All ETF Daily News Articles

Emerging Markets, The next bubble?

emgmarket

WHETHER THE GROUP OF 20 ESTABLISHED A "new world order," as British Prime Minister Gordon Brown asserted Thursday at the end of the London meeting of world leaders, it clearly gave a boost to the emerging markets of the world.

The G20 approved a $1.1 trillion package designed to pull the global economy out of recession, with a $750 billion expansion in funding for the International Monetary Fund, $100 billion for the World Bank and $250 billion in trade financing through multilateral financial institutions. Of the $750 billion for the IMF, $250 billion represents the creation of $250 billion of Special Drawing Rights, which is roughly the equivalent of printing money globally.

Stock markets around the globe soared following the G20 agreements, with the Dow Jones Industrial Average adding another 200 points to close just below 8,000 for the first time in nearly two months. Assets that have benefited from investors' aversion from risk, such as Treasury securities and the Japanese yen, fell sharply. Meanwhile crude oil rebounded.

Emerging market countries figure to be the biggest winners from the G20's package, according to Citigroup economists Don Hanna and Jurgen Michaels. Support for multilateral financial institutions is especially helpful for emerging markets, they write in a research note. So, too, is the increase in SDRs, which they note can be drawn down without conditions.

Emerging markets responded with sharp gains. The iShares MSCI Emerging Market Index exchange-traded fund (ticker: EEM), a useful proxy for the sector, surged 5.4% Thursday, about twice the gain in the Dow. Since its low of early March, the emerging markets ETF has surged 35%.

But even before the G20's largesse, emerging markets looked to be a big beneficiary of the Federal Reserve's monetary expansion, according to MacroMavens' Stephanie Pomboy. Just as the Fed's liquidity pumping after the dot-com bubble burst created the housing bubble, the U.S. central bank's exertions would serve to lift emerging markets, she writes in a note to clients.

The surplus liquidity isn't likely to ignite an inflationary boom in the U.S. economy if consumers refuse to borrow and spend. But that liquidity has to go somewhere, and emerging markets look like the most likely destination, she reckons.

Emerging markets and commodities took the first hits in the credit implosion because they were viewed as warrants (long-term call options) on global growth. Could it be emerging markets are moving from warrants on global growth to drivers of growth?

Meantime, Ms. Pomboy points out that while emerging economies account for 43.7% of global output, they represent only 10.9% of global stock market capitalization. China by itself makes up 15% of the global economy but less than 2% of market cap while the U.S. provides 21% of output but 43.4% of market cap.

"With so much room to grow…and so much money to flow..might the Emerging Markets become the next bubble?" she asks rhetorically. "All the ingredients are there, the persuasive story line (from their savings to their demographics), the dearth of compelling investment alternatives and, of course, the Fed's flowing font of cheap capital."

Now that's being augmented by the gusher being provided by the G20. And with a simple way to play it such as EEM, plus any number of single-country ETFs (notably the popular iShares/Xinhua 25 , better known by its ticker, FXI), it's easy to see traders' flocking to emerging markets.

Source: barrons.com

ETF BASIC NEWS April 3, 2009 9:02am

The Ups And Downs With The Oil Market!

etf-newsWhy Oil ETFs Can Lose As Prices Increase

By Tom Lydon on April 2, 2009 | More Posts By Tom Lydon | Author's Website Understanding why the oil exchange traded fund (ETF) occasionally lags behind jumps in oil prices is a simple matter of knowing how it works. United States Oil (USO: 30.98 +2.40 +8.40%) is the largest ETF that tracks the commodity. It followed the 77% drop of crude prices between July and December. But Kevin Baker for TheStreet explains that although oil prices have risen 45% since the low in 2008, the ETF went down another 4.3%. What’s happening highlights the challenges that ETFs trading futures encounter. During bullish times, when the price of oil is expected to rise, funds can end up paying contract prices that are higher than spot prices, a situation called “contango.” Each time an oil ETF rolls contracts forward a month during periods of contango its return is eroded. USO holds long positions on oil futures, rolling them forward each month. Three factors impact the ETF:
  1. Changes in the spot price
  2. Interest income on uninvested cash
  3. The roll yield
USO’s prospectus warns of such a situation: a negative “roll yield” could cause the net asset value of USO to deviate significantly from crude’s spot price.
  • United States Oil (USO): down 12.4% year-to-date; up 7.8% for one month
Source: www.dailymarkets.com
NYSE:USO April 2, 2009 9:36pm

Could Jobless Claims Soar To All Time High On Friday?

job-lossU.S. Preview: Job Losses in U.S. Nonfarm Report Could Be Far Worse Than Expected (Repeat)

(CEP News) - The nonfarm payrolls report is expected to show yet another month of staggering job losses in the United States on Friday, as the recession rolls on. Economists expect 660,000 job losses in March to be revealed in the Bureau of Labor Statistics (BLS) report, against 651,000 jobs lost in February, marking the fifth straight month of over half a million job losses. “The US labour market continues to melt down as companies scramble to adjust their head counts in the face of a deepening economic slump that is among the most serious downturns in the postwar period,” CIBC World Markets economist Meny Grauman said. Several indicators released this week suggest the report could be even worse than the consensus. Wednesday morning’s ADP employment report on the private sector was much worse than expected, with 742,000 job losses reported, compared to the 663,000 decline expected. Furthermore, the employment sub-component of the ISM manufacturing index released Wednesday remained deeply in contraction. “The employment component (of the ISM Manufacturing report) remained in the sub-30 range for the fourth straight month,” economists at BMO noted. “This, along with this morning’s reported 742,000 drop in private sector jobs in March, according to ADP, and the surging trend in announced job cuts according to the Challenger folks, raises the risk of a recession-high amount of payroll job losses in the month.” The record for nonfarm payrolls is the 681,000 job losses recorded in December 2008. Economists at RDQ said that although they’re skeptical about the ADP report methodology, today’s 742,000 jobs lost signals 700,000 jobs lost in the government nonfarm payrolls report, and that this indicator and others “point to a faster rate of job losses in March than seen in the prior three months.” Another ominous sign this week was the labour component of the March U.S. consumer confidence report, which showed the “jobs-hard-to-get” index hitting a 17-year high. And finally, the weekly jobless claims reports have stabilized near record-high levels, with the four-week moving average at 649,000 claims. Economists at Capital Economics said if payrolls fall by 740,000, as their forecast model suggests, “a decline of that magnitude would presumably come as a nasty shock to the markets.” However, Grauman said a staggering figure might not throw markets off guard, with triple-digit declines the norm since February 2008. “Nevertheless, considering the recent spate of better-than-expected economic results, and the three-week-long stock market rally, another big drop in jobs may get investors to reconsider their recent bout of economic optimism,” he said. By Megan Ainscow, mainscow@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca CEP Newswires - CEP News © 2009. www.economicnews.ca Source:  www.dailymarkets.com
ETF BASIC NEWS April 2, 2009 7:25pm

Emerging market ETF sees bearish option action-analyst

bear1 By Doris Frankel  CHICAGO, April 2 (Reuters) - Many option traders on Thursday appeared to be betting the share gains in an emerging market exchange-traded fund will be short-lived and aggressively bought puts and sold calls, according to one analyst.  Shares of the iShares MSCI Emerging Market fund EEM.P rose 5.42 percent, or $1.39, to close at $27.04.  In all, about 137,000 puts and 116,000 calls changed hands in the ETF, above its daily combined volume of 154,000 contracts, data from option analytics firm Trade Alert show.  "The trading pattern on the emerging markets ETF was bearish except for one investor, who went against the grain today," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group, in a note to clients.  Investors often use equity puts, which allow them to sell the security's shares at a given price and time, to protect stock holdings or to speculate on a stock's future weakness.  Call selling is often viewed as a neutral to bearish strategy. A call seller is obligated to deliver the stock at the fixed strike price in exchange for the premium received.  At the April $25 strike price, about 30,500 EEM puts were purchased for an average premium of 48 cents each, while the June contract attracted investors looking for protection at even lower strikes, he said.  Wilkinson also said at the June $21 strike price, 10,000 puts were picked up for 66 cents apiece whereas 5,000 puts were bought at the June $24 strike for $1.37 apiece.  Call options were also sold in heavy volume, with 5,000 lots shed at the same $24 strike for $4.45 as some traders were seen booking gains on the current rally in the stock's price, he said.  Similarly, he noticed that 10,000 calls were shed at the now in-the-money June $27 strike for $2.55 per contract.  Wilkinson said some investors do not see the rally continuing through $31 by expiration in June as 32,500 calls were sold at the June $31 strike price for 90 cents apiece.  But one investor supported the fund's gains by selling 25,000 puts at the June $24 strike for $1.32 each to fund the purchase of 25,000 calls at the June $29 strike price for a premium of $1.64, he said.  This trader established a bullish call position at the June $29 strike and vastly reduced the outlay to just 32 cents a contract by selling the same amount of June $24 strike puts.  The investor would begin to realize profits at a share price of $29.32 by June expiration, he said. (Editing by Jan Paschal) Source: reuters.com
ETF BASIC NEWS April 2, 2009 4:48pm

Accounting Rule Changes Rally ETF’s Across The Globe!

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Markets across the globe continued to soar ignoring the bad data released.  The bulls are in control and there are not any bears in sight for now!  The DOW has broken the critical 8000 level signaling a large turn around for equities.  Will it continue?  I am sure the bears think NOT.  With data being released on the daily basis, the bears will monitor and digest if things continue to get worse or if the turn is here for good?

April 02, 2009 at 10:08 am by Tom Lydon 
 
U.S. stocks and exchange traded funds (ETFs) rallied this morning, extending a global advance on word that accounting regulators approved a rule change that may boost bank profits.

The rally was further supported by the G-20 Summit, where leaders of the global powerhouses neared an agreement on the global recession through tightening rules on financial markets, cracking down on tax havens and channeling more cash to the International Monetary Fund. In fact, the G-20 leaders have decided to pump $1.1 trillion in international aid into the global markets to cushion the global recession’s blow, state Tony Czuczka and Edwin Chen for Bloomberg.

 The effects of the recession have been further supported by the rise in consumer loan delinquencies.  Mounting job losses have forced the delinquency rates across multiple types of closed-end consumer loans to jump to 3.2%, states the Stephen Bernanrd of the Associated Press.  What’s shocking is that these delinquency rates do not take into consideration credit cards, which, for some, is a way of life.  If one includes credit card delinquencies, this percentage will absolutely increase.

Many believe that the reason consumer loan delinquencies continue to rise is the increase in jobless claims, and there doesn’t seem to be any relief in this department.  New claims for unemployment benefits jumped to a 26-year high and jobless claims increased to a whopping 669,000, last week, the highest jump since 1982, states the Labor Department.  Although these numbers are devastating, they seem to have no immediate effect on the markets and their rally.

Crude oil seems to have jumped on the wagon and is riding the wave of the global market rally.  A combination of surging markets in Asia and Europe and hopes of an economic recovery in the United States sent black gold north of $5 a barrel in intraday trading.  PowerShares DB Oil (DBO), was up 6.8% in intraday trading and 0.1% year to date.

 

It seems that no amount of bad news can throw the markets off of their high horse.  Supplier of herbicides and genetically engineered seeds, Monsanto (MON), increased revenues by 8.3%, but saw a drop in profits by 3.3%.  These numbers still beat analysts’ expectations, sending shares of the seed maker’s stock in the green during morning trading, states The Wall Street Journal.

  • Market Vectors Agribusiness ETF (MOO): up 3.2% in intraday trading and 4.5% year-to-date; MON is 8.4%

The Dow Jones Industrial Average soared 3.6% sending it north of 8,000 midday, the S&P 500 jumped 3.2% and the Nasdaq gained 3.8% in morning trading.

Kevin Grewal contributed to this article. Source: www.etftrends.com
ETF BASIC NEWS April 2, 2009 12:57pm

Hyper Inflation and the ETF UYM

Inflation is an inevitability; we wrote about this back earlier this month in our article "INFLATION WILL MAKE UYM A 10 BAGGER BY THE END OF 2009!" Glenn Beck of "Fox News" has a great chart presentation that describes where the value of our money is headed.  With a devalued dollar hard assets will be the place to be. We here at ETF Daily news see no better  ETF fund to benefit from this scenario than UYM. Check out the video below, we appreciate your take on what the devaluation means to your portfolio.


ETF BASIC NEWS April 2, 2009 11:26am

FASB Decision Tomorrow, What does this do to the treasury plan?

sinking The treasury is looking to rid banks of their toxic assets by partnering up with private investors to buy these assets. The thought is that people will bet that some of these assets will recover, and give a return on investment. With the proposed FASB change tomorrow morning, what will happen to the valuation of these assets? Are these two plans somewhat contradictory? Doesn't this give the banks incentive to horde their bad assets?
By Kevin G. Hall | McClatchy Newspapers WASHINGTON — The little-known Financial Accounting Standards Board is poised to deliver Thursday a change in accounting rules that proponents say will save the banking system — and opponents warn could bring even more ruin to the U.S. economy. The FASB board is expected to relax the rules on how banks value assets that investors no longer are willing to purchase. Current rules require banks to list the value of assets on their books at their current market price — a practice called "mark-to-market." The assets, however, at the center of the global financial meltdown — securities backed by bad mortgages — have no market. Investors simply won't touch them. That's forced banks to lower the reported value of their assets, and quarter after quarter since mid-2007, they've had to write off more and more losses. That forces them to hoard their capital, rather than lend it, to offset their losses. That's how the housing crisis begat the banking crisis, which begat the U.S. economic crisis, which begat the global financial meltdown. Banks say the mark-to-market accounting rule has worsened the financial crisis by making institutions appear weaker than they really are. The pools of mortgages, they say, should be valued not on what they're worth today, but what they are expected to be worth at maturity. "Why should all assets be treated as if they're really for sale?" asked Bert Ely, a banking expert who gained wide recognition during the savings and loan crisis of the late 1980s. During the S&L crisis, government regulators initially eased federal accounting rules for troubled S&Ls, which hid their negative worth and allowed them to make even worse decisions that led to their collapse and an expensive federal rescue. Could it happen again? "That concern does come up with this situation," Ely said. "At what point in time do we move from improved accounting to manipulation?" Although Ely thinks there are risks in the accounting shift, he acknowledges that mark-to-market has amplified both the mortgage finance and banking crises. Enter FASB. The Norwalk, Conn., private-sector entity adopts common standards that are accepted by regulators such as the Securities and Exchange Commission. FASB moved with breakneck speed to consider the rule change after its chairman, Robert Herz, was roughed up by lawmakers on March 12 and warned that Congress could impose new rules if he wasn't willing to do so. Democrats, led by Massachusetts Rep. Barney Frank, the chairman of the House Financial Services Committee, insisted on the change. FASB is expected to relax mark-to-market rules, sometimes called fair-value accounting, to recognize the maturity value of the mortgage securities often referred to as toxic assets. Supporters think this will provide a tremendous boost to banks and ease the economic crisis. "I think change in mark-to-market (rules) would make a big difference. If there's a bottom spotted on the economy, then the banking thing goes away. As soon as Wall Street sees a bottom, then you can make accurate forecasts. When you can do that, the banking crisis ends," said James Paulsen, chief investment strategist for Wells Capital Management, a subsidiary of Wells Fargo. "That's equivalent to a huge toxic asset (being lifted) because you bring private investors back in." Other supporters, such as investment analyst Ed Yardeni, call the change long overdue. "I fully agree with investors who insist that mark-to-market is necessary for honest accounting. However, it makes no sense to require financial firms to raise capital just because the values of their assets have been temporarily depressed by a financial crisis," Yardeni wrote this week in a research note. The rule change could allow banks to use one accounting standard for what it reports to the SEC, whose mandate is investor protection, and a more relaxed standard for reporting to banking regulators. That would ease the demand on banks to raise more capital in a distressed environment. Critics think the change would allow banks to cook their books by hiding their truly bad assets behind longer maturity dates. "The biggest problem with mark-to-market isn't mark-to-market, it's what part of the balance sheet is mark-to-market and what part is not," said Franklin Raines, the former chief executive of mortgage-finance giant Fannie Mae. If FASB relaxes the rule for distressed bank assets, he said, "You have got a distortion in the balance sheet that nobody can understand." The changes would allow banks to revise their first quarter 2009 reports to reflect a hold-to-maturity value on assets that no investor will buy now. Some advocates have proposed allowing this change to apply retroactively to the dismal last quarter of 2008, and perhaps even further back. The change has been debated from the very start of the financial crisis in mid-2007, so action now raises eyebrows. "It's an awkward time to do it," said David Wyss, chief economist for the credit rating agency Standard & Poor's in New York. He said it gives the appearance of sweeping problems under the rug. The action could add more uncertainty, warned Gary Stern, the president of the Federal Reserve Bank of Minneapolis. "I think it would raise as many problems as it answers," he told McClatchy. Once the rule change is made, bank balance sheets could appear healthier, but Raines and other financial experts doubt the banks would be perceived that way. "It's kind of hard to fool people at this stage, where everyone is so focused on what the facts are," Raines said. "I think there are a lot of problems with mark-to-market, but I don't think you are going to change people's views of these banks by moving around the accounting, especially if you are moving away from market prices. I think the average person might be fooled by it, but I don't think smart investors will be fooled by it." The rule change may also affect the Obama administration's ambitious program to have the government, alongside private investors, buy back as much as $1 trillion of toxic assets polluting bank balance sheets. "Banks have already taken large markdowns, and may now be able to mark up the values of their assets," analyst Yardeni wrote in a March 25 research note. "In other words, their toxic assets won't be so toxic. Their distressed assets won't be so distressed. They won't be under the gun to raise capital, or beg for more of it from the government." Source: http://www.mcclatchydc.com
NYSE:GLD April 1, 2009 6:44pm

NAR Home Pending Data Up 2.1% In February

pendingIt is no secret that we here at ETF Daily news are bullish on the real estate market. With over 90% of Americans working, it was only a matter of time before the home pricing levels, attractive mortgage rates and government tax incentives to entice those workers back into the real estate market. I think most people reading this will find that water cooler conversations are changing from the real estate debacle, to conversions about the great deals available right now. Even if you consider a large majority of these sales may be foreclosed homes, these homes will be off the market lessening the competition for the more conventional sales and new construction.
New research from the National Association of Realtors offers hope that the housing market may be stabilizing. The number of existing homes for sale put under contract rose 2.1 percent in February after hitting a historic low the previous month. But despite the national boost, the West is lagging. Pending home sales in the West dropped 13.5 percent, while the Midwest, Northeast and South all posted strong gains. The NAR report also showed that housing affordability hit a record high in February. The group’s Housing Affordability Index jumped 0.9 percentage points to 173.5 in February, up 36.3 percentage points from a year ago. To determine affordability, the index incorporates the relationship between home prices, mortgage interest rates and family income. A family earning the national median income of $59,700 could afford a $285,600 home in February, presuming no more than 25 percent of gross income is devoted to mortgage principal and interest, NAR said. The national median price for existing single-family homes is $164,600. Source: Phoenix Business Journal
NYSE:SRS April 1, 2009 2:44pm

ETF’S HAVE ONE OF THE BEST MONTHS IN YEARS!

etf-news1

March ETF Performance Report 

March 31, 2009 at 1:40 pm by Tom Lydon www.etftrends.com  March was one of the best months in years for the major indexes and exchange traded funds (ETFs). The Dow Jones Industrial Average rose 7.7% for March, but lost 12.2% this quarter. While no one is declaring the problems in the economy fixed, some strategists say that there’s at least a change in perception. Earnings season is now beginning, and many are nervous about what the reports will bring. The S&P 500 rose 8.5% for the month and fell 10.4% for the quarter. The Nasdaq gained 10.9% in March, but lost 1.4% in the quarter. The strongest sector for the month was solar energy, which rose 29%. For the quarter, gasoline was a standout, gaining 33.5%. For a complete look at the month of March, as well as the first quarter of 2009, click through to see our March ETF Performance Report.
ETF BASIC NEWS March 31, 2009 6:51pm

U.S. Traded ETF Sponsor Sites

U.S. Traded ETF Sponsor Sites   SOURCE: www.masterdata.com   Below is a listing of all U.S. traded ETF Sponsors with actively trading Exchange Traded Funds
ETF BASIC NEWS March 31, 2009 1:49pm

Retail Service Industry Betting On Consumer Confidence?

shopping Ultra Consumer Services ProShares (UCC) is an ETF that bets on the consumer spending money.  UCC includes companies like Home Depot, McDonald's, CVS, and Walmart, etc...  If the consumer is
NYSE:SCC March 31, 2009 10:54am

Commodities Stumble As the Market Retraces!

commodities Commodities: Crude Oil, Gasoline Decline Most commodities were weaker in the U.S. Monday, with the majority of agricultural futures joining energy and metals on the downside. Crude oil dropped $3.97 to $48.41 a barrel at the New York Mercantile Exchange, and reformulated gasoline was off 11 cents at $1.38 a gallon. Heating oil lost 9 cents to $1.34 a gallon, while natural gas rose. Gold fell $7.60 to $917.70 an ounce, and silver was weaker by 23 cents at $13.03 an ounce. Aluminum and copper also slipped. Cocoa, cotton and wheat rose, but frozen concentrated orange juice, soybeans, coffee and corn fell. Prices for lean hogs and cattle retreated. The Reuters/Jefferies CRB Index gave back 7.09 points to 215.17. On a day that the stock market overall sold off, most commodity-related stocks were sluggish, as well. Exxon Mobil (XOM Quote - Cramer on XOM - Stock Picks) was down 1.9% at $68.63, and Chevron (CVX Quote - Cramer on CVX - Stock Picks) lost 3.1% to $66.80. ConocoPhillips (COP Quote - Cramer on COP - Stock Picks) surrendered 3.3% to $39.02. Miners BHP Billiton (BHP Quote - Cramer on BHP - Stock Picks) and Rio Tinto (RTP Quote - Cramer on RTP - Stock Picks) shed around 6% each, and Freeport-McMoRan (FCX Quote - Cramer on FCX - Stock Picks) lost 8.5%. As for exchange-traded funds, the U.S. Oil (USO Quote - Cramer on USO - Stock Picks) was down 6.7% at $28.70, and the Gold Shares (GLD Quote - Cramer on GLD - Stock Picks) edged lower by 0.8% to $89.98. The Market Vectors Agribusiness (MOO Quote - Cramer on MOO - Stock Picks) fell 5.5% to $28.12. Source: www.thestreet.com
NYSE:GLD March 30, 2009 9:24pm

Nikkei up 1.8% Sluffing off GM Bankruptcy News

nikkei* Nikkei gains 1.8 pct after falling 4.5 pct on Monday * Yen's fall vs dollar helps exporter shares By Rika Otsuka TOKYO, March 31 (Reuters) - Japan's Nikkei average rose 1.8 percent on Tuesday as investors picked up exporters like Honda Motor Co (7267.T) that had slid the previous day on fears of bankruptcy for U.S. automakers. Mizuho Financial Group (8411.T) fell after saying it would not redeem $1.5 billion of perpetual subordinated bonds issued to retail investors when they first become callable next month given current market conditions. [ID:nT127312] U.S. stocks tumbled on Monday as General Motors Corp (GM.N) and Chrysler LLC took a step closer to potential bankruptcy, and a spate of European bank rescues heightened concerns over the financial system's health, putting the brakes on a recent run-up. [.N] "The Japanese stock market opened weaker, dragged down by U.S. stocks, but it soon regained ground as investors thought the previous day's fall provided a chance to buy," said Yutaka Miura, senior technical analyst at Shinko Securities. "The issue of GM and Chrysler is unlikely to spark heavy stock selling again, though it may cap gains in shares," he said. The benchmark Nikkei .N225 climbed 146.58 points to 8,382.66, while the broader Topix rose 1 percent to 797.10. A panel of Japan's ruling Liberal Democratic Party said on Tuesday it would come up with a system to allow a government agency to buy shares from the market, though the market showed muted reaction as investors awaited details of the plan. Mizuho Financial Group, Japan's second-biggest bank, fell 1 percent to 195 yen after it said it would not redeem the perpetual subordinated bonds. But shares of Mitsubishi UFJ Financial Group (8306.T), Japan's top lender, rose 1 percent to 493 yen, while No. 3 Sumitomo Mitsui Financial Group (8316.T) added 2.6 percent to 3,610 yen as investors bought back stocks battered in Monday's sell-off. Sony Corp (6758.T) and other exporters rose as the yen weakened against the dollar, which was climbing towards 98 yen <JPY=>. Sony rose 1.7 percent to 2,095 yen, Honda Motor Co (7267.T) rose 2.2 percent to 2,350 yen and Canon Inc (7751.T) edged up 0.5 percent to 2,915 yen. (Reporting by Rika Otsuka; Editing by Chris Gallagher) Source: www.reuters.com
ETF BASIC NEWS March 30, 2009 9:06pm

Gold ETF Holdings Hit Record

goldSource: reuters.com * Gold ticks up as auto news batters stocks * Gold up about 5 pct on quarter * SPDR hits new high, silver trust holdings stay at record * Activity subdued due to month-end (Releads, updates prices) By Chikako Mogi TOKYO, March 30 (Reuters) - Gold nudged up on Monday after stocks were battered by a U.S. task force rejecting the turnaround plans of big automakers, underscoring scepticism about an economic recovery. The Obama administration autos task force on Monday rejected overhaul plans of General Motors Corp (GM.N) and Chrysler LLC and warned both could be put through bankruptcy to slash debts. [ID:nLU152601] [ID:nN29520526] Tokyo shares steepened their decline and were down nearly 4 percent after the news, against the morning's drop of 1.8 percent. [.T] "How U.S. stocks and bonds will react to the auto news will be key for the gold market, but judging from Nikkei's slide it looks to be a positive for gold," said a dealer at a Japanese trading firm. Gold was at $925.00 per ounce by 0530 GMT, up 0.3 percent from New York's notional close of $922.10. Gold fell 3 percent last week but has held firmly above $900 thanks to buying related to gold-backed securities. At current levels, gold is up about 5 percent on the quarter but about 10 percent below an all-time high of $1,030.80 hit a year ago. Bullion has recovered about 5 percent from a six-week low of $882.90 hit on March 18, but is 8 percent off the 11-month high above $1,000 set in February. Stabilising stock markets and the dollar's rise over the past week after the U.S. government announced measures to clean toxic assets off banks' balance sheets put a cap on gold prices, undermining the yellow metal's appeal as a safe haven. Still, uncertainties over the sustainability of a stock market rally and the dollar's rise, as well as the global economic outlook, kept investor appetite intact, resulting in record holdings of gold-backed securities. "The stock market is stabilising and investors are stopping their safe-haven buying of gold," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. At the same time, there was nothing to justify selling of gold because it was unclear how the economy would fare, he said. It has been six months since the collapse of Lehman Brothers, which aggravated the financial crisis, and the global economy and financial system have yet to show a clear sign of a turnaround, traders said. "Unless the economy really starts working and stock markets rally, banks start lending and businesses revive, people will not jump out of the gold market," Leung said. Trading was subdued due to the month-end and as some players turned cautious ahead of U.S. nonfarm payrolls data due later in the week. There were few expectations of the meeting later in the week of the G20 group of the world's biggest economies, traders said. The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, said holdings rose 2.45 tonnes to a record 1,127.44 tonnes on March 29. [GOL/SPDR] For details on the gold holdings of the ETF listed in New York and co-listed on other exchanges, click on: here The dollar fell nearly 1 percent against the yen but firmed against the euro after the single currency posted its biggest one-day fall since early January on Friday. [USD/] Later on Monday, data on British consumer credit and mortgage lending for February and euro zone March business climate sentiment will be released. Prices as of 0535 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 925.45 3.35 +0.36 5.15 Spot Silver 13.32 0.05 +0.38 17.67 Spot Platinum 1132.50 9.50 +0.85 21.51 Spot Palladium 215.00 -2.50 -1.15 16.53 TOCOM Gold 2901.00 -59.00 -1.99 12.75 32437 TOCOM Platinum 3571.00 -72.00 -1.98 34.65 10523 TOCOM Silver 411.30 -12.10 -2.86 28.81 294 TOCOM Palladium 678.00 -28.00 -3.97 23.27 693 Euro/Dollar 1.3206 Dollar/Yen 96.96 TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce. (Additional reporting by Risa Maeda; Editing by Ben Tan)
ETF BASIC NEWS March 30, 2009 8:26pm

A Rise in unemployment doesn’t necessarily mean we didn’t hit bottom

goodbad It's hard to find signs of life in the economy, but the signs of death seem to be growing fainter. In what passes for good news these days, Treasury Secretary Timothy Geithner told CNBC last week, "You're seeing the pace of deterioration start to slow in some areas." Investors who share an inkling that the worst could soon be over have started a revival in the stock market. Since its March 9 low, the Standard & Poor's 500 index is up 20.6 percent, although it is still 48 percent below its all-time high in October 2007. Generally, a 20 percent increase qualifies as a bull market. Whether this year's March madness marks the beginning of a new bull market, or a temporary rally in an ongoing bear market, is an important question not just for investors, but for everyone. Why? Because the stock market is a fairly reliable leading indicator of the economy. Over the past 60 years, recessions typically ended four or five months after a new bull market began, according to Sam Stovall, S&P's chief investment strategist for equity research. During this period, the S&P 500 correctly anticipated the end of a recession 9 out of 10 times, he adds. The exception was in 2000 to 2002, when the economy recovered before the stock market. If stocks really did hit bottom on March 9 - and that's a big if - history would suggest that the recession could end in the third quarter of this year. Employment, considered a lagging indicator, wouldn't pick up until months after that. In Stovall's study, the unemployment rate didn't start falling until about four months after a recession ended, and eight or nine months after a bull market began. S&P economists say the current recession will end late in the third quarter of this year. That's when things "will stop falling. It doesn't mean things will be getting better," Stovall says. He predicts that the U.S. unemployment rate, 8.1 percent in February, will peak at 9.75 percent in the second quarter of 2010 and decline very gradually in the second half. If the stock market has not really embarked on a new bull market, then a recovery in the economy and employment would come even later. Brief outbreaks of optimism are common during long bear markets. Between Nov. 20 and Jan. 6, the S&P 500 surged 24 percent, only to plunge back to a new low on March 9.

5 bear rallies in 1930s

During the early 1930s, the Dow Jones industrial average staged five bear market rallies of 20 percent or greater before hitting an ultimate bottom in 1932. The most famous was a 48 percent gain in 1930. Tom McManus, chief investment officer with Wachovia Securities, says the market will give up at least half of its March gains. "We are in a bottoming process, where the market is winnowing out the winners from the losers," he says. "March 9 was probably a bottom for the quality stocks. It's probably not a bottom for the lower-quality stocks." He says there's a 40 percent chance the overall market could fall below its March 9 low.

Durables are volatile

McManus doesn't put much faith in the signs of stabilization that some analysts see, such as better-than-expected reports on durable goods, home sales and retail sales. Durable goods is so volatile, he says, "I would never use it as a signal the trend has changed." Some analysts cheered when the government reported that retail sales in February were down only 0.1 percent (economists were expecting a 0.5 percent drop) and revised January's surprise increase upward to 1.8 percent from its original estimate of 1 percent. When you look at the drop in retail sales over the previous three to four months, "the size of the improvement is microscopic," he says. "It's like saying your kid took a test and got 1 right out of 20. The next time he got 2 right out of 20. You could say, 'Wow, he did twice as well.' But it was still horrible." McManus says the S&P 500 might "bounce around 700-900 for another six months." It closed Friday at 816. Its low on March 9 was 677. He says the economy will start to recover at the end of 2009 or early next year. He warns that investors should not try to pick the exact bottom. Instead, they should put money into the market gradually over the next six months. Five years from now, that will look like a very smart investment.

Patience can pay off

"The valuations are very attractive. Someone who is patient can make money. Focus on improving the quality of your portfolio," he says. That means dumping stocks that have gone down the most and putting money into high-quality companies that have been hurt less. Rob Arnott, chairman of Research Affiliates, is gloomier on the economy. "I don't see how the economy can turn around while we are engaged in this massive de-leveraging," he says. "Resources are being siphoned to pay down debt, both household and corporate debt. This process is going to take time, a lot of time. It's dangerous to assume the economy can suddenly pick up when the de-leveraging process is only just now gaining full steam."

Growth seen in 2010

Arnott says the economy won't start growing until 2010 and employment won't pick up until 2011. "I think unemployment will crest above 10 percent, perhaps significantly above. This will be ugly," he says. For now, Arnott says investors should put money into corporate bonds, not stocks, on the theory that the stock market can't really recover until the credit markets do. He says that corporate bonds did not show the same improvement in March that stocks did. Until they do, "I don't think this is a real bull market," he says.  

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com.

This article appeared on page D - 1 of the San Francisco Chronicle

NYSE:GLD March 30, 2009 3:58pm

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