Gary Lucido

Residential Housing ETFs Reflect Recovery Expectations

Actually, these instruments reflect a more optimistic outlook than you think. Their price also reflects the risk of an early termination and the fact that the high expenses will eat away at the NAV of the vehicles: blog.lucidrealty.com/2.../

Is There a Bad Bet with the MacroShares Housing Funds?

There are actually several subtleties with these instruments. For one, the expenses are likely to be higher than 1.25%. I cover the issues here: blog.lucidrealty.com/2.../

Oil ETFs and ETNs: More Complicated Than You Think

I believe that during the period you are referring to oil was not in contango or not nearly in as much contango as it is now.

Oil ETFs and ETNs: More Complicated Than You Think

Unfortunately, I don't think there is a way to buy spot oil. It would require huge storage facilities to implement an instrument like that. As for why OIL and USO have diverged I would have to research it. The only thing I can think of is that they roll their contracts at different times and have been affected differently by contango.


On Feb 03 07:38 PM NewbieTom wrote:

> Gary,
> Another thing... I am into OIL right now.
>
> Like you said it tracked right with USO until about a month ago.
> There seems to be ~4% delta there... Not sure how that works...
>
>
> Any info on that would be great. Thanks.

Oil ETFs and ETNs: More Complicated Than You Think

I have always assumed that OIL and USO work very similarly. Up until very recently they performed almost identically. However, they have diverged in the last month or so. Maybe OIL rolls over at a different time.


On Feb 01 04:10 AM User 348554 wrote:

> hey gary thanks alot . How does the oil index work - you explained
> uso but not oil.

Oil ETFs and ETNs: More Complicated Than You Think

They are allowed to but it doesn't look like they are: unitedstatesoilfund.co...

However, this is really stupid. If I want to invest in natural gas I'll buy UNG.


On Jan 30 02:04 PM secmaven wrote:

> A further complication with USO is that it is invested 25% in natural
> gas contracts.

Oil ETFs and ETNs: More Complicated Than You Think

Yes. Looks like it performed very similarly to DBO.


On Jan 30 08:38 AM tradetime wrote:

> Have you looked at USL, it's run by the same person / people as USO
> but invests in a 12 month range of contracts, if you compare over
> long term with USO on a percentage basis I think you'll find it performs
> much better in contango

Oil ETFs and ETNs: More Complicated Than You Think

Well, I need to do more research but it looks like DBO has performed better lately while there has been contango. Don't know if it's always going to be that way. Also, USO can be a problem when the futures market moves into contango.


On Jan 30 08:38 AM tradetime wrote:

> Have you looked at USL, it's run by the same person / people as USO
> but invests in a 12 month range of contracts, if you compare over
> long term with USO on a percentage basis I think you'll find it performs
> much better in contango

Oil ETFs and ETNs: More Complicated Than You Think

There is no manipulation. My article explains why USO doesn't track spot prices and the link directly above explains the issues with double long and short funds.


On Jan 29 08:21 PM 777 wrote:

> Crude oil has risen from 32$ to 42$, that's 30% up altogether. But
> why USO still stay at the level of its lows ?I t should be around
> 40$.
> Also DTO double bear should down 60% because of its double about
> 80$, but why it still stay at the high level of 180 ? If there is
> "severe contango " ,should exist in both of the two funds, but "severe
> contango " can't explain the true reason for the funds tracking the
> crude oil index. Only one thing is there----That's "severe manipulation
> "rather than " severe contango" .
> The canadian EFT hou.to and hod.to are more radiculous. For crude
> oil has risen from 32$ to 42$, so hou.to should be at around 11$
> or more
> but when crude oil up 1.2% it up 1.1%, crude down 1.6,it down 4.1%,so
> hou.to has fallen down over 30 times from 48$, and right now it is
> just equal to1.525$(5:1consolidat... or 7.63$ now, but oil is just
> down 147/41.5=3 times.
> So contango can explain nothing, Just price manipulation.
> Here I believe the market should be fair, just, open to every investor,and
> it should have a comparatively reasonable game rules.Or the market
> is robbing money from investor directly. So I call for an investigation
> from New York stock Exchange to get rid of the clear price manipulation.
>
> If you are interested my opinion, you can compare the 4 ETF: USO
> bull and DTO bear; HOU.TO bull and HOD bear which is more distinct
> example for price manipulation rather than so called " contango ".Let
> up to complain to New York stock Exchange.

Oil ETFs and ETNs: More Complicated Than You Think

Those are double long and double short funds. Whole other ball of wax. They don't act like you might think. I learned that with a double short China fund:
www.investingminds.com...


On Jan 29 07:35 PM User 347374 wrote:

> Gary,
>
> Would you care to comment on the ETN's, DXO and DTO, their structure
> and the ramifications of trading re. your article?
>
>

Oil ETFs and ETNs: More Complicated Than You Think

It's always the front month contract and rolls over about 2 weeks prior to expiration. The details are covered in the prospectus at this address: www.unitedstatesoilfun...


On Jan 29 01:41 PM allinstox wrote:

> Quick follow-up question - can you provide a link that details:

>
> 2. The futures contract against which USO is calculated?

Oil ETFs and ETNs: More Complicated Than You Think

True. However, if you want to play the contango then there might be an opportunity with UOY and DOY.


On Jan 29 10:59 AM ROLEX18K wrote:

> UOY volume 6,062 shares
> DOY volume 100 shares
>
> 10.55AM New York time
>
> The penny stocks have bigger volume than this 2 Oil ETN's.
> On UOY bid/ask 13.00-13.31=2.5%
> On DOY bid/ask 35.09-35.18=0.8%
> With such liquidity and spread it is a suicide to trade it, if one
> believes Oil is a buy he can buy any Oil/Gas stock or for direct
> Crude Oil investment buy USO and for shorting sell USO.

Oil ETFs and ETNs: More Complicated Than You Think

Interesting. Given the difference in performance I need to check this out. Based upon just a few minutes of research it appears that DBO buys futures contracts further out. I'll need to study their strategy but it has certainly done better in the last few months.


On Jan 29 10:47 AM SA Editor Jonathan Liss wrote:

> Gary,
>
> Just curious, how does DBO fit into the mix here? It seems far less
> volatile than the other funds you mention even though it also invests
> in an index that is comprised of Light Sweet Crude futures?

Four Ways to Capitalize on 'Super Contango'

Given how USO works you can not capitalize on the contango by buying USO. USO holds the front month contract and rolls it over to the next month each month. Therefore, if we assume that oil futures remain unchanged from where they are now and the spot price follows the futures exactly then there would be zero profit from holding USO. Each month it would have to reinvest at the higher price of the next front month contract. However, if USO actually inventoried oil it would be a different story.

Watch for Yourself: 60 Minutes Oil Story Was Spot On

Nope don't buy it. First, demand is clearly much lower now than it was when oil was 147. Opec is cutting back and inventories are building. It doesn't take much demand change to move the price a lot when the supply and demand curves are fairly inelastic. Second, let's walk through the mechanism in detail that must occur in order for speculators to drive up spot prices. It doesn't make sense. Let's say demand is stable and suddenly speculators start buying futures contracts that they never take delivery on. If the demand is not there spot prices will not rise because no one is taking delivery on those contracts. You would end up with significant contango but as soon as the front month settled the prices on those contracts would crash to the spot price. The spot price is only going to be affected by real demand - unless people start to store oil for future delivery in which case inventories would rise. However, there was not contango at the time of 147 oil and inventories did not rise. There is no mechanism by which speculation can move spot prices unless that speculation reflects real demand - in which case it's the demand influencing speculation and not vice versa.


On Jan 14 01:17 PM Allen Phatimer wrote:

> One more time Gary, and don't take this personally. Although I'm
> not an "oil expert", I've followed oil and other commodities closely
> for 10 years now and traded commodities more often than most over
> that time. I've had the fortune to learn a lot the energy markets
> directly from many analysts you've seen and still see on CNBC in
> that time. I'm on this again because I think it would be a shame
> if people believed what you say because you are dead wrong in saying
> "But the only way that the spot market can follow the front month
> price is if the demand is there to justify the price." and use that
> as a point to support the idea that it was purely supply and demand
> or the value of the dollar (which I agree is a critical factor as
> I said) which caused oil to run the way it did and specs had nothing
> to do with it.
>
> The spot market does follow the front month price because it is almost
> the front month price. Real demand does not pay a crapload more
> for oil a month out because it can wait or buy spot and store. And
> its not about 'EVIL" speculators - I never said a bad thing about
> speculators. It was about 3 writers on the front page of seekingalpha
> knocking a fair characterization of what added fuel to the fire of
> the oil bubble without dealing with many facts that proved beyond
> a reasonable doubt that speculation was a key factor. Oil went from
> 80 to 147 and back to 35 in a few months. Please tell me exactly
> how much supply or demand changed in that time. The answer is not
> at all. By the way, a similar thing is happening right now but interestingly
> not having as positive an effect in the short run as one might suspect
> - speculators in the physical markets, like the Morgan Stanley's
> of the world are chartering as many tankers as they can and buying
> spot which they are arbing against a steep contango out to June or
> so. The numbers work because the contango is steep and tanker day
> rates have declined dramatically. The spread is actually quite wide
> and this dynamic would normally close that gap by lifting spot and
> near months. Whats interesting to me about this is I think it suggests
> that the market will be more awash in oil by June that most think,
> and the price might not bounce back as much as most think.
>
> Although I've always been a big fan of Byron Wien's, I suspect his
> and many others calls for $80 oil by year end will look like a very
> tall order when we are still in the mid forties in June. And that's
> not to say I don't think oil is probably a good value here; but a
> return to $80 anytime soon is probably going to require a collapse
> in the dollar WITH stability or improvement in the global economy.
> The article I posted last week on '09 explains why I doubt very much
> the economy improves anytime soon; in fact I think it gets a lot
> worse.