Performance of HAX Actively Managed ETF

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 Update

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

FAS FAZ Banging Again

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.

US GDP Q1 2009 Is Just an Advanced Release, to be Revised.

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."

Under Armour Shares Rise on Earnings

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."

S&P500 Most Oversold and Most Overbought Companies

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:

Daily MultiPeriod Performance of Leveraged ETFs

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:

(please click on images to enlarge)

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.

FAS-FAZ Eclipse Update

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.

Straddles Update April 24

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)

Stock Paired Performance Tool Released

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.

The Next FAS-FAZ Eclipse

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?

Zenn Motor Update (ZNN), EEstor Announces Results

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."

Straddles April 23, Amazon

For tomorrow we have Amazon as the biggest attraction. It is currently trading around $80. Since we have so many days still until expiration, an attractive play would be an 85-75 strangle. Here are the maximum moves and prices as of 1:50PM.



A longer shot, but potentially more profitable, would be a 90-70 position.




Please do your own due dlligence before entering into any such positions. There is the potential for 100% loss when using options. The prices quoted above were the prices as seen by my broker at the time mentioned.


And here are some of the current results, from our online tracker:

(click to enlarge)

Natural Gas Inventories

Natural gas inventories were released today. There was a buildup of +46Bcf. The good news for the natural gas bulls is that the upward slope of the storage curve is not as steep as it has been in recent weeks. The bad news is that we are signifcantly higher than last year at this time. The 2008 curve was superimposed on the 2009 curve on the chart below:



(please click to enlarge)

S&P500 Most Overbought and Most Oversold Companies

Updated with prices at EOD April 22, tables show both RSI7 and RSI14.

Most oversold in the S&P500:



(please click on images to enlarge)

Most overbought in the S&P500:




You may contact me for a complete table.

World GDP Growth for 2009 and 2010

The I.M.F has released new estimates for world's GDP growth for 2009 and 2010. Take a look at which countries are still growing:



(please click to enlarge)


Note that he forecast is for all economies to grow in 2010. This is also a revised forecast from the previous one issued in January. For example, the previous forecast had Brazil growing 1.8% in 2009, and it show a decline of 1.3%.

Leveraged ETFs Performance Since Inception

The table below shows the performance of a vast number of leveraged ETFs in the market. For most of them the performance is measured since inception. Individual and paired performance is shown. Paired performance refers the performance of both funds together i.e, the performance that an ibvestor who bought both funds at the same time would obtain.

With the exception of some of the oil and gas ETFs, the losses on these ETFs are massive for the reasons we have posted here so many times.



(kindly click to enlarge)

Leveraged ETFs are being discussed a lot recently for the losses not only for the losses they cause, but for the possible effects on the market.

Straddles Update April 21

Here is an update. We have 3 winners, 1 loser (so far).




Please note that new straddles for Thursday have been posted at our tracking site.

US Treasury on The Bank Stress Tests

Bloomberg reported on April 10 that the US Treasury asked banks not to release any results of the stress tests.

April 10:



(please click to enlarge)

April 20:

Then yesterday, after supposed leaks of the results, Bloomberg reported that the US Treasury does not have the results of the stress tests.




Which one is true and which one is not, do they have results or not?

S&P 500 Most Oversold and Overbought Stocks, April 20

Here are the most oversold and overbought stocks in the S&P 500, sorted by RSI7 and RSI14, using prices as of the close on Monday April 20. These will e updated regularly here.

Most Overbought:




Most oversold:

Straddles Update

Two straddles for today are big winners, Bank of America and Capital One. As of 2:30PM:



(please click to enlarge)

The other companies have not yet reported. In fact, Capital One will only report tomorrow. We really wonder what the COF news will be like.

These are updated at http://straddles.nexalogic.com/

UCO Straddles for May

Oil is down significantly today, USO rollover is s till a safe 2+ weeks away, and UCO is trading exactly at $7.50, at a perfect spot for straddles and strangles.

Oil as of 10:15AM:




Here are UCO May straddles and strangles and that maximum moves required computed with our StraddlesCalc tool:

7.50:



6-9:



Note that the OI on the 6 puts is still quite low.

With 25 days left to expiration, the actual move required will be much lower than the maximum as there will be value left on the wrong leg of the straddle even after a good move.

The Citibank Arbitrage: Extreme Number of Options Traded

The upcoming conversion of preferred Citibank shares for common shares is causing a very significant surge in the number of options traded in the stock. Take a look at the positions, volumes and open interest, as of EOD Friday, the numbers are absolutely huge:

April:


(please click on images to enlarge)


May:




June:



September:





The trade in C shares has been very popular because the conversion can yield big profits. The bank said on Friday it is not changing terms of a preferred share exchange. The actual conversion process is explained in this page.

A popular trade that locks in profits involves buying Citi preferred stock and simultaneously selling borrowed shares of common stock (shorting). The preferred shares can be converted into common stock in a few weeks, and so can be used to buy Citigroup shares at a lower price than the level at which they are trading now. Because the trade is so popular, it has become very difficult or expensive to short the stock. Traders and then resorting to

"synthetic puts",

which is the practice of buying and selling options to simulate being short on the stock (for example, buying puts and selling calls). Hence, the very high number of options traded.

$52.5 billon of preferred shares for common shares sould be converted. Under the exchange offer terms announced in February, preferreds will buy Citigroup shares at $3.25 each. C shares closed Friday at $3.65.

"Analysts Venu Krishna and Maneesh Deshpande at Barclays Capital on Friday said value investors could simply buy Citi convertible preferred stock series T, which traded for about $34.25 on Friday. When the exchange offer goes through, a $34.25 preferred share will convert into roughly 13.08 Citi shares now worth about $47.73. In other words, $34.25 of preferreds can buy $47.73 worth of common stock. "

The arbitrage play has caused a spike on the price of C, part of it as a short squeeze, clearly seen on the stock price chart:

Straddles for The Week April 20-24 (Optimal Sizing)

Here we go, companies identified and optimal sizing, for the first three days of the week for now:




There is plenty of time for these to work, but, as always, please do your own DD.

You can track them at http://straddles.nexalogic.com

S&P 500 Most Oversold and Overbought Stocks By RSI

Following our S$P 500 topic, here are the 40 most extreme stocks in the index by RSI7 levels (including up to the closing prices of Thursday).

You will notice several familiar names in the lists.

Most oversold:

(Stock and RSI 7 level shown)



There is usually a good reason why these companies are so cheap. However, these are prime candidates for recovery.

Most overbought:




The RSIs were computed with a new tool that we will release in the future.

The Great FAS and FAZ Loss

Some investors were cheering this week the "eclipse" of FAS and FAZ, the infamous 3X leveraged financial ETFs by Direxion. The "eclipse" was the moment in which both ETFs would have the same nominal price. This occurred at least three times this week, on Monday, around $9.55:



(Please click on images to enlarge).

While both ETFs were at $9.55, today one is at around $9.32, the other one at $9.01, i.e, declines of 5.6% and 2.4%! Both have lost even more value this week since the "eclipse". This is clearly seen on a combined comparison chart, where one is up 18% and the other down 32%:



Keep in mind that FAZ started its life at $120, and FAS at $20! Where has all this money gone?

These ETFs have been traded for 101 days (since inception), given them an average daily loss of 2.5% and 0.8%. If these rates of decline were to continue, FAZ will be trading below $1 in 88 days, and FAS in 280 days.

The combined losses in market valuation on FAS and FAZ is a staggering $4.4B since inception:



This can be seen live at the FAZ-FAS Loss-O-Meter tracking site.


The same fund manager has recently launched four new 3X leveraged ETFs, this time for leveraged income funds. They are certainly tremendous money making vehicles for someone, but certainly not for the mom & pop investors in them.

Dennis Gartman on BNN: Short Gold

Dennis Gartman was on BNN today. You can view the clip here.




Mr. Gartman had some interesting comments about gold. He is now short on gold, and he does not believe for a minute that gold will reach $1,300.00 this year. He says that the gold bugs hate him. He also makes fun of the GLD bashers, he people that think GLD does not own any physical gold.

There is it, certainly a contrarian view on gold. Speaking of GLD, where would the price of gold be if not for the GLD purchases (real or not)?

His top picks:

1. Long CAD and AUD (Canadian and Australian dollars), short Yen. He says Japan is "terminal" and will have only half its population in 50 years.
2. Long copper stocks, short S&P500. Top copper stocks: Freeport (FCX) and Southern Copper.
3. Short gold.

Earnings Calendar for the Week April 20 to April 24

This spreadsheet shows the earnings calendar for next week, April 20 to April 24. We are starting to look at these for potential straddles.

You can click on each symbol to see a quote and the Yahoo finance page on that company.

New Citibank Straddles

For April, with 1 day to on for options expiry, and earnings being reported tomorrow, how wild will it get? An investor holding an April 3-3 straddle can probably make money in both directions tomorrow by being fast and nimble. Use the knee-jerk reaction to sell the first side that moves.




May 5-3 Strangle.

This is another probable winner with the expected volatility in C.





Computed with the StraddlesCalc tool.

S&P 500 PE Tracker

I have set up an S&P 500 PE ratio tracker. PEs are updated on a 20-minute delay basis. Only positive PEs are reported, negative PEs show up as N/A.

Here it is:

http://nexalogic.com/sp500.html

USO Rollover Report for April

USO completed the rollover of oil contracts on April 13 (April 7, 8, 9, 13). This is what happened with USO and UCO during these days, and just before an after.



This is what happened last month:



It's too early to make any conclusions, but there clearly is a lot of action occurring those days.

Cheapest Stocks in the S&P 500 by P/E

The Standard & Poor's 500 stock market index comprises 500 large-cap American companies covering about 75% of the American equity market by capitalization.

Here are the cheapest and most expensive stocks in the index by price/earnings ratio (looking only at companies with positive earnings):

30 Companies with lowest P/E:



(please click on image to enlarge)


30 companies with highest P/E:



AVERAGE P/E

The above only shows those companies with positive P/Es. Note that only 399 of the companies in the index have positive P/E ratios. P/E ratios are as EOD today, with data provided by Google Finance.

The average P/E ratio of the companies with positive P/Es is 16.16.


The complete list is here.

Citibank Straddles and Strangles

C earnings straddles returned handsomely. The 3-3 returned +260% in 2 days. This was even before any earnings were announced (which will occur this friday), as C rode on the tail of GS and WFC.

With C trading at $4, here are straddles for April and May and the maximum moves required:

4-4:



5-3:



MAY:

4-4:




5-3:




Computed with StraddlesCalc tool