friday, February 5, 2010

SPX Loses 34 Points, Previous Drops Over 30 Points In 2009 and 2008

The S&P 500 (SPX) lost 34.11 points from the previous close. The previous 30+ point drop had been on April 20 2009.

These are the last major drops since early 2008. All drops greater than 30 points or greater than 3.11% are shown below.

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Thursday, February 4, 2010

Markets Are Tanking: 1066 is the Level to Watch

This is a great video on today's market situation. SPX (click for alerts), the S&P500 index, is currently at 1070:

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Roubini on Greece's Impending Default Crisis

The markets are falling hard - again - in great part due to the impending Greece default/bailout.

Nouriel Roubini, Dr. Doom, wrote a piece on Forbes magazine in whih he says the credibility of the euro and European institutional arrangements is on the line.

"At their Jan. 18, 2009, meeting, eurozone finance ministers kept pressure on Greece to fulfill its commitment to cut its budget deficit below 3% of gross domestic product by 2012. In February the eurozone finance ministers will more fully evaluate the country's spending plans and recommend a timetable for Greece to trim its deficit, estimated at close to 13% of GDP in 2009.
Since the eurozone is a monetary union with a no-bailout clause rather than a political or fiscal union with the associated fiscal federalism, budget cuts to contain the explosion of Greek public debt are urgently needed. In 2010 a sustainable fiscal adjustment must be delivered to restore policy credibility, market confidence and ECB/EU member-state solidarity".

Roubini says that the current and latest default crisis was trigegred by three coinciding events:

1. Greece's sharp budget deficit revisions from as low as 3.7% of GDP to 12.7% in October,
2. the announcement of the beginning of the ECB's exit strategies,
3. the Dubai default

"While in March spreads were broadly driven by a common systemic risk factor, the latest spike bringing Greek yields and CDS spreads to new highs is mostly a country-specific story, brought to light by a change of government and the revelation of far larger budget deficits than previously known and a severe cyclical and structural deterioration in public finances. In tackling the deficit, Greece faces a Hobson's Choice: whether to accept social pain with financial and economic stability, or instability. Whatever it chooses, Greece will face economic pain and difficult socio-political fallout. Deep spending cuts or tax hikes, which comprise the bulk of Greece's current plan, will curb or even derail recovery, perhaps inciting social unrest. But if the debt becomes un-financeable in the primary market or if Greece elects to exit the euro and devalue and re-denominate its liabilities (a la Argentina), this could render its banking system insolvent and tip it into economic and financial isolation and decline, also with dire socio-political consequences.

While a buyers' strike has been averted for now with Greece's successful auction of five-year government debt at 6.2%, the additional yield investors requested was substantial. The possibility of a buyers' strike in the primary market in the future may further test Greece's political commitment to fiscal adjustment and economic stability, as demanded by its treaty obligations and the strictures of a currency union.

Going forward, once Greece has delivered what the EU Commission, ratings agencies and stakeholders in the markets judge to be an adequate pound of flesh, we expect the ECB to take on a more constructive stance, especially in view of the stricter collateral requirements that will be put in place by the end of 2010. The risks of not doing so would entail a judgment that Greece could, in theory, be surgically removed from the eurozone without starting a domino effect in other countries with high or escalating public debt burdens, some of which are far larger economies and hence could have an impact on the regional and global financial and economic systems. Alternatively, a sovereign upgrade to A- by two ratings agencies after the budget effort meets approval could also be part of the solution".

The endgame

Roubini expects "the extraction of a pound of flesh and a bit of a fiscal compromise that together restore debt sustainability". He states that will require a combination of further sharp fiscal adjustment, like Ireland and a signal of support from the ECB. In response, CDS spreads will peak, and improved signals from the ratings agencies will bring cash bond yield spreads back down to earth.

"Over the longer term, of course, there is no alternative to tackling the competitiveness deficit in Greece and in other member countries as well".

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Having Fun With The Toyota Shameless Media Pounding

While the media keeps shamelessly pounding TM, here are our previous straddles results, as of 10AM:

This is fun!

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

Computed with StraddlesCalc Tool

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Not Too Hot, Not Too Cold: UNG Straddles To Profit Either Way

Natural gas storage inventories will be published at 10:30 today. We have had very cold weather in the East, but has it been the same in the west? Temperature has an effect on natural gas drawdowns.

This is the current chart, ahead of this week's inventories, comparing 2009 with 2010 levels:


As can be seen, levels have come down significantly, from the well-above average that they were until late last year.

Regardless of direction, temperatures, or storage levels, straddles can profit, either way up or down, as long as the stock moves the required amount. Here are the February versions for UNG, with prices as of EOD yesterday:



100% loss. Computed with StraddlesCalc Tool



Please do your own due diligence. This is not advice. Options are very dangerous and may cause

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Wednesday, February 3, 2010

Feasting on Toyota Straddles: Profit of +29.4%

On January 28 we posted the straddles for Toyota Motors, TM. Here are the current results, for February to July months:

(please click to enlarge)

All positions are profitable. As expected, the current month options offered the largest gain, at +29.41% in one week. This is followed by March position, at +25.97%. Even the July position is profitable at +8.19%.

The campaign against Toyota is going on strong, the beating goes on. The obvious beneficiaries are Ford and GM. Please remember that last quarter Ford boasted of a profit, but most of its profit was from credit operations (a la GM in the past). Investors should be extremely concerned with this campaign against Toyota. I believe the company will be eventually vindicated. As usual, straddles are one the best ways to play, profiting if the stock goes in either direction.


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Straddles computed with StraddlesCalc Tool

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