ETF REPORT

UNG's Collapse: the Kiss of Death strikes again

2012-03-30T08:11:00.000-04:00

The collapse of UNG post reverse split (a.k.a. the Kiss of death) continues. UNG now trades with a 16 handle.

Storage numbers released yesterday showed a stunning increased. The red curve is the current year's curve, compared with the average 5 year range in shaded gray

Remember the kiss of death post on UNG?

3X Gold ETF: precious metal yes, precious No!

2012-03-19T13:08:00.000-04:00

This "gem" exists, another 3X ETF, on gold bullion: NUGT.

How has it performed? As expected!

How has it performed compared with GLD? As expected: GLD +16.9%, NUGT: -48.1%.

Run, do not walk.

To track all gold and silver ETFs, please see our tracking live page.

Pimco launches new active ETF for small investors

2012-03-01T16:14:00.000-05:00

Pimco, Pacific Investment Management Co., the huge financial company managed by star manager Bill Gross, opened an exchange-traded version of its Pimco Total Return Fund.

Trading today under the ticker symbol TRXT, Gross’s Pimco Total Return ETF started with a net asset value of a mere $100.

“We’ve had two to three years of internal discussions,” Gross said in a telephone interview yesterday from his office in Newport Beach, California. “The challenge is obvious. We could fall flat on our face or we could roar like a lion in a year or two or three and become the largest ETF.”

The new ETF is designed to blend the trading flexibility and accessibility of ETFs with the stock- or bond- picking ability of active management, is a test case for investor interest in a segment that has attracted less than 0.5% of the $1.13 trillion in U.S.-registered ETF assets.

The potential for growth has spurred Pimco, along with at least two dozen other money managers to vie for a slice of the active ETF business, which would compete with the $9.41T mutual fund industry.

Gross, in the interview, said it still bothers him that high brokerage-firm minimums stopped his mother from buying shares of Pimco Total Return Fund, which became the world’s largest mutual fund in 2009. The new ETF aims to get smaller investors into the strategy"

“Small investors don’t always have access to active management with a higher yield and a higher total return,” “We are hoping ‘mom and pop’ can do a little bit better than the bond market at a time of historically low yields.”

UNG Kiss of Death - Again! Reverse Splits. Don't Walk, Run.

2012-02-22T16:53:00.001-05:00

Ooops, they did it again. it wasn't even that long ago that they had done a reverse split (less than 1 year)

They are called kiss of death for a reason. What happened since the last reverse split?

Did they stock go up +301% Oh no, not at all.

March 11 2011: stock was at the equivalent of today's $42 or so. Last reverse split was from $5 to $10. Obviously that was not enough, so this time it was from $5 or so to $20. Given the current supply glut on natural gas, end result could well be the same.

Japanese Yen falls off a cliff: ETFs to use

2012-02-22T09:47:00.000-05:00

After years of climbing for dubious reasons, the Japanese Yen has fallen off a cliff:

The most popular ETF is FXY. There are other long and short ETFs, for example, YCL and YCS. Please see our Currency ETFs tracking live page.

Why You Should Not Buy USO

2012-02-13T12:49:00.000-05:00

Larry Bermann pointed out on TV today why you should not buy USO for the long term, nor any other commodities ETFs that trades futures for that matter.

USO was launched when oil was at around $60. Today oil around $100. How about USO:

How is this possible? The reason is the same we point out so often: contango kills these ETFs.

Current natural gas very high contango: Should UNG really rebound?

2012-01-31T10:21:00.001-05:00

The popular, yet perennial money-loser UNG dropped to under $5, then recovered a little:

Please consider the current contango situation, through the front month contract prices

Contango is at 4.5% on the two front months, and almost 8% from first to third month. This is a really bad (high) number. Whenever this happens, UNG suffers.

Buyer beware.

UNG: Don't Walk, Run!

2012-01-17T19:40:00.002-05:00

What else can be said about this dreadful ETF.

The risks and myths about gold ETFs: Does the gold actually exist?

2012-01-10T08:07:00.000-05:00

BNN had a segment on gold and silver ETFs and the various allegations floating around that they do not actually have the gold they claim the have. The two interviewees state that they are false allegations with the purpose of selling other precious metals investments. You really never know what is behind these things.

Watch video

A top ETF For Safe Income: dividends plus covered calls

2011-12-30T15:09:00.000-05:00

Here is an ETF for income fro relatively safe stocks, plus extra income from selling covered cals: BMO's ZWU.

BMO Covered Call Utilities ETF has been designed to provide exposure to an equal weight portfolio of Canadian utilities, telecoms and pipeline companies, while earning call option premiums. The call options are written out of the money, selected based on the option's implied volatility, and are written in proportion to the securities weight. The option premium provides limited downside protection. The underlying portfolio is rebalanced in June and reconstituted in December. Options are rolled forward upon expiry.

Holdings:

Just Energy Group Inc	6.89%
Atlantic Power Corp	6.53%
Veresen Inc.	6.44%
Rogers Communications Inc	6.41%
TransCanada Corp.	6.31%
Enbridge Inc.	6.30%
AltaGas Ltd	6.26%
Capital Power Corp	6.26%
TELUS Corp.	6.25%
Cdn Utilities Cl A NVS	6.23%
BCE Inc.	6.21%
Fortis Inc.	6.16%
TransAlta Corp.	6.10%
Pembina Pipeline Inc	6.08%
Emera Inc.	6.07%
Manitoba Telecom Services	5.93%

Why UNG is Crashing

2011-12-29T12:13:00.002-05:00

UNG is taking another tumble today. This story repeats itself over and over: contango and storage.

Ouch.

Thursdays is in general due to storage. Here are today's figures:

That red line sticking above the 5 year channel is just dreadful. There is too much of the stuff.

Contango today is there too, but it's not so bad.:

Maybe now that the weather is colder things may change. Hope is the last to day for the dreadful UNG.

BZF and CYB ETFs distribute massive gains

2011-12-22T06:40:00.000-05:00

BZF and CYB dropped significantly yesterday, but the reason is that they distributed massive gains. This happens at the end of every calendar year.

In the case of BZF, the drop was of $5.69, or over 22%.

$5.72 of this was the dividend.

Distributions:

The dreadful leveraged ETFs; Some still green after all these years

2011-12-21T10:17:00.000-05:00

We track leveraged ETFs live here.

This is a partial capture:

As leveraged ETFs eventually lose their value, it is quite interesting to see that there are still some that are quite green.

Royal Bank of Canada loads up on GLD

2011-12-14T14:42:00.000-05:00

GLD is the most popular gold ETF. While gold itself is taking a beating, RBC (ticker RY), or its clients, has been adding GLD is massive amounts.

At the end of June Royal Bank of Canada reported holdings of 1,142,143 shares with a market value of $166,752,878. At the time, this was about 0.16% of the total portfolio.

On 09/30/2011, Royal Bank of Canada reported holding 3,138,217 shares, with a market value of $496,026,571. This comprised 0.63% of the total portfolio.

On Sep 30 GLD was trading at $158.08. Today, after a massive selloff it trades at $152.35.

Natural gas storage drops by 21Bcf: UNG Moves Higher

2011-12-08T15:59:00.000-05:00

As expected, natural gas storage number showed a decline today. The actual figure was -21Bcf:

UNG moved higher, also as expected. Contango is still low at 0.9%:

Natural gas alert: contango diminishes, UNG attractive

2011-12-06T08:58:00.000-05:00

Here is the current contango situation for natural gas this morning:

Contango in the frotn two miotnhs (January and February is 0.75%. As contango goes, this is quite low. While it does not mean that natural gas prices will rise, it means it is not so bad for UNG which suffers so much when contango is in effect.

From February to March the contango it is even lower at 0.26%.

UNG has dropped in recent two days, making it "interesting".

2 months:

6 months:

Dreadful, dreadful, dreadful, always dreadful.

Why natural gas and UNG spiked higher today, and what to expect

2011-12-01T15:42:00.000-05:00

Storage inventories were released this morning showing the first decline of the season - finally, and barely.

Note how the storage touched the top of the 5-year channel, actually were just above it. Just in time!

UNG:

Natural gas prices, however, are still in contango. Therefore, these spikes are usually only temporary. Rinse and repeat.

There is more to ETFs than you think

2011-11-30T07:17:00.000-05:00

The Financial Post has a very good article today on the ciomplexity of ETFs and the way they trade. ETFs are no doubt better than mutual funds in most ways, but they do have certain complexities that not many people know about.

The author attended a session by PowerShares which it hosted for advisors, covering the shortcomings of traditionalmarket-cap-weighted indexes (and ETFs tracking them) versus enhanced or "fundamental" indexing like that used by ETFs based on RAFI (Research Affiliates Fundamental Index.)

"The most interesting session was a panel involving three market makers and designated brokers. The stage was set in a backgrounder by Cooke on ETF liquidity, titled More than meets the eye. Because they're openended structures, ETFs don't trade precisely like stocks. Cooke argues stocks trade in an "auction" market with a fixed number of shares available. The value of a stock is determined "by the aggregate opinion of the outright value of the company in question." Based on all combined public investor opinions derived from publicly available information, the "correct" value of the stock is its current market price.

ETFs are different: Because of the way they are created and redeemed, they trade in an arbitrage situation. Bid and ask prices aren't arrived at through supply and demand of the ETF units themselves or by ETF unit trading volume. Rather, prices are determined by the value and liquidity of the underlying baskets of securities.

Or as Cooke summarizes, "ETFs do not trade like stocks. They trade like the sum of the stocks that comprise them." Designated brokers and dealers can create and redeem units to meet investor demand. They can also create extra units by assembling a basket of the stocks held in the ETF in the same relative weights, then exchanging the units for ETF units. For ETF redemptions, this is reversed.

One implication is there is a not a fixed number of ETF units in the marketplace, so liquidity of the ETFs is tied to liquidity of underlying holdings. Second, it allows designated brokers to spot arbitrage opportunities if the ETF trades at a discount or premium to net asset value.

Investors need to pay attention to market depth on ETFs and will be better off using limit orders rather than orders "at market." Cooke says market depth offers a more complete picture by revealing where the true liquidity on an ETF can be found. Sometimes market makers will post their best bids and best offers at prices reflecting the cost of hedging their market risk. This can create a "mirage" of liquidity based on small-sized bids and offers. "Market depth helps investors see where market makers post largersize bids and offers a better indication of where most ETF trades can be executed."

The main risk with a limit order is the risk of the whole trade not going through. But this is better than buying or selling at a hefty premium or discount to the ETF's worth. John Hoffman, PowerShares' director of institutional sales, suggested investors "avoid market orders. Always use limit orders when possible. A limit order ultimately protects you on price. A market order puts the priority on speed. A limit order is not protected on speed but on price of execution."
One advantage of ETF liquidity is sellers don't necessarily have to be matched with buyers. Cooke cites a real-life example from September. An institution wanted to buy almost 600,000 units of the PowerShares 1-5 Year Laddered Investment Grade Corporate Bond Index ETF (PSB/TSX), even though the average daily volume was only 10% of that amount. If this involved a single stock or bond, such an outsized order might push the price up, but in this case, the market maker created units by acquiring the underlying basket of liquid corporate bonds. The large trade was executed as a single block with minimal price disruption. "This illustrates how effectively even a large trade can be executed in a relatively illiquid ETF, assuming there is an investable basket of securities."

At the seminar, TD Securities vice-president Alex Perel observed that "fixed-income ETFs are by far the best deal for investors because of institutional pricing."
I came away with the impression there's more to choosing and trading ETFs than investors realize - and I dare say many advisors could say the same as they make the shift to ETFs from mutual funds"

The New Social Media ETF: SOCL

2011-11-17T15:05:00.000-05:00

A new dot bomb or will it actually have growth? In this world of social apps, a new social media ETF has been launched by Global X: ticker SOCL.

With a management fee of 0.65%, it holds many U.S. as well as non U.S. companies. 37% exposure to China.

"The Global X Social Media Index ETF (“Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Social Media Index (“Underlying Index”)".

The Underlying Index tracks the equity performance of the largest and most liquid companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications. As of September 10, 2011, the Underlying Index had 26 constituents, 18 of which are foreign companies.

% of Net Assets	Name	Identifier	Market Price($)	Shares Held	Market Value($)
	10.83	NETEASE.COM INC ADR	64110W102	45.70	3,384.00	154,648.80
	10.56	SINA CORP US	2579230	77.96	1,934.00	150,774.64
	10.46	DENA CO LTD	B05L364	34.67	4,310.00	149,411.84
	9.82	TENCENT HOLDINGS LTD	B01CT30	20.04	6,998.00	140,265.71
	8.39	GREE INC.	B3FJNX6	35.42	3,384.00	119,859.15
	5.05	GOOGLE INC	38259P508	611.47	118.00	72,153.46
	4.98	GROUPON INC	399473107	24.03	2,962.00	71,176.86
	4.67	MAIL.RU GROUP-GDR REGS W/	560317208	30.70	2,172.00	66,680.40
	4.61	YANDEX NV-A	N97284108	23.51	2,800.00	65,828.00
	4.37	RENREN INC ADR	759892102	4.52	13,812.00	62,430.24
	3.94	PANDORA MEDIA INC	698354107	12.16	4,622.00	56,203.52
	3.52	UNITED ONLINE	911268100	5.27	9,530.00	50,223.10
	3.40	LINKEDIN CORP - A	53578A108	71.56	678.00	48,517.68
	2.41	NUTRI/SYSTEM INC	67069D108	11.42	3,014.00	34,419.88
	2.20	XING AG	B1JTY91	74.93	420.00	31,471.14
	2.08	MIXI INC.	B1BSCX6	3,718.52	8.00	29,748.12
	2.03	DEMAND MEDIA	24802N109	7.23	4,018.00	29,050.14
	1.96	REDIFF.COM INDIA LTD-ADR	757479100	9.19	3,040.00	27,937.60
	1.89	PCHOME ONLINE INC	B05DVL1	6.42	4,200.00	26,972.09
	1.06	SKY-MOBI LTD SP ADR	83084G109	4.21	3,590.00	15,113.90
	1.01	BUONGIORNO SPA	4572691	1.38	10,466.00	14,466.40
	0.89	THE9 LIMITED - ADR	88337K104	4.66	2,718.00	12,665.88
	0.80	PROMETHEAN WORLD PLC	B60B6S4	0.89	12,852.00	11,376.58
	0.57	GEEKNET INC	36846Q203	17.21	470.00	8,088.70
	0.47	QUEPASA CORP	74833W206	4.06	1,638.00	6,650.28
	-1.95	CASH	CASH	1.86	-14,967.01	-27,904.10

Natural Gas' Huge Contango: Kiss of Death for UNG; UNG Drop to $7.x

2011-11-14T17:11:00.000-05:00

This is the current situation with natural gas prices:

There is currently a contango of 4.1% between the the two front month contracts. This is quite large. When this happens, UNg tends to underperformed. There has been contango for quite some time now, and anyone who bought UNG is painfully aware of the consequences.

In the meantime, UNG has now a 7 handle:

Absolutely dreadful.

Oil and USO: To the moon and down; how to profit either way

2011-11-11T13:11:00.000-05:00

USO is the most popular ETF to track the price of oil. Oil has risen very significantly lately, in what many analysts deem is unjustifiable given the poor economic conditions.

As USO trades very near $38, it is in a perfect price range for straddles, which allow an investor to profit either way the price goes. The following are straddles for both November and December for USO, showing the moves required for the position to be profitable..

These are computed with StraddlesCalc

Options are dangerous and may cause 100% loss. Please do your own due diligence.

Europe's giant snow ball is falling down the hill: profit from a banks' collapse

2011-11-09T15:07:00.001-05:00

Greece seems almost forgotten now that it has been replaced by Italy's woes in the news. The European leaders are now publicly discussing splitting the Eurozone into two. These are fascinating times, we can see the snow ball falling up the hill.

Below are straddles on XLF for November, computed with StraddlesCalc tool.

This wonderful tool indictaes the moves required by the underlying ETF to achive profitabiliyt.

If you think 6% or so is too much, these are the results from our previous straddles, from Oct 28:

+37% is not bad for about 10 trading days.

Please do your own due diligence. Options are dangerous and may cause 100% loss.

Cracks already appearing; is Europe really saved? Using XLF

2011-10-28T15:19:00.000-04:00

Today Italy's 10-year bonds hit record yields, this after Europe was 'saved" yesterday..

The solution so widely advertised does not really solve anything. The issue is timing.

These are straddles for XLF, the most popular financial ETF. XLF is currently trading near at perfect $14.

Computed with the free StraddlesClac tool.

Options are dangerous and may cause 100% loss. Please do your proper due diligence.

Preparing For Bank Earnings Next Week With XLF

2011-10-13T15:14:00.001-04:00

JPM reported earnings today and the market was disappointed, bringing XLF down. Next week, several other major banks and financial institutions will report, including MS and GS.

These are particular interesting as JPM reports deteriorating trading income.

These are in-the-money and out-of-the money straddles for next week:

Options are dangerous and may cause 100% loss (not the ITMs above though, which may only cause "significant" losses. Please do your own due diligence.)

ETFs For the Downgrades of Italy, Belgium, Spain

2011-10-05T10:33:00.001-04:00

As our readers know, we track all global ETFs live here.

Yesterday, the ratng agencies downgraded Italy, while the exptactions were for Belgium. The ETF for Italy is EWI:

The ETF for Belgium the aptly named, EWK:

Note that they are strikingly similar.

As for Spain, it is EWP: