Replies to post #38673 on A.I.M. Users Bulletin Board (AIMUSERS)

[The Grabber]

Hiya Toof!
Hope you had a great turkey Day!

I have been out of the energy sector for a long time.

Started a new Aim account witj ERX @ $61.94

This is a triple ETF so I see no reason to use LD Aim with this. I am using standard Aim settings.

It's a 3X leveraged fund?
Yikes!

My oil holding (AXAS) dropped like a stone today along with every other energy issue (and maybe a few countires from what I've been reading).
And that triggered a Buy a full 22% below the Sell I had just last month.

From what I heard on the radio while on the road today, today's close on oil is likely not the last we'll see of the downdraft.
It could reach under $60/barrel and maybe get to $55. We might even see gas prices drop to below $2.00!

Apparently the Saudis are trying to run the small, highly leveraged players here in the US out of business by not reducing production, ostensibly holding on to market share.
They (and the rest of OPEC) did that in 1986, but the oil business here in Texas is in better shaper financially than they were back then. Albeit there are some newer players here that could get stung. But they represent a very small piece of the pie. Most of the developed fields can be profitable at $50.

So it may backfire on them. As a result it may get more unstable politically over there (greater Mid-East) than it already is.

And other countires like Russia, Nigeria and our friends in Venezuela might be the first to feel the heat.
And personally I wonder if the Saudis aren't pushing Iran a little as well.
There could be an arm's race over there before too long if Iran develops their nuke capability much further.

In that situation, you're dealing with a thousand+ year old schism between Sunni and Shia and as we witness every day, there's no love lost between those folks.

Bottom line is that a buy at these levels could be very lucrative in a short time. If the price does drop further, then maybe add a little more. But I'm not ready to 'Triple-Down' on that.

See this article:
http://finance.yahoo.com/news/opec-refusal-pressure-oil-weakest-192118167.html

[Adam]

Hi Toof, Re ERX, a 19+ % drop in one day is too scary for me. And that's on top of a 1% expense ratio which is about 0.5% higher than a simple energy ETF like IYE, which is what I own. Let's hope AIM can overcome this, but I've learned the hard way that it's best to stick to simple ETFs.

[BowlerBob]

Toofuzzy,

Perhaps you would be kind enough to explain why you have chosen to "AIM" the Leveraged ETF, ERX, rather than "LD-AIM" it. I have never done an LD-AIM program, and I know you have, but I studied the calculator that Steve has provided, and it seems to me that a Leveraged ETF is "ideally suited" for the LD-AIM concept, because it will ultimately "sell-out" the actual shares in a long enough Up Trend (leaving only "Virtual" shares). AIM, on the other hand, will have you holding on to a "Core" position, through all ups and downs over the years, and you may face the prospect of the Reverse Splits, if the down trends are particularly sharp or long-lasting.

The second question I have is, have you determined that AIM will provide you primarily with Short-Term Gains, and so you are not concerned with the Leveraged ETF possible failure to qualify for Long-Term Capital Gains tax rates?

I ask these questions because I have a similar position in NUGT, the 3X Leveraged ETF of the Gold Miners Index/ETF (GDX) and am facing some of those decisions. I have been buying NUGT as AIM directs, but plan to sell "all" my shares doing something similar to Ocroft's plan for "buying", but on the "sell" side. Both NUGT & ERX are 3X Leveraged ETFs of "commodities" and may qualify for another tax consideration altogether. I also do not know for certain how this will affect my previous tax filing of "estimated" taxes on my rather large gains (15 months) in TNA. I might get a very unpleasant surprise in February 2015 (I am holding cash to cover this surprise, but the penalties and interest would still hurt).

Regards,

Bob