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Read the Bloomberg BusinessWeek article "Amber Waves of Pain" from a couple of weeks ago first.
Was just thinking the same thing. Contango's a killer for these things.
I heard about the under performing ETFs, but there must be something with a solid track record out there and hence why I'm asking. Mutual fund recommendations are also welcome.
The contango trap is reality. Just as any fund will have to roll their contracts they will be forced to buy at the higher market. None of the ETFs out there return close to what the future returns, due to fees, contango etc..
USO rolls completely F up the market, and you obviously lose from the contango. You can get HOU/HOD, which are double juiced directional ETFs that has a steadier roll. However, vols will erode the price away like maaaad, not to mention the bs mgmt feeds.
If you want to go long nattie buy chesapeke if you want crude buy valero? How well does this hold up?
I would just buy a few hundred barrels and keep them in my backyard.
You can use some of the profit to rent a u-haul and deliver them to your eventual buyer.
Thats how u capture the carry cost in the contango. Crude has been backwardated more than it has been in contango.
Why not invest in an oil trust? Instead of paying contango on oil, you get a dividend instead.
Oil trusts enjoy some of the cheapest storage costs in the business. (The ground doesn't charge all that much for storage.)
What about crude futures? How would one invest in those?
Find a brokerage that lets you buy and sell contracts on the NYMEX- and be aware that a contract is for 1000 barrels.
E-minis are also an option if the margins are too high for you. 1 contract = 500 barrels.
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