Friday, October 22, 2010
10/22/10 No Mas! When Do UNG/HNU.to/VXX Investors Break Free?
Is there anything like the relentless downhill slide in these poor excuses for 'tracking' ETFs? They're not just ETFs from hell. They're deceptive ETFs that slowly suck investors into (financial) hell, stuck doing time on a 21 inch screen- a daily grind of watching fellow inmates (I mean investors) push prices up the slope of hope, only to watch them tumble back down to new lows.
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David- Give it up, man. You'll be so much happier.
ReplyDeleteMan, Nancy Pelosi gives me serious heeby jeebies. I'm watching her on Charlie Rose from earlier this week. She looks and sounds so fake.
ReplyDeleteport2013 -- thanks for helping me out with my UNG! :) On a more serious note, I'll make sure that I short that sucker next summer into the contango season!
ReplyDelete2nd_ave -- there is time for everything. Time to sell UNG and time to buy it. Time to sell it was in August, when it was really vulnerable to contango losses. At this point, the contango has already made its damage (which was a minor fraction of the overall damage, as I'll show below). For example, today the January futures dropped by 0.070 while the December ones (tracked by UNG and HNU.TO) dropped by 0.054, so the contango has actually *decreased* today.
ReplyDeleteAt this point, we should look only at the FUTURE prospects of UNG. Its future is determined by the future change in the futures. If the spread between December and January futures remains constant for the next month (even if the traders keep dumping NG, I don't expect the spread to widen much more than it is now, as I expect both the December and the January futures to go down in tandem, since we are just as likely to have cold weather in December as in January), then we should basically ask ourselves what we expect to happen to the January futures FROM THE CURRENT LEVEL over the next 2 months. The February/March futures are priced now EXACTLY like the January ones, so an even more accurate question is: what do we expect to happen to the winter strip in NG from now on. The winter strip has undergone a HUGE decline over the past two months. The January-March futures have collapsed from $5.40 on August 1 to $3.95 now. So 90% of the recent damage to UNG is actually due to the unbelievable collapse of the winter strip. I think right now it prices in the most horrible scenario for the NG-related variables (warmest possible winter, LOTS of production, LOTS of LNG imports, etc.). When the pendulum in trader's attitudes finally swings in the opposite direction, I expect the winter strip to reach at least $5, and I am OK with waiting for a month or two until it finally happens. In the meantime, if NG keeps going down, I'll just keep buying it in ever increasing quantities.
RBY - This price looks pretty good to me...
ReplyDeletePelosi - I watched that interview, it prompted me to think this week about how everything in DC remains in a holding pattern until we can get some clarification.
ReplyDeleteI have this feeling DC's like a deer in the headlights, voters need to flash the high beams to wake them from their mindless trance.
I also don't appreciate DC concentrating so much more time and effort on elections as opposed to economic issues but then again maybe we're better off.
ReplyDeleteNat Gas - Have consumption figures been rising at all?
ReplyDeleteBYD - Reports today, I presume in the morning.
ReplyDeleteOkay, make that Monday morning...
ReplyDelete"Did you know that if you sell your house after 2012 you will pay a 3.8% Sales tax on it? That's $15,200 on a $400,000 home etc. When did this happen? It's in the healthcare bill. Just thought you should know."
ReplyDeleteThe baby boomers wanting to downsize get screwed...
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