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Reported by all major news sites today:
"WASHINGTON (Reuters) - U.S. regulators are working with the top 19 banks on Tuesday to put the final touches on the results of regulatory stress tests,..."
How is it possible that the regulators are working *with* the convicts? You can only wonder if this is only to find a palatable sentence. This is just another example of the current bizarre state of affairs we are in. How can any of these stress results be believable or useful?
Here is an update of the most overbought and most oversold companies in the S&P500 by RSI7 and RSI14 (relative strength indicator for 7 and 14 days).
Most oversold:
(please click to enlarge)
Most overbought:
There was an excellent letter by James Craig to the Ottawa Citizen last weekend "McGuinty fiddles with GM while Nortel's fire sale burns". Mr. Craig is a former President of the Broadband division at Nortel. He argues that while the governments are so intent in saving the car industry, it does nothing to keep Nortel and all its benefits to Canada. While his main target is the Ontario government, the same argument applies to the Federal governent which has apparently now acquired a stake in Chrysler, a company that may still well soon be cease to exist given the illegality of the proposed deals to save it.
At this point the number of employees that remain with Nortel is comparable with those of GM in Canada, and both companies generate other employment and business through suppliers and 3rd parties, but this is not the only important factor. Sure, management made many mistakes. The fact is however, that Nortel spawned the launch on thousands of high-tech companies in Canada, generating in turn many thousands of employees, and taxes. Equally important, Nortel made Canada achieve countless advancements in technology. This is all about to end and is something that will be extremely difficult to be replaced or repeated.
From a speculative point of view, Nortel's divisions will be sold at any moment now. Some of these divisions will fetch a large sum of money. The price of the stock will likely pop on the news. At $0.23, it is a good (unfortunately) speculative stock.
"J. A. Craig, a former senior Nortel executive, writes that Premier Dalton McGuinty should consider an equity stake in Nortel to help save the Canadian company.
Photograph by: Pat McGrath, The Ottawa Citizen, The Ottawa Citizen
Re: End game at Nortel, April 29.
Jim Bagnall's excellent exposé of the Silence of the (political) Lambs during this death spiral of Nortel, is all the more irritating considering the support that is being thrown at General Motors, which, like Nortel, is suffering from a "self-inflicted" wound.
Nortel's wound is the incompetence of the executive management, not the world class technology the Ottawa R&D teams continue to deliver. At least Nortel has a leading edge portfolio and brand name recognized worldwide, for decades, as being competitive with the best.
General Motors for years peddled an uncompetitive portfolio in North America alone and sported unenlightened management. Nortel is a Canadian company; GM Canada is a subsidiary of a U.S. corporation. Nortel's jobs are high tech; GM's are assembly line. High tech is a growth industry in the information age; automotive is not. High tech is green technology; automotive is not.
Winning for Canada is not about size, but about punching above your weight in market share, world wide, niche by niche. Nortel pioneered this and RIM has followed suit. The lab talent and industry savvy management, without the 'Z Factor' can do this again.
Yet Premier Dalton McGuinty "suggests" that Ontario would take an equity stake in GM Canada? How? It is not traded.
What then is wrong with an equity stake in Nortel, Dalton, which is traded and could be saved as a Canadian entity, with a little bit of provincial interest and encouragement? What say you, Dalton -- what about some equality here?
The knackers yard for Nortel condemns a generation of talented graduate engineers in your backyard to vote with their feet and leave for greener pastures elsewhere; I guess they are knackered too.
After all, that is what the Silence of the Lambs is all about, isn't it?
J.A. Craig,
Ottawa
Former president
Nortel Broadband"
BNN reported today that Chrysler's secured bold holders have been receiving death threats after being vilified by the government last week a fact also reported by the Detroit News. cases have been referred to the FBI and local police.
The bond holders claim that the sale of assets is patently illegal under banruptcy law. They have filed an objection today, as follows:
"Separate and apart from the lack of due process and any infirmities in the bidding procedures themselves, the Sale Motion should be denied because it seeks approval of a sale that cannot be approved under the Bankruptcy Code. In short, the Court should not permit a patently illegal sales process to go forward. Among other things, the sale proposed by the Debtors constitutes an impermissible sub rosa plan of reorganization that strips the Chrysler Senior Lenders of the protections of section 1129(a) of title 11 of the United States Code (the “Bankruptcy Code”) and improperly attempts to extinguish their property rights without their consent. Further, the sale does not comply with section 363(f) of the Bankruptcy Code and was not proposed in good faith. Indeed, the sale is far from an arm’s length transaction, but rather, is the result of a tainted sales process dominated by the United States government. Under these circumstances, the Sale Motion should be denied."
Please remember that USO rollover starts tomorrow and extended for 4 days. We have published here on several occasions what happens with USO and UCO during rollover.
Here is the rollover calendar:
April effects:
March effects:
Here are earnings straddles ideas for this week:
And there are current results from last week. There were 9 winners, 4 losers:
(please click on images to enlarge)
The average return was +54.6% (not counding UCO as it is an ongoing straddle).
Sign of the times: China surpassed the USA as the biggest market for Brazilian products, according to Brazilian newspaper O Estado de Sao Paulo in a report published today. The dollar amount exported to China grew by 62.7% in Q1 2009. The biggest increases were in soya, pulp and paper products, iron ore, oil, commodities which correspond to 76% of all exports to China.
Brazil seems to be one of the biggest beneficiary of the new Chinese policy which is shifting away from being an export-driven economy to a focus on internal economy. The $600B stimulus package seems to he having an effect.
The stimulus package has an emphasis on contruction, thus iron ore is a direct beneficiary of the policy. With only 10% of its land suitable for agriculture, China is also increasing its food imports.
Other facts:
- I spite of an overall drop in exports, Brazilian trade surplus was still 9% in Q1.
- The level of Brazilian exports to China are expected to continue in the next quarter.
- China is now responsible for 46% of the exports to Asia
Natural gas inventories were released Thursday, showing a buildup of 82Bcf. This was very much in line with espectations of around 80Bcf. There were no surprises, however the total amount under storage is still touching the top of the 5 year average:
(please click to enlarge)
An injection of about 150Bcf next week will pierce the top of the prior 5 year average and will look even worse. There is a very distinct possibility that next week's injection may be even higher than 150Bcf. It should be very interesting to watch and see what happens with the average itself.
Horizons betaPro launched an actively managed ETF on January 7 2009, the "Horizons AlphaPro Managed S&P/TSX 60", trading under ther symbol HAX.to on the TSX. BetaPro president Howard Atkinson says the ETF can go to cash if necessary and will use technical analysis from Phases & Cycles' Ron Meisels to over- and under-weight sectors of the TSX60 index. The Management Expense Ratio (MER) is 0.70% and there will be a 20% performance fee levied on top of that.
So, how well did it perform since the close of January 7?
- S$P60: 565.38 vs 550.77, ROI: +2.65%
- XIU.TO: an S&P60 tracking ETF: 14.24 vs 13.87, ROI:+2.66%
- HAX.to: 9.25 vs 9.60, -3.6%
We knew that leveraged ETFs are big money losers, this "actively managed" ETF appears to following on the same path.
Note also how well the XIU ETF tracks the underlying index (XIU is an iShares product).
You can readily see this in this 3-month chart comparing all three:
(kindly click to enlarge)
You can easily compare the performance of these ETFs (or any stocks) with the Paired Performance tool for Firefox, as well as analyze long-short strategies.
Earnings straddles for this week are doing quite well on average. So far we have 5 winners, (ETFC, UA, SI, TWC, WYN) and 1 loser (SQM). SQM is really as good conservative company. It is a good buy, perhaps not so good for short-lived straddles. We have another 6 companies reporting this week, MOT has just reported today. You can track these at http://straddles.nexalogic.com
We have added a number of companies for today and tomorrow.
Capri link
Today FAS and FAZ are banging against each other at 8.26. The last encounter had been at 8.31. The first one was at 9.55. It is a series of continuing declines and losses. What else can you say.
Previous encounters.
Previous encounters showing intra-day losses.
EDIT 4:42PM. They closed today at 8.23 and 8.20, again showing intra-day losses, both being lower than the 8.26 they crossed earlier.
The US (Bureau of Economic Analysis National Economic Accounts) has just released the GDP figures for Q1 2009. It is noteworthy that this is just a preliminary "advanced" release, much like we had for Q4 last year when the equivalent figure was -3.8%, and was subsequently revised to -6.7%.
Therefore, the actual drop on GDP can be significantly different. The number -6.1% is largely irrelevant, it could well be -9%.
This is the advance release for Q4 2008, from January 30 2009
"GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2008 (ADVANCE)
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent.
The Bureau emphasized that the fourth-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The fourth-quarter “preliminary” estimates, based on more comprehensive data, will be released on February 27, 2009.
The decrease in real GDP in the fourth quarter primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment that were partly offset by positive contributions from private inventory investment and federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased."
Our first straddle of the week is big winner. Shares of Under Armour Inc. rose 15% after the athletic apparel and footwear company reported a 38 percent jump in profit for its first quarter, surpassing expectations.
(click to enlarge)
"The Baltimore-based company said its profit rose to nearly $4 million, or 8 cents per share, for the quarter ended March 31, well above analysts expectations of 3 cents per share. That's up from $2.9 million, or 6 cents per share, that the company reported for the first quarter of the prior year. Revenue rose 27 percent to $200 million.
The gain was largely due to strong sales of Under Armour's new running shoe, its first foray into that category."
Here are the most oversold and overbought companies in the S&P500 index, sorted by RSI7 and RSI 14. Updated at EOD April 27. Click on images to enlarge please.
Most oversold:
Most overbought:
We look today at the average multiperiod daily performance of a couple of pairs of leveraged ETFs. The study was based on the daily closing prices of:
- FAS and FAZ, since inception on November 19 2008
- HGU.to and HGD.to since Jan. 2 2008.
We looked at the performance of holding these funds for 1 day, 2 days, 3 days, and so on all the way to 180 days, and also compare with XLF as well as the XGD.to.
FAS, FAZ:
On average, FAZ always lost money, even after holding for only 1 day. FAS does slightly little better, with a very minor gain after holding for up to 5 days. It is interesting to remember that one of these funds is a bear and the other one a bull. In comparison, XLF does much better than both of them, showing average gains up to 15 days.
HGU.to, HGD.to:
Similarly, on average HGD always lost money since Jan 2 2008, even after holding for only 1 day. HGU has a slight gain up to holding for only 2 days , then only losses.
This shows that it has not been good to hold these ETFs for more than 1 day, and again shows that on average most investors lose money with them, a fact which we already knew, but here is some proof - for the average investor.
Yesterday we predicted that the ent FAS-FAZ "eclipse" would occur at $8.36. This occurred today right on cue between 8.36 and 8.37 around 12:56PM. It was then followed by several others: $8.36 (1:31PM), $8.35 (2:02PM), $8.33 (2:36PM), and finally $8.31 (3:56PM). This appears to show an intra-day erosion as well.
Data provided by Google. Please click to enlarge.
Here are some results for the straddles as of today 1:30PM, from http://straddles.nexalogic.com At the site there is a second table at the bottom with other results from purchases this week. There are losses (but there is still plenty of time to expiration so these are not written in stone), as well as some very large gains:
(please click to enlarge)
A Paired Performance Tool has been released. This tool allows the user to enter up to 4 stock symbols and do a historical performance analisys of going long or short in these stocks, in any combination. So, for example, you an choose to invest $1,000 in SPY and $2,000 in XLF, while shorting $1,000 worth of FAZ. You specify the desired time period and the tool will show you what happened with this investment.
As another example, you can also see what happens if you had shorted a paired FAS + FAZ trade. To do this, specify the same dollar amount for both FAS and FAZ and select short. Then select the time period, and see how rich you would be!
Here is a screen capture:
(please click to enlarge)
There some some limits on this freely available online tool. A Pro version is available that removes the limitation. Customization is also available, as is custom branding. Rotating ad space is also available. The tool is provided as Google gadget and therefore has bery big visibility. Please contact us for details.
While FAZ, the infamous 3X financial bear ETF, started trading in November 2008 at $120, it now trades under $10 and in the same range of its sibling FAS (the bull version), which has also lost most of its value (it started trading at $20, also last November).
A couple of weesk agot this created the first "eclipse", the point in which both bear and bull versions traded at the same price: $9.55. This was followed by another eclipse around $9.50 on the same day (April 13), and then around $9.20 three times on April 16 and April 17. The last "eclipse" was on April 17 around $9.15. Note how subsequent values are alway lower and lower.
When will the next eclipse be? With FAS currently at $7.85 and FAZ at $8.91, an "eclipse" can be easily achieved in one day, if FAS were to go up a mere 6.5% (and FAZ down 6.5%).
The next projected "eclipse" value if this were to happen tomorrow? $8.36!
The drop from the last "eclipse"? 8.6%
The drop from the first eclipse? 12.5%
Chart:
(Please click to enlarge. Many thanks to miadhach on skype for providing the original chart).
Note also the black line (XLF). While XLF remained relatively stable during this period, both FAS and FAZ went down significantly.
FAS and FAZ: "instruments of mass financial descruction".
Next eclipse after 8.36? Perhaps under $1?
I commented about Zenn Motor back in June 27 2008. The stock is 46% up today on news associated to EEstor. The stock is now slightly higher than what it was in June, but the post was before the stock market collapse. Stock is up +100% since April 16.
"These cars may soon (calendar year 2008 according to its CEO on a recent BNN interview) be powered by a new type of battery, one that can be recharged in minutes and allow 400Km of travel in one charge, and whose batteries are significantly lighter too (10% of the traditional lead battery weight)."
I also mentioned that "In the next several weeks, a privately-held and ultra-secretive company named EEStor Inc. will release the results of independent third-party testing of its electrical energy storage". EEstor has announced some results that are very good.
Here is news from MarketWire:
"Apr 22, 2009 18:00 ETZENN Motor Company's Strategic Partner, EEStor, Inc., Announces Permittivity Results
TORONTO, ONTARIO--(Marketwire - April 22, 2009) - ZENN Motor Company ("ZMC") (TSX VENTURE:ZNN) a leading developer of zero emission transportation solutions, is pleased to confirm that its energy storage partner, EEStor, Inc., issued a press release today announcing permittivity results of the manufacturing-grade chemicals to be used in their Electrical Energy Storage Unit (EESU).
Austin-based EEStor, Inc. disclosed that it has exceeded expectations on the key milestone of permittivity testing, notably the attainment of a relative permittivity of at least 22,500 for its patented and patent-pending Composition Modified Barium-Titanate Powders, the key material in their energy storage technology. ZENN Motor Company is currently reviewing the results as it relates to its Technology Agreement with EEStor.
"The permittivity results as indicated are beyond the specifications outlined in our technology agreement which is extremely encouraging," stated Michael Bergeron, VP of Engineering, ZENN Motor Company. "We will review these results and expect to announce our findings as soon as they are available."
"EEStor's announcement reveals continued progress in developing their Electrical Energy Storage Unit," said Ian Clifford, Chief Executive Officer of ZENN Motor Company. "We remain focused on fulfilling our cityZENN and ZENNergyTM drivetrain programs, the first implementations of EEStor's EESU."
