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half way interesting: The Only Oil ETF Worth Investing In
By Jonas Elmerraji
August 7, 2009
Oil prices have fallen through the floor in the last year — a 41% drop to be precise… That’s exactly why the coming rise in oil prices is bound to be the story of the summer. And today, I’m going to fill you in on the smartest way to profit from higher prices at the pump.
On Wednesday, I told you how out of control breakeven prices for oil producers were a sign that oil prices were due to push back into the triple-digits (visit the Penny Sleuth website to read that article). I also told you that one ETF was the best way to make a play for black gold right now.
That’s because only oil ETFs let you take advantage of oil’s moves just as easily as you’d invest in a regular stock…
There are a large number of oil and oil-related ETFs trading on the market right now —including funds that invest in oil futures and those that hold shares of oilfield service companies. But investing in oil through companies that service oil producers is a risky play; as the Exxons of the world continue to see their margins evaporate, they’ll be unlikely to enter into many major development obligations that these companies live on.
Right now, there are only three oil futures ETFs trading on the market: the U.S. Oil Fund ETF (NYSE: USO), the PowerShares DB Oil Fund ETF (NYSE: DBO) and the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL).
But of the three, only one stands out as a good investment right now…
For starters, the iPath fund isn’t actually an ETF at all — it’s an exchange-traded note (ETN) — a debt security that’s linked to changes in the crude oil commodity markets. Instead of directly investing in oil futures (like the two ETFs do), this ETN is basically a promise from the issuer that they’ll track the performance of oil. That fact adds a lot of risk to OIL — to be precise, it’s known as counterparty risk — because the investment’s performance isn’t just tied to oil, it’s also tied to the financial health of the issuer. We’ll pass on this one…
Commodity ETFs have taken a lot of heat recently because they don’t perfectly track their underlying commodities. In the last 4 months, for example, the spot price of crude oil has risen 36%, while USO has only rallied 28%. One of the biggest reasons for the huge tracking error is what’s known as “roll yield.” Because futures have expiration dates, USO’s administrators have to constantly trade in their old futures for new ones. Unfortunately, because of the way future prices change over time, they often post a small loss on each position as they roll into the next futures contract.
As time goes by, this roll yield adds up to a big discrepancy between the performance of oil and the performance of USO.
But negative roll yields aren’t a problem for DBO. This ETF, which is based on the Deutsche Bank’s Optimum Yield Oil Index, uses the an optimum yield formula to replace expiring futures contracts with contracts that have the highest possible positive roll yield. And even with the added yield advantage, DBO’s expenses are 37% cheaper than USO’s.
While even DBO can’t track the spot price of oil perfectly, the ETF is the only fund worth considering if you want to invest in oil. And the technicals suggest that right now is the time to open a position …
Maximize Your Oil Profits with Smart Timing
For the past five months, DBO has been in a sustained uptrend from its March lows. Currently, there are several very bullish indicators that suggest DBO is going to keep up — or accelerate — its rally. First, onto the chart:
DBO has been trading in a fairly well-defined channel since March, and while this ETF’s current share price is sitting toward the midpoint, a recent bounce off of its 50-day moving average (DBO’s average price over the trailing 50 days) means that the price has a safety net to keep it from tracking back down to the lower bound of the channel.
Translation: DBO will continue to push higher…
Another bullish signal right now is the crossover of the 50-day moving average over the 200-day moving average. That intersection is a leading signal that means a large positive change is underway in this ETF. Given that this is taking place during a big bullish move, it’s a very strong positive signal for traders.
DBO’s Fibonacci retracements are also looking very solid right now…
Fibonacci retracements are a tool used by technical analysts to determine key points of support and resistance using mathematically significant numbers. DBO has bumped off the vertical blue Fibonacci lines six times in its latest rally — which tells me that this ETF is highly influenced by these levels. Right now, it has just broken out above its most recent high (and the 0% retracement level on the graph above). That’s a significant development because it means that there aren’t any obvious stumbling blocks left for DBO to hit.
All of that said, I’d like to see a healthy pullback to either the lower bound of the price channel or either the 50 or 200-day moving averages before taking a position in this ETF.
As usual, the options on this ETF have a much higher profit potential than buying the ETF itself can provide. If your risk tolerance is higher, there are a number of DBO options with a decent trading volume right now.
Cheers,
Jonas Elmerraji
BEHL ... oops!
always been right here, watching your back.
there ya go. A little bash sometimes does miracles....
AIG being propped by same guys behind BEHL. Watch for dump. JMHO!
Hey happy belated harbs! Sorry missed it but I am sure you enjoyed your big day to the fullest
LMBO, you bastages!
lord have mercy .... lol
say hi from me.
and yes i never forget. I tried to warn some punks on ihub about that but they never listen...
thanks mary.
she still doing anime dressup? hahahaha
Doing well, thanks! How bout you? How's your daughter?
Congrats Ryan HUGE!!! YES!
MARYYYYYYYYY!!!!!
nutsssss
its good! Pretty damn good!
GNLR at 2.00 !!!!!
who is GNLR and wtf is he doing?
call me whiz kid....
NOTTTTTTTTTTTTT
I was only 3 years old in 99 so cannot relate.
It sure reminds me of 2005 and the following years... aka the good times.
Enjoying it. Just make it last a little bit longer, PLEASE.
The usual. Got busy in GM land and had fun with spongebob. 'Xept for that - nuttin new. Yourself been good?
or no where... yawn...
BANK???
So was I part of it, or did I just flip stocks on volume like I always do "and did not do anything to help them"?? make up your mind there, robert ford. You snitched out Evo to kill your scamming competition. Now you run around and accuse others that are not involved in any wrongdoing to be criminals..... Trouble
wow that's serious allegations. This time, you will hear from me.
yeah of course. He was your biggest competition and took a lot of 'business' from you guys.
ROTFFFFFFF! The yellow corvette! Kid didnt even know how to spell Murcielago back then!
These Italians.......
ALWAYS does
knock on wood
AT LEAST.........
I AM NOT A SNITCH. NOBODY CAN SAY THAT. Alleging that AOL logged the info is a weak excuse. We all know it was you, Raw. I have an excellent movie for you: The Assassination of Jesse James by the Coward Robert Ford.
I am not a scammer/fraudster/thief either. NOBODY can say that. If I was, I would be on that list. I believe David aka DCweiss has done an excellent job prosecuting this case.
And I don't rat out my supposed 'friends' or 'business partners' just to get off the criminal prosecution and be solely listed on the civil lawsuit.... NOBODY can say that! If I was, you all be seeing me on that list, too.
I am just a flipper. Reason enough to be hated by many but my record is clean as a whistle. I am the master of my own affairs and I sleep very well at night. Neither prosecution nor the fraudster will have anything against me.
Rawnoc, don't you think .... PAPA is gonna catch up with you one day? Wouldnt it be funny if you went down for the same cockiness that cost EVO his job, his dream and quite possibly his freedom? No, you are way smarter...
... AT LEAST that's what you think.
As for your allegations, it's time you be very careful now. Making false claims about people like me is an offense, too. And this time, I won't let it go... I know you enjoy engaging with me in those silly discussions cause I am one of the few on the 'hub' that has the brains to keep you interested. Markey Mark just don't do it for you anymore, I know. Keep it casual, amigo, once you cross the line there won't be no return.
Don't be like EVO.
Dumb. The only place I see my name in this court filings is when it mentions the US Attorney prosecuting the case. So you are proudly announcing being the snitch that sold out the kid to the SEC when he gave u that PR? You know how Italians treat snitches?
WOW! UD student, Newark man named in
'pump and dump' civil suit
[make sure to read this to the end]
By SEAN O’SULLIVAN • The News Journal • May 21, 2009
WILMINGTON -- Federal prosecutors in Delaware have unsealed a series of criminal charges and a civil lawsuit charging seven men with committing securities fraud.
Two other defendants, including a University of Delaware student, are named only in the civil complaint.
Advertisement
The group, including one man out of Newark – Pawel P. Dynkowski – are alleged to have operated a "pump and dump" scheme on small "penny" stocks. The frauds were operated between September 2006 and September 2008 and allegedly netted more than $6 million for the participants.
According to court papers, the group conspired to artificially drive up the price of certain companies through coordinated "wash" sales, to make it look as though there were increased interest and activity in the stock, which was timed with the issuing of fraudulent press releases by company officials, sometimes written by the conspirators, and false tips placed on internet message boards and small investor chat rooms.
Once the "pumped" stock reached a certain level – attracting unsuspecting outside investors – the group would sell or "dump" the shares they had been holding to reap a quick profit, the suit alleges.
The schemes sometimes took as little as a week, and in addition to issuing press releases some company officials also provided conspirators with stock in exchange for kickbacks once the fraud was completed, according to court papers.
Acting U.S. Attorney David C. Weiss announced the charges today in a press release along with officials from Immigration and Customs Enforcement, the IRS, the Delaware State Police and the Securities and Exchange Commission.
"The integrity of our nation's public stock markets requires protection from those greedy few who engage in market manipulation at the expense of many," said Weiss. "The wide-ranging actions of the defendants demonstrate rampant, serial abuse of the free-market system through a nationwide network of manipulative trading."
In addition to Dynkowski, 24, of Newark, who also has an address in California, the criminal indictments name Joseph Mangiapane Jr., 43, of Laguna Niguel, Calif.; Marc Riviello, 50, of Atherton, Calif.; Matthew W. Brown, 26, of Aliso Viejo, Calif.; Jacob Canceli, 50 of Mission Viejo, Calif.; Gerard D'Amaro, 38, of Lighthouse Point, Fla. And Angelo "Bill" Panetta, 48, of Montebello, Calif.
Canceli and D'Amaro are stock promoters, according to court papers, and Brown operated the penny stock Web site InvestorsHub.com.
Mangiapane and Riviello both were representatives of AIS Financial, and Mangiapane is also CEO of Rubicon Financial, the owner of AIS Financial.
All except Panetta are charged with one or more counts of the following: securities fraud, wire fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering or money laundering offenses.
Panetta is charged with perjury and one count of obstruction of justice for allegedly lying to the Grand Jury.
Two men named in the civil complaint, but not charged criminally, are Adam Rosengard, a UD student, of Voorhees, N.J., and Nathan M. Michaud of Boston, a Web designer.
NGHI opened yesterday. Seems red hot .... :o)
NEOm has a CC going?
GMDP omg. Memories!
he movin
UBRG .01
will look thanks
Buy JJU?
Just saw this from europe earlier today, might put further fuel into precious metal ralley
Failed gilt auction stokes fears over UK economy
The Government has suffered a major blow to its economic stimulus ambitions after an auction of Treasury gilts failed for the first time in more than a decade, underlining the market’s fears about the state of the nation’s finances.
By Philip Aldrick
Last Updated: 5:30PM GMT 25 Mar 2009
The UK Debt Management Office (DMO) attracted just £1.67bn in bids for its sale of £1.75bn of 2049 gilts this morning, its first uncovered auction of conventional gilts since 1995.
The cover of just 0.93 times is believed to be the lowest in history and far worse than the 0.99 times in 1995. The average cover of the last three auctions was 2.1 times.
Failure raises fears that the Government may not be able to secure the billions of pounds its needs from the markets to fund its record fiscal deficit without paying far more for the money, and reflects concerns about UK economic stability.
It comes at a highly embarrassing time for Gordon Brown, who is hosting a summit of G20 leaders next week to spearhead recovery plans for the global economy.
His call for further economic stimulus packages was also called into question yesterday by Mervyn King, Governor of the Bank of England, who warned that the UK finances were so stretched the Government would be unable to launch new spending plans.
Moreover, politicians have raised concerns that an uncovered gilt auction could lead to a cut in the sovereign credit rating, which could have devastating consequences for the national debt – due to hit a record £1 trillion - as the interest bill would soar.
At a recent Treasury Select Committee hearing, Michael Fallon, the committee’s deputy chairman and a Tory MP, was told by the credit rating agencies that a series of uncovered gilt auctions could be one the triggers that might lead to a change in the credit rating of a sovereign country like the UK
Analysts said the market had been knocked by Mr King’s comments on Tuesday that the central bank may not need to buy as many gilts as planned if its £75bn quantitative easing programme enjoys early success.
“There has been a lot of uncertainty created over the last couple of days by the King comments,” said Sean Maloney at Nomura.
David Buik of BGC Partners added: “Suggestions that there were balance sheet constraints, [the] bond wasn’t cheap enough, [the] shock rise in inflation and Mervyn King’s comments yesterday didn’t help.”
Investors are thought to be concerned that, should the Bank not do as much quantitative easing as planned, they could be left holding more gilts than hoped as they would not be able to offload them on the central bank. The markets are already under pressure to increase their exposure to gilts as the Government is issuing far more than usual.
The DMO is expected to issue £146.6bn of gilts this year compared with £58.4m last year, and another £110bn in 2010. The shortage of demand caused gilt futures to slump as to a session low of 119.45 while 10-year yields rocketed 18 basis points to 3.5pc, illustrating that it will cost the Government more to raise the debt required.
The DMO said the approach of the financial year-end may have hampered demand. “We’re aware that this is the riskiest part of the curve,” said a spokesman. “An additional factor that may have deterred some bidders is the imminent financial year end.”
The last official failed auction was in 2002 but, unlike today, it was for an index-linked gilt.
thanks! eom