ETF Grind

Game Over for U.S. Oil, Natural Gas ETFs?

I don't think parsing words is the best way to determine the meaning of anything.

If you think the investigation and the fact that the request hasn't been approved yet are unrelated, then you're right.

If you think they are related, then I'm right.

We don't know, but I was willing to bet that the CFTC opening an investigation into the fund had something to do with it halting trading, and so were every journalist who covered the story from Bloomberg to Reuters.

Cheers.


On Jul 09 05:50 AM H. T. Love wrote:

> Ok. So when you communicate to others, I guess we just need to know
> that when you say declined, you *may* mean "not yet approved", which
> leaves open a future action.
>
> Based on that example, I hereafter will presume that I don't know
> what you mean in any statement you make, since your words have meaning
> unique to you.
>
> As to "deadline", that's another ballgame. If I recall correctly,
> last time this happened to UNG, 3 days after the "deadline", the
> new issuance was approved.
>
> I won't start another discussion of "deadline" meanings and implications,
> but that past action does appear to completely obviate your use of
> "declined".
>
> HardToLove
>
> On Jul 08 04:42 PM ETF Grind wrote:

Game Over for U.S. Oil, Natural Gas ETFs?

Well, USCF employees aside most people do have a problem with these funds.

Yes, people can sell the UNG every month, but they would have to buy it back it again if they wanted back into the market - thus rollover.

And individual futures traders can buy contracts of different maturities! How can you not know that? They don't have to roll over six one-month contracts like the UNG, they can buy a six-month contract instead!

The market conditions I described are known as "contango". Google it.

And I find it convenient you didn't address my point about the USO's under performance and the possibility that the UNG could miss the mark by that much as well.

Cheers. Me and my mates drink one to your education tonight at the pub.

Game Over for U.S. Oil, Natural Gas ETFs?

That's a good point. But counterparty risk is a big danger.


On Jul 08 04:49 PM varun saluja wrote:

> "If anyone can figure out an exchange traded investment product that
> can actually track commodity prices through futures, it'd be a wonderful
> tool to play the whole asset class."
>
> Exchange Traded Notes? They have 0 tracking error, by definition.
>
>
> There are a ton of articles on seekingalpha about them. The major
> risk involved is credit risk. Would it be possible (at least in
> theory) to hedge this with CDS? Probably not for the individual
> investor...

Game Over for U.S. Oil, Natural Gas ETFs?

Well, I don't know how to respond to this puzzling critique.

Individuals trading futures are not required to roll over their contracts every month. They can take delivery or sell the contracts and not buy new ones.

The UNG doesn't have those options Hence this rollover problem is unique to ETFs like the UNG and the USO.

As far as returns go, the critique was more for the USO than the UNG. Take a look at USO versus crude and you'll see what I mean. Its a terrible under performance ytd.

The UNG has also underperformed, but not as badly. But it point is more that is has the potential to perform much worse than spot prices, if market conditions are right. That's a hidden risk of these funds.

As for CEFs, if they are so wonderful, why are ETFs booming as a vehicle?

Cheers.

On Jul 08 04:06 PM zboy2854 wrote:

> This article is full of misinformation, and should only be used as
> a contrarian indicator. Firstly, the assertion that a fund such
> as UNG "underperforms" due to rollover costs makes no sense, since
> there are rollover costs if you play the actual futures themselves!
> So why would one think it could be avoided in ETF form if you can't
> avoid it in the futures market?
>
> Secondly, if you pull up a weekly chart of NG spot prices going back
> to 2008 and overlay it with a weekly chart of UNG over the same time
> period, the price movements track almost exactly, further negating
> the assertion that there is any "sub par" returns.
>
> Next, the assertion that all the purchasing of shares of UNG has
> led to distortions in spot prices is not borne out by reality. Buying
> in UNG has increased 8 fold over the last few months, while during
> the same time period NG prices have DECLINED!
>
> Then there's the assertion that if funds such as UNG or USO are forced
> to become CEF's that they will always be trading at a discount or
> premium to their NAV, and that it is necessarily a bad thing, both
> of which are false. Most CEF's usually only trade at a discount
> or premium during extremely volatile periods, and always return eventually
> to their NAV. For the smart investor, this simply creates additional
> opportunities, either to sell the fund when it's trading at a premium,
> or to buy more of it when it trades at a discount.

Game Over for U.S. Oil, Natural Gas ETFs?

To me "has not yet approved the request" means they declined the request.

Yes, they may approve it later. But the fund needs the new shares now. There was a deadline, and it passed without a decision. To me that's a decline.


On Jul 08 04:17 PM H. T. Love wrote:

> I'm sorry, but I find only "The SEC has not yet approved the request
> and a spokesman for the agency said the SEC has no comment." as the
> closet thing to "declined to accept" in the article that was linked
> in. Is there another source that I should have reviewed?
>
> I'm not a habitual critic and really do try to be accurate.
>
> Thanks in advance,
> HardToLove

Game Over for U.S. Oil, Natural Gas ETFs?

Well they had no comment on why they denied the request.

And I guess technically you're right. The application wasn't denied. the agency simply "declined to accept" it.

Basically, the UNG wasn't allowed to issue new shares due to the regulators actions - whatever you call it.


On Jul 08 09:00 AM H. T. Love wrote:

> Regardless of the intrinsic value of UNG et al, this statement is
> misleading.
>
> "Trading in the UNG was breifly halted as the SEC denied its routine
> request to issue more shares."
>
> In the article, "no comment" can not be reasonably interpreted as
> "denied", although some insider may know that's what is meant or
> implied.
>
> All that has happened so far is the normal SEC snails-pace processing.
> Of more import, in my opinion, is the CFTC discussions that will
> occur over the summer.
>
> The last action Edgar shows is this initial filing (that I can find)
>
> www.sec.gov/Archives/e...
>
>
> Let's keep it accurate folks. No additional unwarranted consternation
> needed in this market.
>
> HardToLove

New ETF Offers Access to Diverse Emerging Market Currencies

This ETF has been trading for months.

Indonesia ETF: 5 Factors to Consider Before Investing

???????

A Yudhoyono victory will be positive for the markets, not negative.

4 Reasons Not to Count Out Coal ETFs

Coal is done.

Only the China thesis makes sense.

Carbon capture doesn't work. And, by the way, "clean coal" is the same thing as carbon capture.

ETF Securities Offering Levered Long / Short European Index ETFs

I don't think the author makes clear that these funds will be UK-listed.

New Natural Gas ETF Could Help Battle Contango

I wouldn't say this would beat contango.

The USL has done better than the USO, but still hasn't tracked crude well.

BRIC to BIC to BICI?

Global incomes are converging, so in the future the aggregate GDP rankings will be the same as the population rankings.


On Jun 27 03:01 AM ron_paulite wrote:

> << Indonesia, on the other hand, is the world's 4th most populous
> country and should therefore be more important than even Brazil.
> >>
>
> What is the logic of this?
> Just because a country has a bigger population, it is more important???

BRIC to BIC to BICI?

Indonesia is certainly a better long term investment than Russia, but if crude goes to 200 a barrel then Moscow is worth a look.

In the long run, Russian population decline will mean its importance in the world economy will be about that of Spain.

Indonesia, on the other hand, is the world's 4th most populous country and should therefore be more important than even Brazil.

Is UNG Propping Up Natural Gas Prices?

It seems unlikely that big institutional investors would save very much investing though the ETF rather than trading the futures directly. Especially considering the potential for UNG to underperform the spot price.

Something else must be going on here...

FCG: A Better Natural Gas ETF

I'm glad someone understood this post.


On Jun 24 12:22 PM pdub271 wrote:

> Yeah UNG is crap, for all kinds of reasons, including the contango
> risk, and the possibility that UNG will eventually be slapped with
> regulations to lower its share of total futures holdings.
>
> Even if NG could be directly traded like gold, though, there would
> still be a fundamental difference between trading NG and investing
> in ETFs tracking NG companies. Imagine if NG extraction companies
> make a tech breakthrough to lower extraction costs. NG prices don't
> go up, but the companies' profits go up. The NG price is an object
> fundamentally different than the profit margin of NG businesses,
> at least in the long term.