U.S. Treasury To Sell Citi Shares

Bloomberg reports today that The U.S. Treasury intends to sell its 27% ownserhip of Citigroup Inc. using a "preset trading plan" which locks the government into a selling schedule.

As to who will be in charge of the sale, Citigroup itself applied for the job and offered to do it for a discount, according to the report. This is not likely as it would appear as a conflict of interest. Several firms are running, including JPM, GS, and MS. Whoever gets its will undoubtely earns even more millions in profits.

Last year, the Treasury converted $25B of the bailout funds into common shares at a price of $3.25. The current price is $4.15, for a current Treasury stake of $31.9B, or a paper profit of $6.9 billion.

One would expect C shares not to fall until then.

The I.M.F, Greece And Their Effects on U.S. Dollar and Gold

Germany's Angela Merkel is on the news again today defending an IMF bailout of Greece. Clearly there is no appetite for Germans to volunteer money for the Greek's own faults.

Merkel told German lawmakers in Berlin today:

“A good European is not necessarily one who rushes to assist”

Since the U.S is the largest share owner of the IMF (17%), questions have arisen as to whether the US dollar is the one that will suffer as the U.S is forced to issue yet more debt.



Last year there was much fanfare about the IMF supposed sale of hundreds of tons of gold to India (actually SDRs, which India had received in July, but we digress).

So the question is, why couldn't the IMF simply sell more gold in this case too? The amount in question is relatively small at $10/$15B.

In this case, the price that could suffer is that of gold.

Goldman Sachs Chief Economist: No U.S. Rate Hikes Even by 2011; U.S Weight In the World Overestimated; Brazil to Raise 3.75%

Jan Hatzius, Goldman Sachs' U.S. chief economist, gave an interview in Brazil yesterday.

Mr. Hatzius is part of a team of analysts known for pessimism. In the interview he lives up to its name. Some of his points:

• Recovery. There will be a recovery (in the U.S.) but it will be slow. It will take time for the Fed and the tax policy makers to change their concerns about unemployment by concerns over inflation." he adds that it will take a long time for the labor market really provide improvement.
• Interest Rates. He does not expect a rise in U.S. interest rates not even in 2011, but it will depend on the performance of the economy.
• The economy grew at an annualized rate of 5.9% in the last quarter of 2009. However, two factors have stimulated this growth: tax policy and the inventory cycle. This will not occur in 2010 with the same intensity of 2009.
• U.S. On average, the U.S. economy will grow 2% per quarter in 2010.
• Believes that in 2011, U.S. growth will stay above potential and unemployment will begin to fall.
• Crisis. The worst of the crisis in the U.S. is behind us. There is a feeling in the financial, securities and stock markets that conditions are much more normal today than they were six months, one year and one and a half years ago. The sector that still suffers pressure is banking. The willingness of institutions to offer credit to customers is still limited.
• U.S. Growth meaning to the world. Asked what does the fact that the U.S. will grow below potential for some time mean for the world, he answered that people overestimate the link between the growth of the world and the United States. Even with an American growth in the range of 2%, he thinks it possible for countries that have had no problems with imbalances, notably the BRIC countries (Brazil, Russia, India and China) to sustain global growth.
• World growth. He believes that world growth will exceed current estimates, despite being more cautious about the expansion of the U.S. The BRIC countries are being driven by domestic demand.
• Yuan. The decision on what to do with the exchange rate in China is strictly of the government of China. The U.S. government knows this. He believes that China, for its own interest, will revalue its currency in 2010 and also in 2011 and that the policy of gradual appreciation of the currency will resume. The U.S. government can take action, but it would be counterproductive.
• Stock Market. When asked about the spectacular performance of the stock market in 2009, he says that stocks were severely undervalued and people were expecting a second Great Depression. Now we are in an area that is closer to neutral. We are not close to another bubble, but neither are we in a time of undervalued prices.
• Risks. The main risk to the global economy today is for the G-3 (U.S., Europe and Japan) to withdraw too early their fiscal and monetary stimulus. In the emerging world, the risk is of overheating. There are signs of that in many of the BRICs. That is why GS is expecting significant interest rates hikes in Brazil (the bank provides a full cycle of increases in the Selic rate of 3.75 points, to 12.5% per year).
• China. Their projection for Chinese GDP growth is 11.4% this year, a pace that is "very, very rapid".

PBR, Petrobras, To Invest $220B

PBR, the Brazilian oil giant and world's 2nd most profitable company, confirmed today that it will invest $220B for the period 2010-2014.

In order to invest this kind of money, the company will need to raise funds. The amount raised will vary depending o the value of a barrel of oil. As mentioned here last week, this will occur in the first half of 2010.

According to José Sergio Gabrielli, PBR's, President:

• If the price of oil is $64, the company will raise $15B
• If the price of oil is $80, the company will raise $25B.

The funds raised will constitute a minority ownership.

Interestingly, the current relative strength values are 42.70, 51.44, 50.65, right into neutral territory.

We track PBR live in our Live Tracking site of latin-american ADRS.

Investment protection in the face of a global melt-down

The company (and Brazil) is sitting on huge oil deposits. Barring a 2nd depression or some similar event which could severely restrict the demand for oil for many years, this may be the place to be given the funny money being printed in Europe and the US to pay bad debts.

These are the optimum buy alerts produced by our own Risk Analysis tool (green signals):




Disclaimer: The author does not own PBR.

Profit and Protect From the Upcoming Chaos in Currencies: U.S. Dollar, Euro and Gold

In light of all the recent events going on with Europe (Greece bailout, I.M.F or not, Spain default, etc, etc,, etc,), currencies are in near chaos. What will happen depends on too many factors. if the US is forced to bailout Greece, then the US is basically aiding Greece causing all sorts of nasty effects on the Euro, the US dollar and possibly gold. Then there is China's surprising trade deficit, and Japan's tragic fiscal situation.

Our favorite way to play them: straddles. here they are for UUP, FXE, and GLD.



Computed with StraddlesCalc Tool which shows the maximum moves required to achieve profitability. The moves are for April straddles and are all under 4%.

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

Pravda: Euro Doomed to Collapse: Target 1.20, Spain Near Default

Russian newspaper Pravda reports today that the Euro is doomed to collapse. It argues that Portugal, grece, Italy and Ireland will suffer enormous pressure to cut stimulating programs, which is what would have allowed them to escape recession. This new recession in Europe will tirgger a drop in the Euro. Also, mentions may ne near the edge of default.

"The European Union still has no coordinated approach to the current events in Greece. The transatlantic financial politics may split and result in the collapse of the European currency. The euro has already plunged below the level of $1.35. Experts say that the euro has fallen under the strong influence of political discrepancy between EU leaders in connection with Greek events.

The joint European currency may find itself between two traps formed by the policy of the European Central Bank and decisive actions taken by the USA’s Federal Reserve System.
Two leading economies of the world follow different principles in forming their financial policies. Therefore, the euro will continue declining in the near future and may soon reach the level of $1.20 per one euro, experts of BlueGold Capital Management said in their report.

European countries have no single approach to the problems of the crisis in Greece and the support of the euro. Germany is said to be the adversary of any decisive measures at this point.
Experts say that the German government is interested in the reduction of the Euro rate, because the cheaper euro would expand the nation’s exporting capabilities. China has recently become the world’s No.1 exporter instead of Germany, which raised serious concerns in the European country. Germany would like to retrieve its export status to euro’s detriment, specialists say.

Such a position contradicts to general interests of the European Union. Many EU states are not so dependent on export as Germany is. Analysts say that another European country – Spain - may near the edge of default very soon in the event Germany does not provide direct financial assistance to Greece.

Spain’s budget deficit in 2009 made up 11.2 percent, which is very close to Greek numbers.
For the time being, no one knows how the EU is going to solve its problems, and what is eventually going to happen to the euro. Time will show".

Greece: Merkel Emerging as Victor, Euro Bailout To Open to I.M.F.

German magazine Spiegel reports today that Angela Merkel is emerging as the vivctor in the batle of who will provide aid to Greece. She had been the standalone potions against the demands from the rest of the European Union to promise financial aid to Greece.

Things have changed and France's Sarkozy seems to have shifted to her camp. France is now open to the IMF aid.

"France and most other EU countries had long rejected the idea of IMF intervention. But now that Merkel apparently has the support of French President Nicolas Sarkozy, as the Süddeutsche Zeitung reports on Wednesday, the rest will likely be easier to convince. Should help for Greece become necessary, some EU countries could contribute bilateral loans in addition to a financial injection from the IMF. In government circles in Berlin, there was cautious optimism about "initial signals from various capitals" that officials there could imagine financial assistance coming from the IMF."

Greece must still refinance €50B in debt this year. With its poor credit rating borrowing money has become very expensive for the country.

Euro zone debt coming up:

(please click to enlarge)

S&P500 Companies and Markets Are At Extremely Overbought Levels

We computed the relative strength index values of all companies in the S&P500. The average RSI7s are now:

• short term: 67.46 (vs. 64.34 yesterday)
• medium term: 67.58 (vs. 66.62)
• long term: 64.83 (vs. 64.86)

That is an average increase of 2.06%. Clearly the increases are showing signs of saturation, as yesterday it was +3.67%.

In terms of overbought versus oversold:

Number of oversold companies:

• short term: 10 (yesterday: 15)
• medium term: 2 (yesterday: 3)
• long term: 1 (yesterday: 1)

Number of overbought companies:

• short term: 233 (yesterday it was 192); most overbought is CTAS (95.83)
• medium term: 234 (yesterday: 218); most overbought is TSN (94.33)
• long term: 183 (yesterday: 157); most overbought is HSP (91.12)

On average the ratio overbought to oversold is now a huge 50.0 (it was 29.8 yesterday). Simply amazing.

China Registers Trade Deficit of $8B in Early March: No Yuan Appreciation, and no US Treasury Purchases?

Chinese Premier Wen Jiabao said China's trade surplus has dropped in recent months, moving its trade balance to a deficit of about $ 8 billion in early March.

So much for all the talk and cries for Yuan appeciation, and maybe future U.S. Treasury purchases? What an answer from the Chinese!

This deficit, which would be the first month since April 2004, may weaken the argument for the appreciation of the yuan, at a time when international pressure for currency appreciation has grown.

Mr. Wen added that Chinese economic growth last year "was reached primarily based on domestic demand," Since then, the Chinese surplus has decreased, and the first one-third of March, China registered a trade deficit of about $ 8 billion.

The Chinese Premier was also quoted as saying "To be honest, I am very happy with it,".

The comments follow a statement made Sunday by the Minister of Commerce Chen Deming, alerting to the fact that China will record a trade deficit in March. The final figures will not be released before April 11, but the revelations of the Chinese authorities show a stronger government defense of a policy that is generating strong criticism from its trading partners.

Keep in mind these are Chinese numbers.

With information from Agencia Estado.

Impact of Apple's iPad on Amazon Revenue: Shorting QQQQ Not AMZN

There is noise on financial blogs about shorting Amazon (AMZN) here in light if the imminent loss of sales due to Apple's iPad (AAPL).

Using data from Barclays, Rory Maher estimates that if Amazon were to lose its e-book market share from the current 60% to 25%, its effect on revenue would be a drop of 2.0%:



Amazon had total revenues of $24.5B in 2009, with an estimated $250M derived from the Kindle. Now Mr. Maher estimates revenue due to Kindle and ebooks at $1.5B for 2010 and makes his calculations based on that higher figure. That is a big jump from 2009. If the actual sales of Kindle/ebooks is much lower, then the effect on Amazon will be much smaller too.

Amazon's RSI7 are at 54.51/61.35/73.27. Only the monthly is slightly overbought, and it still compares favorably to QQQQ whose numbers are at 77.24/76.24/74.7, overbought on all counts.
The optimum RSI to sell Amazon is Rsi9 (computed by our own Risk Analysis tool) , and a sell alert was issued on Dec 1 when it was trading a $142.5:



Today AMZN trades at $128.82:



Relatively speaking, the odds favor shorting QQQQ at this point.

Disclaimer: The author does not hold AMZN, but just bought puts on QQQQ.

S&P500 Index: Ratio Overbought to Oversold is 30:1

The S&P500 started the day significantly overbought yesterday, and ended the day even more overbought:

The average RSI7s are currently:

• short term: 64.34 (vs. 61.42 yesterday)
• medium term: 66.62 (vs. 64.63)
• long term: 64.86 (vs. 62.84)

That is an average increase of 3.67%.

In terms of overbought versus oversold:

Number of oversold companies:

• short term: 15 (yesterday: 16)
• medium term: 3 (yesterday: 5)
• long term: 1 (yesterday: 1)

Overbought:

• short term: 192 (yesterday it was 164); most overbought is CTAS
• medium term: 218 (yesterday: 178), most overbought is EL
• long term: 157 (yesterday: 146), most overbought is MJN

On average the ratio overbought to oversold is now a gigantic 29.8.

The two worst companies in terms of our favorite RSI-A are MYL and MIL, both related to the health sector.

Health Care Stocks and ETFs: The Winners And The Losers

Following our post yesterday (live tracking of health care stocks and ETFs), here are the winners and losers from yesterday:

Biggest winner: MDT (Medtronic): +2.25%

Biggest loser: UNH (United Health Group): -3.17%

Top Companies in The S&P500 To Buy or to Sell: OverBought Outnumber Oversold 22 to 1

We computed the relative strength values of all companies in the S&p500 for three time frames, short (daily), medium (weekly), and long (monthly).

The average RSI7s are remarkably similar:

• short term: 61.42
• medium term: 64.63
• long term: 62.84

However, the number of overbought and oversold companies is quite different.

Oversold:

• short term: 16; most oversold is NBR (15.78)
• medium term: 5, most oversold is BSX (23.25)
• long term: 1, most oversold is AIG (27.85)

Overbought:

• short term: 164 (!); most overbought is LMT (94.67)
• medium term: 178 (!), most overbought is EFX (93.42)
• long term: 146, most overbought is MJN (92.39)

Clearly there are too many overbought companies. In aggregate, there are 22.1 overbought companies for every oversold company. In the long term they are 146:1, the lonely one there is AIG, which is overbought in the short term. Amazing!

Here are the top 30 oversold companies, sorted by our favorite RSIA, in descending order:

There are 147 companies oversold by RSIA.

Disclaimer: The author does not own any of the mentioned stocks.

Profit From the Heath Care Bill: The Top Health Care ETFs To Buy And To Sell

Yesterday we wrote about the top health care companies in terms of what is oversold and what is overbought.

We have now added heath care ETFs to our live tracking system. The ETFs are listed below the top companies. Here is the current situation:

And there are our favorite measure, current RSIA values:

The most oversold ETFs are RXD, which is an ultra short for health care sector. The most overbought are RYH (Rydex equal weight health care), IHF (iShares Dow Jones Health Care), and IBB (iShares biotech).

Clearly the sector is overbought.

Health Care Plan: The Top Health Care Companies To Buy and To Sell

The Health Care plan is in everyone minds. It wil have profound implications for the health care industry worldwide. As readers know, we track the top global health care companies live here.

Here is the current status:

Performance since Jan 2009:






RSIs

We computed the relative strength values of all of them, and sorted by our preferred RSIA:



The most undervalued company is PFE and the teo top most overbought are BMY and NVO.


P/E

We also sorted them by Price/Earnings ratio (P/Es as reported by Google Financial):



Here the cheapest stock is again PFE, nearly half cheaper (P/E/ wise) than the 2nd cheapest MDT.

There is a whole collection of most expensive companies, starting with AMGN, followed by and JNJ, CVH, NVO, AET.


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

The Top Senior, Intermediate, and Junior Gold Miners and Precious Metals Producers

We track a top group of senior, intermediate and junior gold miners live as one of our Tracking Live sites: Track miners live. Some of the top performers may surprise.

The top senior performer is BVN, Compania de Minas Buenaventura from Peru, followed by Australia's AU, Anglo Gold Ashanti.

The top intermediate producer is by far Centerra gold, CG.

The best performance however, comes from the juniors NCM, Newcrest (+500%) and NG, Novagold (+402%), GSS, Golden Star follows (266%).

Here are screen captures with prices as of today, and performance chart since January 2009.

(please click to enlarge images)

Top 20 ETFs to Buy and To Sell For Week of March 22: Plus The 'ETF Horribilis'

We calculated the relative strength values of all ETFs that trade in the US and then sorted them by RSI-A. We use the average of all three time frame indicators as it is a closer approximation of the correct buy and sell signals.

These indicators provide a good idea of whether an ETF is oversold or overbought. Some of these values we found are very scary.

Top 20 Most Oversold ETFs:



Look at the monthly indicator for FAZ: 1.02. Now FAZ is a dreadful instrument that should be avoided at all costs. The 2nd most oversold: the equally dreadful UNG, another 'ETF Horribilis' to avoid all all costs.

This is tough investing.

The fact that many of these deeply oversold ETfs are leveraged speaks for itself.

Top 20 to Sell:

The top (as in most overbought) are FBT, FXH, IFNA, XRT. FBT mirrors cross section of companies in the biotechnology industry; FXH is health care. IFNA is real estate and XRT is the retail industry.

Note that FAS, the FAZ counterpart is not on the top overbought list. In fact it only appears in position 204! Stay away from these, as we have said so many times.

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).

Fed Must Disclose Record of Financial Bailout, Again!

Bloomberg has won another round against the Fed, see report. A federal appeals court ruled today that The Federal Reserve must disclose documents identifying financial firms that might have collapsed without the U.S. government bailout. Why all the secrecy?

"The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of LEH. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.

The opinion might not be the final word in the bid for the documents, which was launched by Bloomberg LP, the parent of Bloomberg News, with a November 2008 lawsuit. The Fed could seek a rehearing or appeal to the full appeals court and eventually petition the US Supreme court.

The court was asked to decide whether loan records are covered by the U.S. Freedom of Information Act, or FOIA. Historically, the type of government documents sought in the case has been protected from public disclosure because they might reveal competitive trade secrets. The Board of Governors of the Federal Reserve System had argued that disclosure of the documents threatens to stigmatize lenders and cause them “severe and irreparable competitive injury.” "

Interest Rates Set To Rise Globally

Yesterday we commented on the possibility of the Brazilian bank rasing rates, which will make them the highest effective rates in the world. The vote was a split 5-3 in favor of staying the course, for now. The hike will likely happen next month.

Today Canada's inflation rate was higher than expected, pointing to a rise on the Canadian rate. The Canadian dollar responded by rising sharply.

Bloomberg today reports that US rates are set to rise as well.

"The Federal Reserve may increase the discount rate, charged on direct loans to banks, before the next meeting of the Federal Open Market Committee on April 28".
The reports cites Micheal Feroli, U.S. economist at JPMorgan Chase: “It’s going to happen at some point,” “Whether it’s today, whether it’s next week or next month is hard to say.”

"The board on March 16 held a 'general discussion of discount window matters' with the FOMC, the Web site said. Such a discussion wouldn’t be unusual either at a time when lending programs, financial stability and bank reserves are all part of the FOMC’s discussion about its monetary policy stance. “There has been no decline in borrowings since the discount-rate increase, which is why it is entirely possible they want to raise the discount rate in the days ahead,” Crandall said. “Their stated rationale for raising the rate was to turn it into what it used to be: a liquidity backstop instead of a primary source of funding.”

Alert Optimization and Risk Analysis Tool Results

I received some requests for examples and results of RSI analysis from our new tool. Here are some.

Nokia, NOK

Standard RSI7, 30/70:


(please click to enlarge images)

For NOK the Buy alert success rate after 30 days is 66%. The sell alert success rate is 50%. After 400 days the success rate is 66% for buys, and 90% for sells.

Nokia RSI, 9 28/60 (Buy optimal):



Now the Buy success rate after 30 and 240 days is 80%.

RSI13, 20/76, sell success rises to 100% (sell optimal):



Sell success rate after 30 days and 240 days is 100.0%

USO:

RSI 7, 30/70

Buy success: 72%, sell success: 64%

RSI5, 20/60 (buy success: 100%):



RSI7, 20/78 (sell success: 75%/100%):



VIX:

You cannot buy the VIX of course, buy be careful you understansd the VIX: buying the VIX usually means selling stocks.

RSI7, 30/70:

That is pretty good.

RSI11, 38/60 (sell success 100%, sell ROI 30/39% for holding 90/240 days)

NTRI

RSI 7, 30/70:



RSI5, 22/78 (buy optimal):



RSI5 28/80 (sell optimal):

Goldcorp, GG

RSI7, 30/70:

RSI5, 28/80 (Buy optimal)



RSI7, 20/80 (sell optimal):

BC

RSI7, 30/70:



RSI 7, 20/60 (Buy optimal)



RSI5, 20/72 (Sell optimal):



For requests of other stocks or early access to the tool, please submit a comment or email me.