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Natural gas inventories were released a few minutes ago showing a drop of only 11 Bcf. This is almost an injection. With the very warm (and gorgeous) weather we are having on east coast lately, there may well be an injection next week.
Chart compares 2009 and 2010. 2010 is almost shaping up as bad as 2009 already.
Here is the current status of our UNG straddles from yesterday, +7.69% for March and +5.13% for April:
The day is early...
UPDATE 2:25PM: Marchs are now +19.15%
UBS, Deutsche Bank, JPMorgan Chase and Depfa Bank will be tried in Milan, Italy, because of the alleged fraudulent sale of derivatives amounting to €1.7 billion (U.S. $ 2.3 billion), stated Italian prosecutor Alfredo Robledo.
Banks are accused of having obtained 100 million in illicit profits through irregularities in the sale of derivatives linked to an issue of bonds by the municipality of Milan, conducted between 2005 and 2007. "It's the first time in the world that banks will be judged because of the sale of derivatives to municipalities," said Robledo.
The hearings will begin on May 16. In April 2009, more than € 476 million in assets were confiscated by the Italian tax officials as part of an investigation that lasted more than two years.
In separate statements, the banks have denied any wrongdoing and said they would defend themselves.
With news from Agencia Estado.
For fixed income investors, speculation is growing that the Brazilian interest rates are set to increase either today or next months' central bank meeting. if they are raised by 0.25%, the country will have the highest rate in the world. It is no wonder that the countries' currency is the best performer since January 2009.
We track all currency ETFs live here.
Here are the top 30 real (effective) rates (interest rate less inflation):
(please click to enlarge)
Now here are the worse 10 possible countries to invest money in:
Note the U.S. is in 8th place with a negative return of -2.35% (less fees!).
Natural gas inventory reports will be published tomorrow AM. Here are straddles for March and April.
There will be only one day to expiration of the March contracts, so they are extremely risky. As shown, they need a 4%move. You will also notice that the 8 calls sell for 0.06 or so, which requires a relatively high number of contracts (167 for a 1k position). Today's volume so far is 7,160 call contracts (1:35PM), and just over 2k puts, which is really high. Aprils are 12,784 (and 11,000 puts)!
Computed with StraddlesCalc Tool
Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.
Oil investories will be released this morning. Here are straddles for March (2 days from now!).
As usual, UCO is the better bet since it moves 2X in relation to USO and is very close to a strike price. The maximum moves shown above are computed with StraddlesCalc Tool.
Here are the same straddles for April:
Martin Wolf, from the Financial Times writes today that Germany and China are committing to a deflationary scenario. Citing Wolfgang Schäuble, Germany’s finance minister three main points last week: (1) combining emergency aid for countries running excessive fiscal deficits with fierce penalties; (2) suspending voting rights of badly behaving members within the eurogroup; (3) allowing a member to exit the monetary union, while remaining inside the European Union, Wolf says that suddenly, the eurozone is not so irrevocable because... Germany has said so.
According to him, three points can be drawn from this démarche:
(1) it will have an overwhelmingly deflationary impact;
(2) it is unworkable;
(3) it might pave the way for Germany’s exit from the eurozone.
Wolf introduces 'Chermany', "a composite of the world’s biggest net exporters: China, with a forecast current account surplus of $291B this year and Germany, with a forecast surplus of $187B" (he alludes to 'Chimerica' is a term used to describe the fusion between the Chinese and American economies. 'Chindia' describe the composite new Asian giant, China + India).
Although China and Germany are very different they share some characteristics:
Wolf states that since their surpluses entail others’ deficits, their position is incoherent.
"Surplus countries have to finance those in deficit. If the stock of debt becomes too big, the debtors will default. If so, the vaunted “savings” of surplus countries will prove to have been illusory: vendor finance becomes, after the fact, open export subsidies.
Wold is doubting that the open global economy is going to survive this crisis and thinks the eurozone may also be in some danger.
"If Germany gets what it wants, the world’s second-largest economy would play an altogether negative role in the search for a way out from the global slump in aggregate demand. The eurozone would not be exporting the demand the world now needs. It would export excess supply, instead".
Registered FT users may read the full article.
On the topic of Greece being forced to sharply cut its deficit (not feasible, see our post yesterday), Wolf suggests to imagine that "weaker eurozone countries were forced to contract their fiscal deficits sharply. This would surely weaken the entire eurozone economy. But the result would also be fiscal deterioration in Germany and France. Imagine that Germany then did don the hair shirt. Would it instruct France to do the same? After all, France already has a general government deficit forecast by the Organisation for Economic Co-operation and Development at close to 9 per cent of gross domestic product this year. Does Mr Schäuble imagine France could be fined? Surely not. Yet it is not Greek public finances that threaten the stability of the eurozone. These are a mere bagatelle. The threat is the public finances of big countries. Since Germany could not force such countries to behave and has no chance of expelling any member it disapproves of from the eurozone, it would have to leave itself. That is the logic of Mr Schäuble’s ideas. This must be obvious to him, too".
"Germany is in a supposedly irrevocable currency union with some of its principal customers. It now wants them to deflate their way to prosperity in a world of chronically weak aggregate demand. [China's] Wen has the same idea. But the economy he wants to pursue this goal is the US. Fat chance!"
US Proteccionism
Mr Wen's remarks were well publicized yesterday: “What I don’t understand is depreciating one’s own currency, and attempting to pressure others to appreciate, for the purpose of increasing exports. In my view, that is protectionism.” He also insisted he was worried about the safety of China’s dollar investments.
Wolf ends:
"Behind all this is a fundamental divide. Surplus countries insist on continuing just as before. But they refuse to accept that their reliance on export surpluses must rebound upon themselves, once their customers go broke. Indeed, that is just what is happening. Meanwhile, countries that ran huge external deficits in the past can cut the massive fiscal deficits that result from post-bubble deleveraging by their private sectors only via a big surge in their net exports. If surplus countries fail to offset that shift, through expansion in aggregate demand, the world is inevitably caught in a “beggar-my-neighbour” battle: everybody seeks desperately to foist excess supplies on to their trading partners. That was a big part of the catastrophe of the 1930s, too.
In this battle, the surplus countries are most unlikely to win. A disruption of the eurozone would be very bad for German manufacturing. A US resort to protectionism would be very bad for China. Those whom the gods wish to destroy, they first make mad. It is not too late to look for co-operative solutions. Both sides have to seek to adjust. Forget all the self-righteous moralising. Try some plain common sense, instead".
Latest Meredith Whitney interview on CNBC on the U.K.: U.S Housing prices will continue to fall.
Ms. Whitney says that there is a corporate recovery going on but the consumer situation continues to deteriorate. Consumer is very precarious. Consumer has less liquidity and jave less available credit. The real issue is the middle class. The underclass in the US has no access to credit anyway.
The situation on capital markets are very different from what is going on on main street. Furthernmore, for banks it is unprofitable to issue mortgages because they can't securitize them now.
She adds that the Fed has been supporting mortgage market. One third of the Fed's balance sheet is currently tied to mortgages. How they exit this program at the end of March (will they?) is the key to watch.
The above chart shows the Euro (in USD). You can clearly see that the Euro was going up (i.e, the dollar was dropping) significantly throughout 2009, and thow the movement reversed in 2010, against all the predictions of the people who were saying that the USD was doomed.
According to INO's latest video on the USD, the Euro is headed back up to 1.42/1.44. Currently it is at 1.367, that's a differential of about +5.1%. Current chart as of today:
A popular ETF to use is FXE, which shows pretty much the same scenario in terms of alerts and technical analysis:
FXE closed today at $137.47. April 138 calls sell for $1.30. To achieve profitability, this position needs a move of 1.33%. If you also buy the 136 puts for $1.05, for a straddle protection, then the move required is -2.78% or +2.09% on the upside. These options expire April 17.
To run INO's tool yourself on any stock you like, please use this custom link (2 months free).
The options are computed with our StraddlesCalc Tool.
Martin Feldstein, the Harvard University Professor who said two decades ago that the euro would prove an economic liability has finally said what everyone knows: It is not possible for Greece to go from a 12% deficit now to a 3% deficit two years from now. It is just fantasy.
“The alternatives are to default in some way or to leave, or both.”
According to Bloomberg today, Billionaire George Soros said last month that the euro “may not survive,” and credit default swaps indicate a 22% chance Greece will default within five years.
Feldstein says that the Euro rules generated a “very strong bias toward large chronic fiscal deficits”.
Feldstein says that "Greece will ultimately need to mull alternative ways to tackle its crisis, possibly by finding a “polite way” to default, which might include persuading investors to swap maturing bonds for longer-term assets at lower interest rates and/or leaving the euro area to devalue and then returning once the fiscal weaknesses are solved.
“I don’t know that there’s a good solution to this problem,” Feldstein said.
‘Proved Wrong’
“American economists such as Marty have been proved wrong for a decade and will be proved wrong for the next decade,” said Wyplosz, who predicts that a Greece exit would trigger a “total collapse of the Greek economy.”
Feldstein stands by his analysis that it’s not “unthinkable” some countries may choose life outside the euro area. Leaving is “certainly possible, and in part it can happen even if all the economic advice to a government is, ‘You shouldn’t do this,’” he said. “Politicians don’t always listen to their economists.”
The FOMC announced today that it is holding Fed Funds rate at 0.25% and says that rates will stay low for an extended period. The markets reacted with a strong uptick at the news, only to be sharply reversed when traders realised what it actually means, in other words, why they need to keep rates so low for so long, a la Greenspan. We know how that ended. Markets are still bouncing up and down at this time.
Look at the charts around 2:15PM:
These are the rates. This is a very scary chart.
You don't see much of this in the news, but China and Japan, the two countries which are the largest holders of US Bonds, reduced their positions in January. Net Long-term TIC Flows, which were expected around $47.5B were only $19.1 billion, a massive 60% below expectations.
Foreign holders sold a net $33.4B in January, after buying of $53.6B in December.
In the meantime, U.S. politicians continue to pound away at China for not revaluing the Yuan. However, if this situation continues interest rates in the US will have to rise to attract buyers/
China has been a net seller of US Treasuries for three months now.
Here is the Press Release:
Washington —The U.S. Department of the Treasury today released Treasury
International Capital (TIC) data for January 2009. Net foreign purchases of
long-term securities were negative $43.0 billion. Net foreign purchases of long-term U.S. securities were negative $18.8 billion. Of this, net purchases by private foreign investors were negative $10.2 billion, and net purchases by foreign official institutions were negative $8.5 billion. U.S. residents purchased a net $24.2 billion of long-term foreign securities. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been negative $60.9 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $30.9 billion. Foreign holdings
of Treasury bills decreased $15.4 billion. Banks’ own net dollar-denominated liabilities to foreign residents decreased $118.9 billion. Monthly net TIC flows were negative $148.9 billion. Of this, net foreign private flows were negative $158.1 billion, and net foreign official flows were $9.2 billion.
We track the price of gold in other currencies, live as one of our live tracking sites. It is still amazing that most investors think that gold goes up but don't realize that it only goes up in some currencies, like USD or Euros.
Here is the current performance char since January 2009:
Investors in Australia, Brazil, and other nations have lost quite a bit of money with gold in that time period.
The price of gold is very correlated to the USD. It is all relative. It is the USD and the Euro that have gone down.
Several Brazilian companies will be launching ADR programs in New York this year. Most should debut in the U.S. market via receipts level 1, the path that has fewer requirements. Others, however, will migrate to higher levels. Such is the case of Banco do Brasil, the country's largest bank which already trades as a level 1 since December, as reported here last year (many foreigners mistakenly believe that the largest bank is Itau/Unibanco, ITUB as an ADR). Any holder of Brazilian banks shares has a huge smile on his or her face. Brazilian banks are even better run than the hyped Canadian banks.
BNY Mellon says that they are coordinating more than five operations. The move reflects the growing interest among global investors in Brazil. Just last month, the Cielo credit card company, the holding company for consumer products Hypermarcas, and Eternit, manufacturer of construction products announced ADRs level 1.
Another factor that fuels interest in level 1 ADRs is the launch of a specific platform for trading of these papers, which now occur only in the OTB market, restricting liquidity. Alex Ibrahim, head of NYSE Euronext to Latin America confirmed that they launch this new platform in April.
Cielo says that the ADR program is another investment option for investors, and increases the visibility of Cielo in the international market. BNY Mellon states that the ADRs Level 1 function as a barometer to assess the appetite of foreign investors for their shares. A greater interest in the market, measured by the increase in turnover, could stimulate the issuing company to migrate to the ADRs of level 2 and 3, adding to a group now restricted to 30 names of Brazilian companies, such as giant Petrobras, Vale, Itau and Unibanco Santander Brazil.
We track all latin American ADRs live here and they certainly have been stellar performers.
Together, the ADRs of Brazilian companies account for a higher aggregate transactions of all companies in any country outside the United States in the New York Stock Exchange.
As for Banco do Brasil, the bank has been awaiting approval from the SEC to move up a level.
BDORY chart:
Banco do Brasil chart at Bovespa:
Yesterday we posted an item about Brazil being the biggest off-shore oil country in the globe. Today, Brazilian Mines and Energy Minister Edison Lobao said that Petrobras, PBR, could raise between $40 billion and $60 billion in a share offer.
Mr. Lobao was speaking on the sidelines of a conference in Sao Paulo and said that "an oil-for-shares swap proposed by the government would help fill Petrobras's coffers and fund the company's investment plans".
Petrobras needs the cash to fund development of the huge pre-salt fields off the coast of Sao Paulo and Rio de Janeiro states.
Such a big offering is likely to affect the stock price. PBR chart:
Here are the current alerts from INO's tool:
(please click to enlarge)
Gold is now confirmed in a trading range, however there is significant downside pressure. Here is INO's latest video on gold. Charts shows a bearish engulfing (see the last right candle on the right of the chart, larger that the previous black one). This is means there is further downside pressure. The big level to watch is $1,091.19, which will trigger a new weekly down signal.
This is described in the video.
The above image is a capture from the video. Here is the current status, capture live at 11:35AM:
And here is the same for the GLD ETF, from 11:36AM. Note the GLD has even more downside pressure with a score of -75:
This is using the MarketClub tool. You may also run the tool yourself on a risk-free basis.
We computed the relative strength values of the top 100 most popular stocks and ETFs that trade in North America (popular by trading volume). We then sorted them by RSIA, which is the average of the daily, weekly and monthly values.
We have run extensive studies and backtesting on why we use certain values using a newly developed tool we developed, more on this later.
The relative strength indicator is a good measure of overbought and oversold conditions. Here are the top 25 most overbought popular stocks, and the top 25 most overbought popular stocks.
Top 25 Most Oversold:
Most oversold are FAZ, SRS and UNG. Unfortunately these are three of the worst possible ETFs available, one is leveraged 3X , the other one leveraged 2X (both to stay aways from), and the last is UNG, which we have extensively written before, also in the 'stay away' from category. There is a reason why some stocks are oversold. They are right on in this case.
PFE is the first non-leveraged non worst-of a kind here. Note the presence of Yahama Gold, AUY, up there.
Top 25 Most Overbought:
Here the situation is different as we have real companies and ETFs at the top. The champion oversold is Ford (F), followed by the XLY ETF, and Home Depot (HD). Cars, consumer discretionary products, and constructions materials! As if the economy were flying on all cylinders. This is really buyer beware.
Note that the Russel 2000 IWM ETF is also way up there.
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.
The CARA100 stocks were update in late February. There are a group of very high quality stocks. Here are the correlations of all its components for the period January 4 2010 to March 12 2010, computed with our stock correlator tool.
As readers here know, we extensively use correlation for proper investment diversification.
(please click to enlarge; it is a large image)
You may also scroll through the image here (scroll to the right to view) or through imageshack (zoom in).
For proper diversification we always look for uncorrelated stocks. These are shown in bold blue. Green and red correspond to positive and negative correlations of over 0.85. Either is not good for diversification.
Perfect pairs of uncorrelated stocks are Boeing, BA and IBM, as well as Target, TGT and NUE, but there are several other good pairs.
Note: SCHW is not shown as we could get stock price info.
Disclaimer: The author does not hold any positions on any of these stocks.
Agencia Estado reports today (in Portuguese) that Brazil is becoming main pole of global oil and gas offshore exploration, taking the lead of the United States. The growth of activity attracts the interest of major oil companies in the world and puts the country ahead of the field production in deep water, defined by the International Energy Agency (IEA) as the main source of growth of world output in coming decades.
We track oil ETFs live here and Brazilian companies that trade on the NYSE here. PBR is up +92% since January 2009
"In terms of deepwater drilling, Brazil will become the most important country in the world," says the chief counsel of expert advice ODS-Petrodata, Tom Kellock. This kind os assessment is confirmed by last week's purchase by the British company BP of the assets of Devon around the world. "BP enters the deep waters of Brazil and strengthens its portfolio," was the title of the statement announcing the deal, which included operations in the Gulf of Mexico and Azerbaijan. BP was the only one among the giants who had no active exploration and production in Brazil.
According to ODS-Petrodata, Brazil currently has 56 drilling rigs sea of oil wells in operation, compared to 68 in the U.S. coast of the Gulf of Mexico region, which attracts most investments in this segment. For the next few years, companies operating in the country will receive 32 new units. In the U.S., it will be only 14.
The timing depends on the pace of orders from Petrobras, which is bidding for 28 high-tech probes for the pre-salt area, with delivery of units for 2014. Before this the company will receive 23 new units, 12 of them for the pre-salt regions. Each unit has a daily cost estimated at about $ 1 million, including rent and supplies. 10 years ago, only 15 rigs drilled wells in Brazilian waters, according to data from Schlumberger, a provider of services for the sector compard to 120 in the Gulf of Mexico. "Today, we compete with Exxon and Shell in the number of exploratory wells drilled," says Guilherme Estrella, head of exploration and production at Petrobras.
This year, says the National Petroleum Agency (ANP), 69 wells will be drilled in the Brazilian coast. The effort is not limited to the activities of Petrobras: OGXwill drill 27 wells in 2010. According to Estrella, the activity puts the country at the forefront for the development of the new frontier of oil: the deep waters. "The IEA says that in 2030 100 million barrels per day will be consumed, of which 60% to 70% are not yet discovered. This volume should come mostly from deep waters. It is a bitter struggle to meet those 60 million barrels."
Other frontiers of exploration are the heavy oil in Venezuela and the oil sands in Canada, where there are large terrestrial activity, and oil in the Arctic. The producers today, as Saudi Arabia and Russia, have focused on onshore. The impacts of this struggle quoted by Estrella can already be felt in the country, where salaries for off-shore workers are higher than on-shore.
All companies are drilling in the hiring process. "Today we have 120 employees. Tomorrow will be a diffefent number," jokes Peccioli Gerson, chairman of Norway's Sevan Marine, which, at the request of Petrobras, destined a probe that would support the company's activities abroad. In addition to jobs, Peccioli believes there is critical mass for equipment suppliers to start operwting in the country already. There are alreadycases, such as Aker Solutions, which last year opened a risers factory (a type of pipe) in Macaé.
The expectation of Petrobras, now, is to attract major the world's major shipyards. It has established that the 28 probes in the bid should be built in Brazil, a demand that brought executives from major industry groups, such as Hyundai and Daewoo to Brazil. Brazilian construction companies that already operate in exploration, as Queiroz Galvão and Odebrecht, also plan to work in the construction of the probes.
Agrium (AGU) today abandoned its long running CF acquisition soap opera. In response AGU stocks rises sharply, and CF drops. Will AGU's CEO remain in his post after such dreadful initiative?
POT on the other hand, raised its guidance, and the stock soars.
These are today's movers and shakers for sure. Lots of drama involved.
These are prime situations for straddles, where investors can profit by the stock moving up or down, as long as they move the necessary amount. These moves are indicated by our StraddlesCalc Tool.
Here they are, for April for POT, AGU, and CF:
They all show similar maximum moves required of around 10%.
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.
Newsweek's writer George F. Will says that today's underemployment rate, which includes the unemployed, plus those employed part time, plus those discouraged persons who have stopped looking for jobs is 17.3%. That is 25M people.
Moreover, nearly 40% of the unemployed have been so for seven months or more. Mr. Will says "which is not surprising: Congress continues to extend eligibility for unemployment benefits, apparently oblivious to the truth that when you subsidize something you get more of it".
he says that there is no precedent for what the nation might be beginning to experience, namely a torpid recovery from a steep recession.
"Today, Americans are still paying down their debts that fueled consumption between 2001 and 2007. Nevertheless, household debt is still 30 percent above what it was a decade ago, so deleveraging has a long way to go. And 23 percent of homeowners with mortgages are still underwater—the value of their houses is less than the amount owed on the mortgages.
The residential-real-estate sector triggered the recession, which now may bring a convulsion in commercial real estate. A quarter of a trillion dollars of loans must be rolled over in each of the next few years.
"With prolonged high unemployment predicted, consumer spending is paralyzed by caution. With Washington experiencing prolonged hyperkinesis, businesspeople are paralyzed by uncertainty about what the rules and costs of commerce are going to be. What would a cap-and-trade carbon-control regime do to energy costs? What will be the costs of whatever the Environmental Protection Agency decides to do on the basis of its "endangerment" finding that carbon dioxide is a pollutant? What will health-care and tax costs be? Money cannot be free forever, so someday interest rates are going to change. Starting from zero, the change will be adverse for many people".
"And for the federal budget. Rates of 5 to 6 percent would require 20 percent of tax revenues just for debt service. In 2015, interest payments on the national debt will require a sum equal to one third of income-tax revenues ($533 billion). There is excess capacity in office space (in Manhattan, square footage equivalent to 920 football fields, according to The New York Times), malls, apartments (5 million are vacant), and in shipping, etc. But the economy, dependent on government-manufactured demand, is like an athlete on performance-enhancing drugs. Writing in Barron's, Vitaliy Katsenelson compares the economy to an injured athlete who takes steroids in order to keep competing. They exaggerate the athlete's recovery and mask the pain, but require steady doses and produce dependency".
"The 1990s were the stock market's best decade since the Depression; the 2000s were the worst. The 2010s? Today, talk about a "new normal" often includes gloomy references to Japan's "lost decade" and a possible American future of protracted slow growth.
The administration, however, projects deficits three times larger than the post-1945 norm, interest rates less than one half the norm, yet growth 10 percent higher than in the booming 1980s. That is irrational exuberance. But nowadays there is no other kind".
