"If Pickens is right and oil is $78-$80 in 4th Q and you incorporate contango in your opinion where does that put USO . Noth of $20?"
Mid-20s, imo. But the issue everyone needs to consider is what if Pickens is wrong and oil stays down longer. A long consolidation period for oil can ensure that your losses in USO and UCO are never recoverable. Ever. Whereas a stock could recover eventually.
So if you're playing with USO, UCO or the other crude ETFs, know that timing is absolutely everything.
So you only report the Great Lakes ice cover when it goes up, then?
(btw, latest reading down from 34% to 27%, likely lower still in tomorrow's reading)
"That puts $USO in the $35-$40 range."
Important that you learn about contango. But even more important that you learn math.
"Great Lakes ice increased now approximately 34% covered by ice, up from 32% yesterday."
1. That 34% is a Thursday reading and the current number is almost certainly lower and you know that.
2. It was 58% a year ago.
3. Who cares. The Great Lakes are supposed to freeze in the winter.
"In 6 months this will look completely different especially when oil goes back above $60. I predict a $60 price range in about 6 months from now."
What benjiman doesn't understand is that oil can be back to $60 in 6 months while UCO stays the same or goes lower due to contango.
Wall St. loves the benjimans.
"It's not a direct correlation. Cotton is used for clothing and outer-wear to keep us
warm in the winter. copper is used to conducted the power to keep us warm in winter,
but there is no direct correlation between the two commodities."
Not questioning your mastery of the relationship between copper and cotton.
But if there is widespread of adoption of electric cars, it's going to affect the price of oil. Simple as that.
"why would anyone compare oil to nat gas? their not used for the same thing. Its like comparing copper to
cotton. We don't make electricity with oil and very little oil is used to heat homes."
A lot more people heated their homes with oil before oil repriced higher. That is the connection: long term substitution. You'll see a lot less adoption of electric cars with $2 gas than with $5 gas.
"Lake Erie is back up to about 95% iced over this morning."
No it isn#$%$ barely 80.
I don't know how much other bad data pervades your analysis, but it's pretty clear you start with a conclusion and work backwards.
"The CEO of Royal Dutch Shell said today that gasoline will be $5 again as oil climbs to $100 before the end of 2015."
The guy hasn't been with Shell for 7 years. He is now shilling for a certain natural gas organization that needs expensive oil to exist. So he was 'talking his book'.
"So considering contango is dragging down the long term performance of this etf even if oil goes up, what made the fund spike to $117 per share in july 2008?"
There probably wasn't that much if any contango in the front of the curve at that time. But more importantly, oil went historically berserk to the upside. If oil goes parabolic quickly, you'll do well in USO. Nobody disputes that.
The problem is if oil does anything other than that. So for example, oil got back to $115 or so in 2011. But USO was only 50% of where it was the last time oil was there in 2008. So you could be 'right' on oil but sustain catastrophic losses that will never be recovered.
"I'm accumulating as it goes down. Hope it'll work out great 12 months from now."
Contango makes this a very dangerous long term hold.
"Lake Erie no longer fully iced over, now 90%"
It was never fully iced over and is now 80%.
Keep up the good work.
You're a good man, Bryan. Remember that SDS decay is nothing compared to UCO's when that curve is in steep contango as it presently is.
"why are we waiting for the rest of the world to pick up demand? rebuild America!"
Funny thing. America stopped being addicted to oil right at the same time that it started to produce a ton of expensive oil.
"John Hofmeister former president of Shell oil said in USA today article"
He was doing his job. He is promoting natural gas as a transportation fuel, something that will never get off the ground unless gasoline is very expensive.
"Lake Erie is now completely iced over."
1. No it isn't.
2. Who cares. It's normal for Lake Erie to freeze in the winter.
"But we long term bulls, averaging down, and reinvesting dividends, and holding on despite gains, will make the most money."
You'd think by this point hr would accept that he doesn't have a command of the future that warrants talking in certainties.
"One day, when we hit $50 a share again with Republican President and Congress, the haters will disappear. Now that thought makes me really excited!"
Or they'll disappear because BTU went under and this board ceased to exist. Either way you win!
"aapljack: The low price you are referring to is $75 a barrel to break even for the Canadian oil sand and Brakkan oil. For Saudies the break even price is $45 a barrel. The companies can pump for a loss for a while after that they are out of business due to high debt or shut down the production. Currently they are pumping from existing wells, however no new rigs are being built. Existing wells will run dry soon. Oil will be back up to at least $75 a barrel by summer."
You are attempting to be Nostradamus on an equation with lots of moving parts.
Rather than get into all the details, will just put it this way. If that rebound comes a year from this summer instead of this summer, holders of these ETFs could be wiped out by contango. That risk should be factored into decisions.