Two ETFs Likely To Be Influenced By G20 Meeting

October 25th, 2010

At the recent G20 meeting in South Korea, the Group of 20 finance chiefs agreed to move towards a more market-determined exchange-rate system that reflects underlying economic fundamentals and refrain from competitive devaluation of currencies, potentially impacting the Market Vectors Chinese Renminbi/USD ETN (CNY), the WisdomTree Dreyfus Chinese Yuan Fund (CYB).

China’s successful economy has enabled it to implement destabilizing use of its fixed exchange rate which has further enabled the world’s second largest economy to build an export capacity.   Furthermore, China’s restraint of its Yuan and the weakness of the US dollar against other currencies have forced other emerging nations to temper gains in their own floating currencies to remain competitive, states Simon Kennedy of Australian News.

The agreement was made at the G20 meeting was the first time finance officials around the world agreed upon currency manipulation and came to a joint stance on exchange rates.  By taking this stance, global finance heads are hoping that Asian nations, more specifically China, will be encouraged to allow their exchange rates to rise without having to worry they will end up doing so alone and lose a trading edge. 

At the end of the day, this movement to stabilize exchange rates is expected to help cushion the effects of the massive deficit that the US is carrying and aid in strengthening the dollar against China’s Yuan.

Disclosure: No Positions

Read more here:
Two ETFs Likely To Be Influenced By G20 Meeting




HERE IS YOUR FOOTER

Uncategorized

Two ETFs Likely To Be Influenced By G20 Meeting

October 25th, 2010

At the recent G20 meeting in South Korea, the Group of 20 finance chiefs agreed to move towards a more market-determined exchange-rate system that reflects underlying economic fundamentals and refrain from competitive devaluation of currencies, potentially impacting the Market Vectors Chinese Renminbi/USD ETN (CNY), the WisdomTree Dreyfus Chinese Yuan Fund (CYB).

China’s successful economy has enabled it to implement destabilizing use of its fixed exchange rate which has further enabled the world’s second largest economy to build an export capacity.   Furthermore, China’s restraint of its Yuan and the weakness of the US dollar against other currencies have forced other emerging nations to temper gains in their own floating currencies to remain competitive, states Simon Kennedy of Australian News.

The agreement was made at the G20 meeting was the first time finance officials around the world agreed upon currency manipulation and came to a joint stance on exchange rates.  By taking this stance, global finance heads are hoping that Asian nations, more specifically China, will be encouraged to allow their exchange rates to rise without having to worry they will end up doing so alone and lose a trading edge. 

At the end of the day, this movement to stabilize exchange rates is expected to help cushion the effects of the massive deficit that the US is carrying and aid in strengthening the dollar against China’s Yuan.

Disclosure: No Positions

Read more here:
Two ETFs Likely To Be Influenced By G20 Meeting




HERE IS YOUR FOOTER

Uncategorized

Weekend SPX, Dollar, Oil and Gold Analysis and Video

October 24th, 2010

Last week was volatile thanks to China raising their interest rates a quarter basis point. This rate hike caused the Dollar to spike in value which in turn forced equities and metals to sell off sharply. This one day event caused equities to break below a short term support level causing a large number of protective stops to be triggered. This added more selling pressure causing the market to be down nearly 2.5% at one point but a late day bounce recouped a good chunk of the drop.

Wednesday & Thursday the market had a nice rally making back all of losses and then some. But Thursday afternoon we saw the market slip below a key short term support level and triggered another wave of stops. The market continues to resilience because it recovered into the close saving the day.

After Thursday’s end of day rally, we had expected a typical light volume session which typically chops around in a sideways or slow grind higher.

SPY – SP500 ETF 10 Minute Intraday Chart

I have put together a short video covering last weeks price action along with that I feel is likely to unfold this week.

SPX, Dollar, Oil & Gold Analysis Video:
http://www.thetechnicaltraders.com/etftradingvideos/FTS149/MarketTrend.html

Chris Vermeulen
www.TheGoldAndOilGuy.com – ETF Swing Trading Signals

Read more here:
Weekend SPX, Dollar, Oil and Gold Analysis and Video




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF

Top ETF Trends of the Week

October 24th, 2010

Equities continued their ascent last week, posting a mild gain of .6% for the S&P500 following a spate of favorable earnings announcements with very few disappointments.  While most companies have now reported and much of the positive anticipated earnings reporting sentiment may be built into equities valuations already given the trend we’ve seen, there are a few other factors impacting equities at the moment.  There is the still unresolved foreclosure scandal, a critically important Quantitative Easing 2 announcement anticipated in early November, and we will certainly see if this was or wasn’t a bond bubble after all when it’s clear just how substantial the program will be and whether the current low yields we saw were already reflective of a major easing program or whether markets are underwhelmed and bonds sell off.

For the week, we saw strength in soft commodities and real estate while we saw weakness in precious metals, with those who timed it right to short gold, realizing quick gains during the correction.  Here are the top conventional and leveraged ETFs from last week which may be volatile going into this week as well.

Conventional Long ETFs/ETNs

BAL – iPath Dow Jones-UBS Cotton Subindex Total Return ETN – Up 11% – Cotton prices have risen over 50% in just the prior three months on concerns over weather and the inability of supply to keep up with demand.  China and Pakistan have seen heavy flooding and with both being top suppliers in the world, such a spike should not be unexpected.  BAL is up 60% on the year, with most of that gain coming from summer onward.

SGG – iPath Dow Jones-UBS Sugar Subindex Total Return ETN – Up 5% – For reasons similar to cotton, but due to flooding in Brazil, sugar has had a strong run as well, often appearing on this list.  SGG is up an astounding 83% over the prior 6 months.  Keep in mind that ETNs differ from ETFs in that you take on the solvency risk of the issuer, whereas, ETFs hold the underlying shares/assets generally.

FAA – Guggenheim Airline – Up 6% – The airlines have been staging a surprising comeback of late, with the majors Delta (DAL), American (AMR) and US Air (LCC) all turning in strong earnings reports and making rosy projections of a recovery.  FAA is up 14% over the prior month.

Leveraged ETFs

ZSL – ProShares UltraShort Silver – Up 8% – Both silver and gold corrected last week, perhaps due to the notion that the excess money supply anticipated from the November QE2 announcement has already been built into the market.  ZSL provides the 2X daily inverse return for bulk silver.  As you can imagine, it hasn’t been pretty for ZSL given the incredible runup silver has undertaken.  In fact, has highlighted in this article on ETFs beating gold, silver has actually been much more volatile (and profitable) than gold bullion itself (GLD), even though gold tends to grab the headlines.  As such, being 2X short, ZSL has lost 48% over the prior 6 months and 60% YTD.

GLL – ProShares UltraShort Gold – Up 6% – GLL is the 2x inverse daily return of bullion and is one of many gold ETFs, but similar to ZSL, GLL has performed quite poorly.  Aside from the fact that leveraged ETFs don’t make for good long term investments due to daily resets anyway, gold has also been on a tear.  Study up on the gold tax laws before investing in various ETFs out there though, since in many cases, it is treated as a “collectible” and taxed at a much higher rate.  GLL is down 27% over the prior 6 months and down 37% YTD.

FAS - Direxion Daily Finan. Bull 3X – Up 5% – The financial sector showed some strength last week, seemingly in spite of the foreclosure-gate scandal that threatens put-back options, delayed foreclosures, and I would anticipate, Congressional hearings to determine how fraudulent foreclosures were undertaken, but the week did see favorable announcements from some major components of the index.

Commodities, ETF, OPTIONS, Real Estate

Four ETFs Driven By Consumer Spending

October 24th, 2010

The US economy grew at a faster than expected rate in the third quarter of this year, buoyed much by an increase in consumer spending, however, is still not growing at a rate to generate new jobs.  Despite this, a ray of light may shine on sectors driven by consumer spending enabling the Consumer Discretionary Select Sector SPDR (XLY), the Vanguard Consumer Discretionary (VCR), the PowerShares Dynamic Consumer Discretionary (PEZ) and the Retail HOLDRs (RTH) to reap the benefits.

According to the Commerce Department, consumer spending, this accounts for nearly 70 percent of US GDP, increased by 2.4 percent annually during the third quarter of this year.  Furthermore, retail sales rose in each of the three months in the third quarter with a further detail indicating that this rise is broad based. 

As for the next few months, the National Retail Federation expects the upcoming holiday season to be the best one in the past four years with sales increasing by 2.3 percent from a year ago.   With this in mind, retailers like Wal-Mart (WMT), Target (TGT) and Amazon (AMZN) are likely to witness increased sales from the previous year. 

The recent increases in consumer spending and the expected holiday season increases are likely being driven by the fact that some consumers believe that the economic recovery in the US is intact and the labor markets can’t get much weaker than they currently are.  Additionally, it appears that some consumers who pushed essential purchases back during the height of the Great Recession are finally starting to loosen their grip on their wallets. 

Although it appears that the aforementioned ETFs have already absorbed the blows dealt with consumers reluctant to spend, a weak labor force and weak consumer sentiment, it is equally important to consider the forces that could hinder them.  Some of these forces include deflation, inflation, and a stubbornly weak real estate sector which could take a further blow due to enhanced foreclosures hitting the market.

A good way to protect against these forces is through the use of an exit strategy which identifies specific price points at which downward price pressure could prevail.  Such a strategy can be found at www.SmartStops.net.

  • Consumer Discretionary Select Sector SPDR (XLY), which holds 81 different stocks that are driven by consumer spending.  Top holdings include fast food giant McDonald’s Corp (MCD), Walt Disney (DIS) and Amazon.
  • Vanguard Consumer Discretionary (VCR), which is the most diverse ETF of its kind with 378 holdings.  VCR includes Amazon and Target in its top holdings
  • PowerShares Dynamic Consumer Discretionart (PEZ), which is a mid-cap blend of 60 holdings.  PEZ top holding is luxury retailer Coach (COH).
  • Retail HOLDRs (RTH), which is heavily concentrated on discount retailers.  RTH allocates 19.48 % of its assets to Wal-Mart, 10.93% to Amazon and 8.68% to Target.

Disclosure: No Positions

 

Read more here:
Four ETFs Driven By Consumer Spending




HERE IS YOUR FOOTER

ETF, Real Estate, Uncategorized

New buys this week! Your deadline: THIS TUESDAY!

October 24th, 2010

Martin D. Weiss, Ph.D.

If you haven’t seen our most recent online presentation, I think you’d better do so before this weekend is over.

The reason for the urgency is quite straightforward: The presentation is about the strategy and investments I’m planning to jump into THIS week — to get my $1,000,000 portfolio positioned IN ADVANCE of the elections.

Moreover, I want to give you the opportunity to buy BEFORE I do. So your deadline is Tuesday — the day after tomorrow!

Explosive market forces are bursting onto
the scene with great speed and power …

And this week will give us one of the
opportunities to take advantage of them!

The cornerstone of the U.S. economy — the U.S. dollar — is losing value right before our eyes.

Real estate is reeling again under the crushing weight of mortgage foreclosures and legal disputes.

The 11 million unemployed plus hundreds of millions of consumers are snapping shut their pocket books.

But there are three MAJOR asset classes — gold, other commodities and foreign currencies — which are enjoying long-term BULL markets, with only temporary corrections. And now, these explosive forces are all coming to a head.

So here’s the timeline …

Tuesday (2 days from today): We take our new presentation offline.

Wednesday (3 days from today): We send out an advance alert to investors providing specific instruction on what I’m going to buy, when and how — with 24 hours advance notice.

Tuesday, November 2: Millions of American go to the polls, and as a result, fiscal conservatives sweep into power.

Wednesday, November 3: The Fed announces a whole new round of mass money printing.

And markets go haywire!

Click here for our presentation on what’s likely to happen next … and how you can convert these dramatic events into equally dramatic profits

Good luck and God bless!

Martin

Related posts:

  1. Weiss Buys Back Bank and Insurance Ratings from TheStreet.com
  2. Weiss Group buys back rating service
  3. The income investments Dad and I are going to talk about next week …

Read more here:
New buys this week! Your deadline: THIS TUESDAY!

Commodities, ETF, Mutual Fund, Real Estate, Uncategorized

New buys this week! Your deadline: THIS TUESDAY!

October 24th, 2010

Martin D. Weiss, Ph.D.

If you haven’t seen our most recent online presentation, I think you’d better do so before this weekend is over.

The reason for the urgency is quite straightforward: The presentation is about the strategy and investments I’m planning to jump into THIS week — to get my $1,000,000 portfolio positioned IN ADVANCE of the elections.

Moreover, I want to give you the opportunity to buy BEFORE I do. So your deadline is Tuesday — the day after tomorrow!

Explosive market forces are bursting onto
the scene with great speed and power …

And this week will give us one of the
opportunities to take advantage of them!

The cornerstone of the U.S. economy — the U.S. dollar — is losing value right before our eyes.

Real estate is reeling again under the crushing weight of mortgage foreclosures and legal disputes.

The 11 million unemployed plus hundreds of millions of consumers are snapping shut their pocket books.

But there are three MAJOR asset classes — gold, other commodities and foreign currencies — which are enjoying long-term BULL markets, with only temporary corrections. And now, these explosive forces are all coming to a head.

So here’s the timeline …

Tuesday (2 days from today): We take our new presentation offline.

Wednesday (3 days from today): We send out an advance alert to investors providing specific instruction on what I’m going to buy, when and how — with 24 hours advance notice.

Tuesday, November 2: Millions of American go to the polls, and as a result, fiscal conservatives sweep into power.

Wednesday, November 3: The Fed announces a whole new round of mass money printing.

And markets go haywire!

Click here for our presentation on what’s likely to happen next … and how you can convert these dramatic events into equally dramatic profits

Good luck and God bless!

Martin

Related posts:

  1. Weiss Buys Back Bank and Insurance Ratings from TheStreet.com
  2. Weiss Group buys back rating service
  3. The income investments Dad and I are going to talk about next week …

Read more here:
New buys this week! Your deadline: THIS TUESDAY!

Commodities, ETF, Mutual Fund, Real Estate, Uncategorized

The Kirk Report Interviews Mike Bellafiore of SMB Capital

October 24th, 2010

I wanted to share a link to another excellent interview in the series from Charles Kirk at the Kirk Report.

This weekend’s interview is with Mike Bellafiore of SMB Capital, who also is the author of the new and popular book One Good Trade (see my earlier book review).

As is my custom, I wanted to highlight a few great quotes from the interview to draw your attention to read the whole piece!

Mike is a proponent of combining sports analogies with trading, and he does that well in his book.  This segment comes from the interview:

“We treat our traders like elite athletes. There are four elements to become great at anything:

  1. Acquiring domain knowledge
  2. Motivation or sustained energy
  3. Critical feedback
  4. Purposeful practice (what we call simulation)”

Next:

Kirk:   I’m curious to know – if your son or daughter just graduated from college would you encourage them to become a trader? Why or why not?

Mike Bellafiore:  My dad told me when I was young to find something I enjoyed and stick with that. I would offer the same advice.

[I had the same advice from my father when I was discovering careers to pursue]

More:

Kirk:  Why do you think most traders fail?

Mike Bellafiore:  Traders fail because they do not develop the skills necessary to succeed. I wrote a whole chapter about this in One Good Trade including some great anecdotes about why some have failed.

Kirk:  [W]hat information do you think every trader needs to have in their trading journal?

Mike Bellafiore: We have developed an extensive trading journal. It is long, detailed, and takes a half hour at a minimum to fill out each day.

[That is dedication - but it facilitates SO much learning]

Head on over to the Kirk Report for the full interview which was posted Friday and read more about Mike’s trading tips and rules, HFT insights, elite performance, and so much more. He also links to articles written in SFO Magazine for more details.

And to follow Mike and the team at SMB Capital, visit their training blog.

Corey Rosenbloom, CMT

Read more here:
The Kirk Report Interviews Mike Bellafiore of SMB Capital

Uncategorized

The Kirk Report Interviews Mike Bellafiore of SMB Capital

October 24th, 2010

I wanted to share a link to another excellent interview in the series from Charles Kirk at the Kirk Report.

This weekend’s interview is with Mike Bellafiore of SMB Capital, who also is the author of the new and popular book One Good Trade (see my earlier book review).

As is my custom, I wanted to highlight a few great quotes from the interview to draw your attention to read the whole piece!

Mike is a proponent of combining sports analogies with trading, and he does that well in his book.  This segment comes from the interview:

“We treat our traders like elite athletes. There are four elements to become great at anything:

  1. Acquiring domain knowledge
  2. Motivation or sustained energy
  3. Critical feedback
  4. Purposeful practice (what we call simulation)”

Next:

Kirk:   I’m curious to know – if your son or daughter just graduated from college would you encourage them to become a trader? Why or why not?

Mike Bellafiore:  My dad told me when I was young to find something I enjoyed and stick with that. I would offer the same advice.

[I had the same advice from my father when I was discovering careers to pursue]

More:

Kirk:  Why do you think most traders fail?

Mike Bellafiore:  Traders fail because they do not develop the skills necessary to succeed. I wrote a whole chapter about this in One Good Trade including some great anecdotes about why some have failed.

Kirk:  [W]hat information do you think every trader needs to have in their trading journal?

Mike Bellafiore: We have developed an extensive trading journal. It is long, detailed, and takes a half hour at a minimum to fill out each day.

[That is dedication - but it facilitates SO much learning]

Head on over to the Kirk Report for the full interview which was posted Friday and read more about Mike’s trading tips and rules, HFT insights, elite performance, and so much more. He also links to articles written in SFO Magazine for more details.

And to follow Mike and the team at SMB Capital, visit their training blog.

Corey Rosenbloom, CMT

Read more here:
The Kirk Report Interviews Mike Bellafiore of SMB Capital

Uncategorized

Key ETFs to Watch Related to QE2 in November

October 23rd, 2010

The current consensus is that the Fed will announce some sort of significant quantitative easing program in early November following the Nov 2-3 FOMC meeting. What isn’t clear is just how large the program will be or exactly how it will be implemented. With this timing in mind, in addition to November elections, it’s important to be positioned for various outcomes during the month of October in anticipation of some potential significant moves in various asset classes in the weeks to come.

A primary consideration I should point out is that it appears as though a significant Quantitative Easing announcement has already been built into various facets of the market. The 10-Year Treasury yield has been hovering around 2.5%, touching 2.4% on some days down from 2.9% when this prospect was given serious consideration.  Meanwhile, gold hit record highs during the week before correcting later in the week, and stocks continue to advance unabated, seemingly ignoring the perils of the yet to be resolve Foreclosure-Gate scandal. It hasn’t hurt that roughly 85% of S&P500 companies reporting earnings have actually beaten their consensus estimates, but come the end of October, going into the FOMC meeting, investors could be in for a very rude awakening should the Fed determine no action or minimal action is appropriate. While most financial advisors (tools to find one near you) would advise clients to stay focused on the long-term, this is one of the rare opportunities for active investors to take advantage of a somewhat binary market event, meaning the outcome will likely be large, moving several asset classes one way or the other. I’d be surprised if November traded in a tight range in other words.  So, here are some key sectors and ETFs to watch.

Treasuries

For retail investors, the best method for playing moves in Treasuries would be ETFs. While I abhor leveraged ETFs as long-term investments, if looking to trade a somewhat binary outcome for November, it might be worthwhile checking out some leveraged Treasury ETFs. You can find several bond durations and long/short/leveraged options in this article on the Treasury Bond Bubble but primarily, I like using (TMF) and (TMV) for long/short 3X Daily 10 Year duration. These tend to be somewhat volatile will likely see some action in November.

Gold and Silver

Gold gets all the headlines, but silver is actually more volatile (and a better performer) than gold in recent history. The most broadly utilized ETFs representing underlying bullion without the leverage would be (GLD) for gold and (SLV) for silver. Year to date, GLD is up 21% and SLV is up 38%. Leveraged ETFs include (UGL) and (GLL) for 2X daily gold long, short, respectively with (AGQ) and (ZSL) representing 2X daily silver long, short, respectively. One should anticipate that if markets are underwhelmed by the Fed’s QE2 announcement, these precious metals will sell of dramatically since much of their buildup has presumably been due to anticipation of further devaluation of the US currency. If the QE2 announcement is substantial, as a confirmatory move, these may very well continue to rally. Surely, the pundits and traders everywhere will be saying precious metals are a must-have in an era of a government debasing its currency. If volatility is spiking following the announcement, watch for gold pairs trade opportunities like the one I exploited a few months back for easy low-risk returns.  Just be mindful of tax rules for gold since bullion is treated as collectibles in some ETF classifications.

Banking Stocks

As one can imagine, the Financial sector has benefited tremendously from record low rates, effectively borrowing for free and lending it out (albeit selectively) while adding to their reserves to comply with FinReg and potential fallout from more mortgage write-downs. A broadly popular Financials ETF is (XLF), while the ETFs (FAS) and (FAZ) take long, short 3X daily positions in the Financials and have been wildly popular thus far this year given the relative volatility of the Financial sector of late.

An interesting play to watch should markets sour would certainly be Preferred Stock ETFs since investors will likely see a drop in share price there too, but given the virtual hybrid bond-like properties, they may very well scoop up preferred stock on Financials with the high yield to boot, realizing a disappointing QE2 announcement is unlikely to actually affect the solvency of these firms, just their near-term profitability to some degree.

At this point, I’m relatively agnostic directionally for November, but think the magnitude of the moves in these classes in November may be dramatic, so I will likely take some off the table by the end of the month, especially considering the stellar performance of many of the tech stocks in the portfolio which tripled the S&P500 over the prior month (portfolio performance/review).

Disclosure: Long GLD.

ETF, OPTIONS

Key ETFs to Watch Related to QE2 in November

October 23rd, 2010

The current consensus is that the Fed will announce some sort of significant quantitative easing program in early November following the Nov 2-3 FOMC meeting. What isn’t clear is just how large the program will be or exactly how it will be implemented. With this timing in mind, in addition to November elections, it’s important to be positioned for various outcomes during the month of October in anticipation of some potential significant moves in various asset classes in the weeks to come.

A primary consideration I should point out is that it appears as though a significant Quantitative Easing announcement has already been built into various facets of the market. The 10-Year Treasury yield has been hovering around 2.5%, touching 2.4% on some days down from 2.9% when this prospect was given serious consideration.  Meanwhile, gold hit record highs during the week before correcting later in the week, and stocks continue to advance unabated, seemingly ignoring the perils of the yet to be resolve Foreclosure-Gate scandal. It hasn’t hurt that roughly 85% of S&P500 companies reporting earnings have actually beaten their consensus estimates, but come the end of October, going into the FOMC meeting, investors could be in for a very rude awakening should the Fed determine no action or minimal action is appropriate. While most financial advisors (tools to find one near you) would advise clients to stay focused on the long-term, this is one of the rare opportunities for active investors to take advantage of a somewhat binary market event, meaning the outcome will likely be large, moving several asset classes one way or the other. I’d be surprised if November traded in a tight range in other words.  So, here are some key sectors and ETFs to watch.

Treasuries

For retail investors, the best method for playing moves in Treasuries would be ETFs. While I abhor leveraged ETFs as long-term investments, if looking to trade a somewhat binary outcome for November, it might be worthwhile checking out some leveraged Treasury ETFs. You can find several bond durations and long/short/leveraged options in this article on the Treasury Bond Bubble but primarily, I like using (TMF) and (TMV) for long/short 3X Daily 10 Year duration. These tend to be somewhat volatile will likely see some action in November.

Gold and Silver

Gold gets all the headlines, but silver is actually more volatile (and a better performer) than gold in recent history. The most broadly utilized ETFs representing underlying bullion without the leverage would be (GLD) for gold and (SLV) for silver. Year to date, GLD is up 21% and SLV is up 38%. Leveraged ETFs include (UGL) and (GLL) for 2X daily gold long, short, respectively with (AGQ) and (ZSL) representing 2X daily silver long, short, respectively. One should anticipate that if markets are underwhelmed by the Fed’s QE2 announcement, these precious metals will sell of dramatically since much of their buildup has presumably been due to anticipation of further devaluation of the US currency. If the QE2 announcement is substantial, as a confirmatory move, these may very well continue to rally. Surely, the pundits and traders everywhere will be saying precious metals are a must-have in an era of a government debasing its currency. If volatility is spiking following the announcement, watch for gold pairs trade opportunities like the one I exploited a few months back for easy low-risk returns.  Just be mindful of tax rules for gold since bullion is treated as collectibles in some ETF classifications.

Banking Stocks

As one can imagine, the Financial sector has benefited tremendously from record low rates, effectively borrowing for free and lending it out (albeit selectively) while adding to their reserves to comply with FinReg and potential fallout from more mortgage write-downs. A broadly popular Financials ETF is (XLF), while the ETFs (FAS) and (FAZ) take long, short 3X daily positions in the Financials and have been wildly popular thus far this year given the relative volatility of the Financial sector of late.

An interesting play to watch should markets sour would certainly be Preferred Stock ETFs since investors will likely see a drop in share price there too, but given the virtual hybrid bond-like properties, they may very well scoop up preferred stock on Financials with the high yield to boot, realizing a disappointing QE2 announcement is unlikely to actually affect the solvency of these firms, just their near-term profitability to some degree.

At this point, I’m relatively agnostic directionally for November, but think the magnitude of the moves in these classes in November may be dramatic, so I will likely take some off the table by the end of the month, especially considering the stellar performance of many of the tech stocks in the portfolio which tripled the S&P500 over the prior month (portfolio performance/review).

Disclosure: Long GLD.

ETF, OPTIONS

Key ETFs to Watch Related to QE2 in November

October 23rd, 2010

The current consensus is that the Fed will announce some sort of significant quantitative easing program in early November following the Nov 2-3 FOMC meeting. What isn’t clear is just how large the program will be or exactly how it will be implemented. With this timing in mind, in addition to November elections, it’s important to be positioned for various outcomes during the month of October in anticipation of some potential significant moves in various asset classes in the weeks to come.

A primary consideration I should point out is that it appears as though a significant Quantitative Easing announcement has already been built into various facets of the market. The 10-Year Treasury yield has been hovering around 2.5%, touching 2.4% on some days down from 2.9% when this prospect was given serious consideration.  Meanwhile, gold hit record highs during the week before correcting later in the week, and stocks continue to advance unabated, seemingly ignoring the perils of the yet to be resolve Foreclosure-Gate scandal. It hasn’t hurt that roughly 85% of S&P500 companies reporting earnings have actually beaten their consensus estimates, but come the end of October, going into the FOMC meeting, investors could be in for a very rude awakening should the Fed determine no action or minimal action is appropriate. While most financial advisors (tools to find one near you) would advise clients to stay focused on the long-term, this is one of the rare opportunities for active investors to take advantage of a somewhat binary market event, meaning the outcome will likely be large, moving several asset classes one way or the other. I’d be surprised if November traded in a tight range in other words.  So, here are some key sectors and ETFs to watch.

Treasuries

For retail investors, the best method for playing moves in Treasuries would be ETFs. While I abhor leveraged ETFs as long-term investments, if looking to trade a somewhat binary outcome for November, it might be worthwhile checking out some leveraged Treasury ETFs. You can find several bond durations and long/short/leveraged options in this article on the Treasury Bond Bubble but primarily, I like using (TMF) and (TMV) for long/short 3X Daily 10 Year duration. These tend to be somewhat volatile will likely see some action in November.

Gold and Silver

Gold gets all the headlines, but silver is actually more volatile (and a better performer) than gold in recent history. The most broadly utilized ETFs representing underlying bullion without the leverage would be (GLD) for gold and (SLV) for silver. Year to date, GLD is up 21% and SLV is up 38%. Leveraged ETFs include (UGL) and (GLL) for 2X daily gold long, short, respectively with (AGQ) and (ZSL) representing 2X daily silver long, short, respectively. One should anticipate that if markets are underwhelmed by the Fed’s QE2 announcement, these precious metals will sell of dramatically since much of their buildup has presumably been due to anticipation of further devaluation of the US currency. If the QE2 announcement is substantial, as a confirmatory move, these may very well continue to rally. Surely, the pundits and traders everywhere will be saying precious metals are a must-have in an era of a government debasing its currency. If volatility is spiking following the announcement, watch for gold pairs trade opportunities like the one I exploited a few months back for easy low-risk returns.  Just be mindful of tax rules for gold since bullion is treated as collectibles in some ETF classifications.

Banking Stocks

As one can imagine, the Financial sector has benefited tremendously from record low rates, effectively borrowing for free and lending it out (albeit selectively) while adding to their reserves to comply with FinReg and potential fallout from more mortgage write-downs. A broadly popular Financials ETF is (XLF), while the ETFs (FAS) and (FAZ) take long, short 3X daily positions in the Financials and have been wildly popular thus far this year given the relative volatility of the Financial sector of late.

An interesting play to watch should markets sour would certainly be Preferred Stock ETFs since investors will likely see a drop in share price there too, but given the virtual hybrid bond-like properties, they may very well scoop up preferred stock on Financials with the high yield to boot, realizing a disappointing QE2 announcement is unlikely to actually affect the solvency of these firms, just their near-term profitability to some degree.

At this point, I’m relatively agnostic directionally for November, but think the magnitude of the moves in these classes in November may be dramatic, so I will likely take some off the table by the end of the month, especially considering the stellar performance of many of the tech stocks in the portfolio which tripled the S&P500 over the prior month (portfolio performance/review).

Disclosure: Long GLD.

ETF, OPTIONS

Building Your Own Convergence Fortune

October 23rd, 2010

They call it the “Convergence.” Sometimes, when researchers get particularly excited, they refer to it as “The Great Convergence.” Some think it’s still a few years away. Others are convinced it’s already happened. So what is it – besides an incredible wealth opportunity for forward-thinkers like you?

The Convergence is the moment when hard scientific research, manufacturing, communications, medicine – just pick a list of industries – all merge together. I’m talking about nano-engineered assembly lines. Cell phones, for example, that take your blood pressure and can email reports to your physician.

Profiting from companies involved in the Convergence is the wealth trend of the next decade. You see, breakthroughs are compounding now. Wealth is piling up faster and faster. Here’s just one example…

This past week, the Nobel Prize in physics for 2010 was awarded to Andre Geim and Konstantin Novoselov for the discovery of graphene. Geim and Novoselov were the first to successfully extract graphene from bulk graphite in 2004 using a sophisticated method referred to as the “Scotch tape technique.” Where others had failed to get single graphene sheets with more advanced methods, these scientists found success with Scotch tape.

Andre Geim was previously famous for levitating a frog using a strong magnetic field, which won him the Ig Nobel Prize in 2000. The results were published in the European Journal of Physics in a paper titled “Of Flying Frogs and Levitrons.”

The discovery of graphene opens doors to revolutionary new materials. Graphene is a sheet of chemically attached carbon atoms a single atom thick. Since carbon can form multiple simultaneous chemical bonds, each carbon atom bonds to three others. The result is a sheet 1 millionth of a millimeter thick in which the hexagonal structure of the carbon bonds takes on a honeycomb appearance with an atom at each vertex.

Along with carbon nanotubes, graphene is the strongest substance ever tested. It could be used to manufacture strong, lightweight products. Think of car bodies or aircraft fuselages. Since carbon is so abundant, the raw materials would be very inexpensive.

Graphene also has unique, useful electrical properties. If commercial graphene manufacturing could be perfected, it has been theorized that graphene could be used to construct many of the components in integrated circuits. In the future, you could be tapping on a smart phone with a graphene touch-screen or reading a book on a graphene monitor.

To give an example, Georgia Institute of Technology researchers have invented a graphene manufacturing technique for nanometer-scale electronics. They found that by etching patterns into silicon carbide, carbon atoms are coaxed into growing ribbons of graphene. With this technique, the researchers can grow an array of 10,000 transistors on a square chip only a quarter centimeter on a side.

Not only could graphene enable extremely small, dense electronic devices, it could also boost clock speeds in computers. UCLA researchers have recently been able to manufacture a 300-gigahertz graphene transistor. This is twice as fast as the best silicon oxide semiconductor transistors and similar in speed to transistors using expensive elements like indium or gallium. Currently, the researchers are trying to push the graphene transistor envelope and hit a speed of 1 terahertz.

Since graphene is an extremely thin honeycomb sheet, it can act as a membrane. The cover story of the Sept. 9 edition of the journal Nature features researchers using graphene sheets with tiny holes drilled in them. Using electrical charges, DNA strands can then be drawn through the holes, called nanopores, and read one base at a time – much how you would read data off of a ticker tape.

If the technology proves viable, it could greatly speed up the time it takes to read the data off of a full DNA molecule. This would make gene sequencing much cheaper. Since reading individual DNA data is important for the advance of personalized medicine, the impact of the technology could end up being huge.

Graphene is just one example of the tech Convergence. From communications to medicine and from computer hardware to bulletproof vests stronger than Kevlar, graphene is a Convergence trend that’s making waves TODAY.

Ad lucrum per scientia,

Ray Blanco
For The Daily Reckoning

Building Your Own Convergence Fortune originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Building Your Own Convergence Fortune




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

G-20 Meetings Could Prove Very Important for Currencies

October 23rd, 2010

Bryan Rich

While many investors have their eyes on the G-20 Summit in November, this weekend’s gathering of G-20 finance ministers could prove to be the more significant event for markets.

If you take a look at recent history, I think you would agree.

In March 2009, when the financial crisis was at its peak, when uncertainty was at its greatest, the G-20 finance ministers met in a perceived “warm-up” for the broader G-20 Summit in the weeks following.

It just so happened that the U.S. stock market reversed from the depths of its deepest decline since the Great Depression that same week — the world’s most closely monitored gauge for the health of the U.S. economy jumped 25 percent in just 14 trading days.

The bounce in stocks took commodities and most global currencies with it. And with that came a recovery in global confidence and risk appetite.

The overall result was a sharp nine-month rally in global financial markets that persuaded the masses that “a sharp economic recovery and a return to normalcy” were under way.

Then …

In June 2010, the global economy was again on the precipice of disaster. Unsustainable sovereign debt problems in the euro zone had taken its currency — the world’s second most widely held — to the edge of a cliff, and the European banking system was not far behind it.

A potential destruction of the euro, the monetary union and the sovereign debt laden European banking system started sending up warning flares for economies around the world. Once again, liquidity started tightening up, putting the world’s financial system in jeopardy.

The world’s attention was squarely on the euro. As the euro moved lower, so did global stocks, commodities and higher risk currencies.

The decline in those markets destroyed confidence and threatened the global economy with another bout of recession.

AGAIN, the finance ministers convened for scheduled meetings over an early June weekend. And sure enough, the following Monday, June 7, the euro bottomed.

As the euro moved higher, global investor fear began to wane. Global markets bounced back and outlook for the world brightened.

Confidence was restored in financial markets.

Now, here we are with a THIRD meeting of G-20 finance ministers, also with a brewing crisis of confidence.

This time, it’s about the growing acts of protectionism — actions that are fracturing the geopolitical unity that has been critical in keeping the global economic crisis from boiling over into unabated depression.

The key spoiler: An escalating crisis in currencies.

Currency Wars

With the recent weakness in the dollar, most global currencies have been aggressively climbing in value.

In response, there has been a growing frequency of unilateral currency market intervention. In plain English, to protect their competitiveness in global trade, countries are battling each other to weaken their currencies.

Japan stepped in last month to weaken the yen with its biggest daily intervention on record. South Korea, Thailand, Singapore, Brazil and others have been consistently intervening to stem the tide of strength in their currencies.

While many perceive the catalyst for these actions to be the dollar and Fed policy, that’s not entirely the case. It all boils down to China.

Countries that are heavily reliant on exporting are less concerned about the value of their currencies relative to the dollar than they are relative to China’s currency … the yuan.

While its trade competitors are experiencing stronger currencies, China continues to keep a lid on the yuan — keeping it closely aligned with the dollar. That has created an increasingly growing competitive trade advantage for China.

That’s precisely why we’re seeing countries take matters into their own hands, with outright intervention to weaken their currencies. And given this environment, global officials are very concerned that a contagion of protectionism could quickly send the world back toward the edge of the cliff.

So, with the G-20 finance ministers back in session this weekend, will we see a market response?

Given the recent history, I see two ways they could act to change the tide:

Action #1: Convince China to revalue its currency … a one-off revaluation.

It would be a move that would go a long way toward rebalancing global economies, a key ingredient in allowing the world to find a sustainable path of growth. That would also reverse global central banks’ bias toward more QE — a stabilizing force. And it would create a more competitive trade environment for Asian exporters — a stabilizing force. But a China revaluation is very unlikely to happen.

Action #2: A coordinated intervention by G-4 countries to weaken the yen against the dollar.

This would reinforce global unity. And it would weaken most currencies around the world relative the Chinese yuan, because it would strengthen the dollar, to which the yuan continues to trade very tightly with.

It wouldn’t change the biggest problem with the yuan … its relationship with the dollar. But it would quell the rising threat of global competitive currency devaluations among its global trading competitors, a dangerous and divisive game.

Regards,

Bryan

Related posts:

  1. Why Currencies Play an Important Role in Earnings
  2. What the Big Mac Can Tell You about Currencies
  3. U.S. Stocks Offer Important Signals for Currency Investors

Read more here:
G-20 Meetings Could Prove Very Important for Currencies

Commodities, ETF, Mutual Fund, Uncategorized

A Second Chance to Buy an Industry Game-Changer

October 23rd, 2010

A Second Chance to Buy an Industry Game-Changer

Talk about timely. Several colleagues of mine were recently discussing what investors should do when that stock you love seems like it already left the station. We ended up covering the topic on our sister site, InvestingAnswers.com. [See: "What to do When You've Missed the White Whale"]

As fate would have it, a company which I have long admired, but whose share price was simply too expensive to recommend, fell out of bed this week and is now down -40% since late April. That company is Cree (Nasdaq: CREE), which is transforming the lighting industry.

Mr. Edison's legacy
After a century of use, the incandescent bulb started to lose favor among builders as compact fluorescent lights (CFLs) arrived with much lower power consumption. But the honeymoon will prove to be short-lived. CFLs may save 65% of the juice needed to provide light when compared to old-fashioned incandescents, but Light Emitting Diodes (LEDs) are even better, representing an energy savings of 85% compared to incandescents. That's the kind of energy saving we need in our bid to wean our dependence off of fossil fuels. The move to LED lighting has only recent begun, though industry titan Phillips predicts that LEDs will comprise 50% of the lighting business by 2015. That prediction could be premature by half a decade, but the trend toward LEDs is inevitable.

Thanks to impressive cost-saving opportunities, some are already approaching LEDs in a big way. China is in the process of retro-fitting street lights to house LEDS (though that effort was recently slowed when it became apparent that Chinese suppliers were providing shoddy goods with short life spans). And architects are increasingly designating LED lights into their plans.

For even faster adoption, these relatively expensive lights will need to come down in price. Rising manufacturing yields are helping that process along.

The industry leader
Cree, which has been developing its LED technology for more than two decades, holds the most patents in the industry and offers the broadest set of lighting products. That has enabled the company to secure roughly 30% of the whole market. But growth for the broader industry in general — and Cree in particular — has only recently taken off.

Cree's annual sales didn't reach $400 million until 2006, and it took another three years to reach the $500 million mark. Yet fiscal (June) 2010 was a breakout year for Cree, as sales shot up +53% to $867 million. That lit a fire under the company's stock, pushing it up from $17 in late 2008 to around $80 this spring. Analysts started to speak of uninterrupted +30% to +40% annual sales growth in coming years, and no price was too high for these shares.

But there's no such thing as uninterrupted growth, as Cree noted in just-released quarterly results. Sales in the company's first fiscal quarter rose +59% from a year ago to $268 million, but analysts were looking for +65% sales growth. That rate is likely to cool further to +40% in the current quarter. Shares, which had already been hit by profit-taking after such a strong run, took another blow and moved below the $50 mark.

Action to Take –> There's an important lesson here. Any company that is subject to very high expectations can be quite vulnerable to any setbacks. Right now, analysts think Cree will still boost sales +40% in fiscal (June) 2011 and +30% in fiscal 2012. Forget that. Instead, simply expect that sales can grow at least +25% annually for a number of years to come as LED deployments take root around the world.

You want to own Cree for its pole position in an exciting new industry that will eventually generate billions in revenue. Cree's slice of that industry revenue may shrink, perhaps to 20%, as competition builds. Yet a smaller slice of a much larger pie is not a bad thing. Cree looks set to top $1 billion in revenue this year, $2 billion by fiscal 2013, and perhaps $3 billion a few years after that.

After the recent sell-off, shares now trade for about 18 times projected (June) 2012 profits. Profit growth will be bumpy, as the company is trying to offset price pressures with lower manufacturing costs. But Cree 's technology lead should ensure it can post gross margins in excess of 45% in coming years. (They currently stand at 48%).

Solid growth, robust margins, industry-leading technology, potentially massive industry opportunity. These are all the characteristics of a winning stock. And that -40% haircut means it's time to pounce.


– David Sterman

P.S. –

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