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iPath Bloomberg Livestock SubTR ETN Message Board

  • GrayDrake__0j0 GrayDrake__0j0 Aug 20, 2009 12:05 PM Flag

    different slant on trend


    one alternative issue is the business model of cow, using futures. there are a number of etf's using futures which do not reflect the nature of the price movement of the commodity, because the cost of futures trading and the cost to run the etf, exceed the profits being made. this occurs when the market for the commodity is flat or near flat.

    i got in pretty heavily in ung, a 3 or 4 weeks ago, and when the movement did not reflect nat gas commodity price fluctuations, i did a little more dd and BINGO.

    cow is or probably is reacting much the same way. i am not suggesting there could be a major run up, but if the market flattens expect cow to deteriorate.

    i would be interested comments on this theory.


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    • Yes, COW like UNG rolls their futures contracts. When the out months are higher than the near months, the etf loses money when rolling contracts. I have heard that UNG is now using swaps to mitigate this, but I cannot comment of the +/- of this as swaps are beyond my expertise.

    • Two years ago when COW opened up, here was the situation

      Live Cattle $96
      Lean Hogs $57
      COW $48

      Given today's prices where should COW be?

      Live Cattle $88
      Lean Hogs $46

      • 2 Replies to tb231335
      • Correction: since live cattle are actually 69% and lean hogs are 31%, the answer is COW would be at $42.9.

        Prices now on
        cattle 85, hogs 47.85. I couldn't find your prices before June 08 but back then (mid-June) they were 116 and 92.5, while COW was at 45. This second comparison would result in a current COW price of $30.41. The difference to the actual price of $27.21 is $3.20, which is 10.5%! Is this the amount of fees that have been milked away from us?

      • If the cattle and hogs are weighed in about half-half, the answer is COW should now be at $42, not at $27! The performance of this etf is beyond dismay. Anyone knows what the "fees and expenses" are? Are we paying bonuses to (incompetent) traders?

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