Conquer The Wallstreet !!!: Thursday, December 4, 2008

Thursday, December 4, 2008

The New ETFs to provide leveraged and inverse exposure to gold and silver

ProFunds Group launched on December 3 the first exchange-traded funds in the U.S. to provide leveraged and inverse exposure to various commodity and currency markets. This is for the first time such products are available in the ETF format. There are other exchange traded products, known as Exchange Traded Notes (ETNs) that provide leveraged and inverse exposure to various commodity and currency markets.

However, ETNs are bonds and as such carry a risk of default from the issuer; a lesson that holders of Lehman backed ETNs learned the hard way last month. Here are the ETFs:

ProShares Ultra Gold (UGL)
ProShares UltraShort Gold (GLL)
ProShares Ultra Silver (AGQ)
ProShares UltraShort Silver (ZSL)

The four new ETFs have being traded on the NYSE Arca since then.

In the last month, Profunds has launched the eight new ETFs from ProShares on November 25, here are:

Ultra DJ-AIG Commodity (UCD)
UltraShort DJ-AIG Commodity (CMD)
Ultra DJ-AIG Crude Oil (UCO)
UltraShort DJ-AIG Crude Oil (SCO)
Ultra Euro (ULE)
UltraShort Euro (EUO)
Ultra Yen (YCL)
Ultra Short Yen (YCS)

Financial Bear 3X (FAZ)-Be ready for the next stock markets crash!!!

Sources :

Investwithanedge.com: Eight New ETFs from ProShares Began Trading Today, November 25, 2008
Yahoo! Finance: ProShares Launches First Short and First Leveraged ETFs Tracking Gold or Silver, December 3, 2008 7:30 am ET
Seeking Alpha: ProShares Launches First Leveraged and Short Commodity ETFs, December 4, 2008

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Warren Buffett of Russia in the interview with Bloomberg TV

Video courtesy of Bloomberg via Clip Syndicate
Prokhorov who was ranked by Forbes magazine as Russia’s fifth- richest man, on December 3, said, “for the time being the best thing is to sit and wait”. Here is from Bloomberg:

“We have a basket of assets, no loans, and cash in the accounts,” Prokhorov said in an interview with Bloomberg Television in Moscow today. “That means for a time we’re quite safe.”

Prokhorov, ranked by Forbes magazine as Russia’s fifth- richest man with a fortune of $22.6 billion in April, sold 25 percent of OAO GMK Norilsk Nickel later that month, mainly for cash. Oleg Deripaska, Russia’s richest man at the time, paid Prokhorov about $8 billion and made him the second largest shareholder in United Co. Rusal, according to the Kommersant and Vedomosti newspapers.

Norilsk Nickel, the world’s largest producer of the metal, has lost about three-fourths of its value since Prokhorov’s sale to Deripaska. Rusal, the world’s biggest aluminum producer, isn’t listed. Prokhorov’s holding company, Onexim Group, bought half of Renaissance Capital in September for $500 million.

Moscow-based Onexim owns the license to develop Russia’s biggest untapped nickel deposit, about 30 percent of OAO Polyus Gold and has insurance, property and media assets.

The global financial crisis is changing the nature of business, said Prokhorov, 43. The billionaire said he’s prepared to sell assets “quickly,” depending on market conditions. “I have some ideas for the future, but I want to keep them a secret,” Prokhorov said.

“The world is changing,” he said. ”You don’t know who will be alive and what your competitive advantage will be. For the time being, the best thing is to sit and wait.”

Prokhorov said he’s no Warren Buffett, even though he anticipated the crisis and liquidated his most valuable asset before financial turmoil spread outside the U.S.
“I think Warren Buffett is a great man and I am not,” Prokhorov said.

The Warren Buffett of Canada calls for “buy stocks”

Sources :

Billionaire Prokhorov Waits for ‘World Change’ to Buy (Update1)

AMD’s revenue is expected will drop by about 25%

Chart courtesy of Stockcharts
Click the image to enlarge
Due to weakening consumer demands, Advanced Micro Devices Inc. (AMD) warned today that its revenue is expected will drop by about 25%. Here is from CNN Money:

Chipmaker Advanced Micro Devices Inc. warned Thursday its fourth-quarter revenue will drop about 25% from third-quarter levels due to weaker-than-expected demand, particularly in the consumer market.

That implies sales of $1.19 billion, based on third-quarter revenue of $1.59 billion. Analysts polled by Thomson Reuters, on average, expect much higher sales of $1.54 billion.

AMD had been struggling long before the economy took a turn for the worst, losing $5.6 billion over the past eight quarters. Last month, AMD said it will cut 500 jobs, or about 3% of its global work force - the company's second big round of layoffs this year amid a huge restructuring.

Intel owns about 80% of the worldwide microprocessor market; AMD essentially has the rest.

Chip sales have been suffering as companies worldwide lay off workers, slash capital spending and delay IT upgrades. The Semiconductor Industry Association said global chip sales were down 2.4% in October from a year ago, mainly due to falling prices for memory chips. The SIA expects the worldwide financial crisis to continue to hold back demand for chips next year.

AMD will report fourth-quarter results after the market closes on Jan. 22, 2009.

Shares slipped 3 cents to $2.17, after earlier falling to as low as $1.92. The company has lost about 71% of its market value this year.

Analysts cut the worldwide PC shipments forecast for 2009

Sources :

AMD warns of 25% revenue drop

Merrill Lynch: oil prices could fall to $25

Francisco Blanch, head of commodities research at Merrill Lynch, today said his main scenario was for oil prices to average $50 a barrel next year, but warned: “A temporary drop below $25 is possible if the global recession extends to China”. Blanch added. “In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations.”

Global oil demand will contract in 2009 as economic growth slows to its weakest since 1982. Merrill’s $50-a-barrel assessment for 2009 is the second- lowest among 32 analyst estimates compiled by Bloomberg, after a prediction of $43.13 by ANZ Banking Group Ltd. issued on Nov. 18.

ETFs/Stocks :

ProShares Ultra Oil & Gas ETF       DIG  $25.77  -2.42 (-8.58%)
ProShares UltraShort Oil & Gas ETF  DUG  $36.44  +2.95 (+8.81%)

[Video]Where is the oil bottom?

Sources :

FT.com: Merrill warns oil prices could fall to $25, December 4, 2008 13:56
Bloomberg: Oil May Fall Below $25 Next Year, Merrill Lynch Says (Update1), December 4, 2008 09:27 EST

Global hedge fund assets fell by $170bn in the Q3 of 2008

Global hedge fund industry has been hit hard by the current markets meltdown. Here is from CNBC:

Global hedge fund industry assets fell by $170 billion in the third quarter of 2008 as negative returns of more than 10 percent combined with heavy net outflows, research firm Lipper TASS said.

The data provider said there was a net outflow of $18.6 billion in the third quarter, reversing the trend of the previous two quarters.

Global hedge fund assets fell to $1.63 trillion at end-September from $1.80 trillion at end-June as the industry also generally failed to post positive returns amid the volatility that many were designed to exploit.

The figures appear to confirm fears that investors spooked by the market turmoil have withdrawn from hedge fund products seen as opaque or too complex.

All hedge fund sub-strategies measured by Credit Suisse/Tremont posted negative returns in the quarter. Some funds did however, attract investment.

The Lipper TASS report published Monday showed there were positive flows into Global Macro, Managed Futures, Equity Market-Neutral and Dedicated Short-Bias sub-strategies in the quarter.

The largest hedge fund sub-strategy outflows were experienced by Long/Short Equity, Fixed Income Arbitrage, Multi-Strategies and Emerging Markets, which also posted the steepest negative returns during the quarter.

Sources :

Hedge Fund Assets Fall $170 Billion in Third Quarter

ECB, BOE & Sweden cut rate; French unveiled a €26bn stimulus packages

Video courtesy of Telegraph
According to Reuters, The European Central Bank (ECB), Bank of England (BOE) and The Swedish central bank (Riksbanken) join party to make an unexpectedly rate cut on Thursday to shore up economies across Europe in the face of ever-bleaker financial news.

Sweden’s central bank cut interest rates by an unprecedented 175 basis points to 2 per cent, underlining the dramatic impact of the global economic downturn on the country’s export-based economy.

The steep cut was almost twice the 100 basis points the market had expected and came ahead of rate cuts by the European Central Bank and the Bank of England.

The Bank of England’s monetary policy committee to cut interest rates on Thursday by a full percentage point to 2 per cent, the lowest level for nearly four decades, to tackle the economic downturn.

The last time interest rates were at 2 per cent was in the final days of George VI’s reign in 1951 and the previous time lending costs were cut from 3 to 2 per cent was October 26 1939, after Britain entered the second world war.

While The ECB slashed 75 points to 2.50 percent as the eurozone's biggest ever cut. The aggressive move, which most economists had forecast, comes as a raft of data shows the state of the economy is worsening by the day. Earlier today, Halifax, the country's largest lender said that house prices had fallen by 2.6 per cent in the last month alone, and have now lost more than £37,000 from their peak last summer.

Two important manufacturing and services surveys this week have shown factories and businesses are feeling the squeeze, while The Pier furniture chain became the latest retailer to collapse into administration.

Europe stock markets declined after the announcement of the Central Banks move. The Central banks’ aggressive steps may be able to halt the current financial markets turmoil in the short term but not in the long term.

Here is from Reuters:

……………………France meanwhile unveiled a 26 billion euro ($32.9 billion) stimulus plan for its faltering economy as unemployment rose, the latest European country to open state coffers to fight the downturn.

With the United States, Europe and Japan now in recession and other countries sliding that way, data showed a mounting pattern of job losses and corporate woes across the globe.

The rate cuts are aimed at making credit cheaper and so boost spending, but banks will need to overcome their reluctance to lend for the measure to take hold and savers will suffer.

Analysts had widely expected the move following business indicators suggesting Britain's economy could be heading for an even deeper recession than most people had predicted.

But it disappointed some investors who had begun to speculate on a bigger easing following Sweden's action and European shares and bund futures pared Thursday's earlier gains.

Most analysts had predicted a 50 basis point cut by the ECB, but with inflation plummeting and the economy of the 15-nation eurozone sinking deeper into recession, it opted for a bigger slice.

Sources :

Reuters: Europeans make big rate cuts to fight recession, December 4, 2008 10:31am EST
Telegraph: Interest rates cut: Bank of England cuts rates from 3 per cent to 2 per cent, December 4, 2008 2:02PM GMT
FT.com: Sweden slashes rates to 2%, December 4 2008 13:31
FT.com: Bank of England cuts rates to 2%, December 4 2008 13:44

Weekly Unique Visitors of Online Dept. Stores: Black Friday 2007 vs 2008

The Following charts show how the leading Department stores & Mass Merchants fared at driving traffic to their websites during the week of Thanksgiving, which included Black Friday (Click the images to enlarge):

Table courtesy of http://datahub.compete.com

US online spending drops

Sources :

Department Store Trends - Unique Visitors: Week of Black Friday 2007 vs. 2008

Financial Bear 3X (FAZ)-Be ready for the next stock markets crash!!!

FAZ-ten your seat belt….. Be ready for the next stock markets crash!!!

The current credit market is starting to rise again, investors are pulling their capital back and seeking for safety assets like government bonds, hedge funds are facing redemptions, global force liquidation is going on, deflation remains to choke the current financial system and global central banks are panicked.

Triple inverse funds offer an alternative to provide extra gains in the uncertain markets situation. We may consider Direxion Financial Bear 3X (FAZ) as a hedge.

The Russell 1000® Financial Services Index is a capitalization-weighted index of companies that provide financial services. As of April 30, 2008, the Index had 227 components, derived from the Russell 1000 Index with an average market capitalization of over $11 billion dollars and a median market capitalization of $4.4 billion dollars. One cannot directly invest in an Index.

The Direxion Financial Bear 3X - Triple-Leveraged ETF is designed to yield investment results approximately equivalent to triple (300%) the inverse of the return of an investment in the Russell 1000 Financials Index, which tracks financial-related securities in the Russell 1000 Index. For example, if the underlying index gains 1%, this fund should decline in value approximately 3%.

Index Sector Weightings :

Diversified Financial Services   21.38%
Real Estate Investment Trusts    11.34%
Insurance: Multi-Line            10.07%
Financial Data & Systems          5.81%
Insurance: Property-Casualty      4.00%
Securities Brokerage & Service    3.85%
Asset Mmgnt. & Custodian          2.31%
Insurance: Life                   2.15%
Consumer Lending                  1.57%
Banks: Svgs Thrift & Mort. Lend.  1.53%
Commercial Fin. & Mort. Co.       0.95%
Real Estate                       0.29%

Data as of 9/30/2008 is subject to change at any time.
Source: Direxion

The Fund seeks to create short positions by investing at least 80% of its net assets in Financial Instruments that provide leveraged and unleveraged exposure to the Financial Index.

FAZ launched on November 3, along with the other seven Triple-Leveraged ETFs by Direxion, a pioneer in providing alternative investment strategies to sophisticated investors. Those funds began to trade on November 5, 2008.

Bullish :

ERX

FAS

BGU

TNA

Bearish :

ERY

FAZ

BGZ

TZA

It’s actually an innovative funds Benchmarked to help advisors and investors seeking to outperform major Russell Indexes in bull and bear markets

Chart courtesy of ETFPort.com
But No Risk No Gain, however investors should be aware there are some risks to these instruments, and they should know and understand them before rushing out to buy. Because they are triple-levered, so if the index drops 15% in one year and everything works out the way it should, your bull ETF will drop 42.62%, according to the prospectus. The estimated return is based on the volatility of the underlying index, so it may vary. If you own the Bear shares, and the index drops 50% over one year, your return could vary anywhere from 33% to 679%. (Investopedia Community)

Related Posts :

The 3-month treasury bill’s yield at the lowest level since Lehman collapsed

Sources :

Stock Encyclopedia: The ETF: Financial Bear 3X - Triple-Leveraged ETF (FAZ)
Direxion: Financial Bear 3x Shares (FAZ)
Stock Rake: 3x Triple Leveraged ETFs, November 13, 2008
Marketwire: Direxion Launches Eight New Leveraged ETFs, November 3, 2008

The 3-month treasury bill’s yield at the lowest level since Lehman collapsed

The current three-month Treasury bill's yield is at 0.01%, down from 0.05% late Tuesday, see the table below.

Click the image to enlarge

Source: Bloomberg
The yield is essentially zero and reaches at the lowest level since September 17, two days after Lehman Bros filling for bankruptcy. While the current TED spread widens to 2.19%, moves inversely to the three-month Treasury bill's yield. Those sign that credit stress is rising again.

Click the image to enlarge

Chart courtesy of Chartmechanic.com
On September 17, the yield on 3-month U.S. Treasury bills fell to 0.02% amid investors' panicked scramble into the safe haven of ultra short-dated government securities. There was disappointment in the Fed's decision to hold interest rates unchanged on September 16. Banks were just pulling back and not lending and not being able to get the funding they need. The TED spread topped out around 2.1% (Reuters, September 17: here and here).

From WTop.com:

After data showing a contracting service sector and slowing U.S. productivity, Treasury bill yields hovered near zero. Meanwhile, the yield on the two-year Treasury note fell as low as 0.87 percent, the 10-year yield sank as low as 2.65 percent, and the 30-year yield dropped as low as 3.16 percent.

These were the lowest yields for these Treasuries since the government started issuing them, and the lowest yields for assets equivalent to these Treasuries in more than 50 years, according to Global Financial Data in Los Angeles.

Total consumer credit, which doesn't even include mortgages, jumped from about $700 million in 1988 to $1.4 trillion in 1998 to $2.6 trillion this year, according to Federal Reserve data. And over that period of time, the average personal savings rate fell from about 8 percent in the late 1980s to 4 percent in the late 1990s to negative territory by 2005, according to the Bureau of Economic Analysis.

ETFs :

ProShares UltraShort Financials ETF  SKF   $135.00
Financial Bear 3X                    FAZ    $55.00

Thursday, December 4, 2008

The New ETFs to provide leveraged and inverse exposure to gold and silver

Warren Buffett of Russia in the interview with Bloomberg TV

AMD’s revenue is expected will drop by about 25%

Merrill Lynch: oil prices could fall to $25

Global hedge fund assets fell by $170bn in the Q3 of 2008

ECB, BOE & Sweden cut rate; French unveiled a €26bn stimulus packages

Weekly Unique Visitors of Online Dept. Stores: Black Friday 2007 vs 2008

Financial Bear 3X (FAZ)-Be ready for the next stock markets crash!!!

The 3-month treasury bill’s yield at the lowest level since Lehman collapsed

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