The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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romaron i bet you missed those days all the hustle and bustle
NO DEBT OR DERIVATIVES
NO SHORTING
NO MARKET TIMING
NO INDEX HUGGING
NO TRADING
NO HEDGING
Some of the promises of one of my better investments. Fundsmith
Some say he's the UK's Warren Buffet and I'm only mentioning the eponymous Terry Smith because most people here basically follow the above but without the success of Terry Smith. WB does write long dated put options but he also loves insurance companies because you get the money up front and only a small percentage of times is there a pay-out. WB has also called derivatives "financial instruments of mass destruction".
I traded for two banks and was a money broker together for 27 years in the days of steam and nothing has really changed. My area was forward foreign exchange which pre-dated futures but both are based off government debt in essence. Society and companies then avail themselves of the benefit of having a sound and sophisticated financial system - foreign trade, holidays, maintaining embassies, insurance etc.... Forward FX dwarfs futures and options but can be unwieldy at times and is hard to access for retail investors largely because of size requirements.
Dealing floors aren't massively different to what is discussed here but they have a massive advantage. It's their full time job and they have customers. These customers are usually predictable except the large ones and they have to be treated with respect. You cannot read them and that is why the trader who looks after Brevan Howard treats brokers and their own sales force as the enemy but is non the less dependent on them for their depth and resources. Knowledge of a large order is power.
Retail are treated in exactly the same way as Betting and Gambling companies treat punters. I expect the house to win so I won't day trade. Another essential to day trading is going short. I have no problem with shorting as it is an excellent indicator (often wrong) but have no desire to be glued to a screen and give up my free time so I largely follow a Terry Smith system. Both he and most of us still have a large advantage. We can afford to be contrarian and take the longer view.
'If oil stayed at $25 the ETF would fall to zero over time' Well it wouldn't fall to zero but I get your point. See full analysis in article below, however I still hold that an oil ETF is not a bad shout at present if you think oil will rise. https://www.bloomberg.com/news/articles/2020-03-30/oil-etf-seen-as-tourist-trap-with-crude-trading-in-the-20s
Where is the $10 pb then. Taps are open allegedly.
PYUECK, you say, ' However I would argue that ENQ is largely a gamble on the price of oil rising.'
I fully agree with you on that point.
If I believed that oil was staying at $25 for say, the next 12 months I would not be invested. But understand the operation of ETF's based on commodity futures. If oil stayed at $25 the ETF would fall to zero over time, and if oil increased by less than the futures curve it would also fall.
It is a very short term instrument. Not to be confused with traditional equity based ETFs.
I think you are being harsh on ETF's, they are the cheapest and most efficient way to trade commodities for retail investors and have no stamp duty payable. I definitely agree that leveraged ETF's should only be used over a few days or weeks, and are largely a gamble. However I would argue that ENQ is largely a gamble on the price of oil rising. I quoted WTI not Brent these tend to be the most liquid ETF but there are Brent ETF's available too.
I am not arguing that somebody should invest in an ETF and definitely not a leveraged one, that's a choice for you. However I disagree with your analysis of ETF's and would question if people who believe in the future of ENQ are not better off investing in ETF's than this stock. All to their own just throwing it out there.
PYUECK, as the noon hour has passed I guess you were being serious.
It's clear from your description of the gains v price that you are not familiar with oil futures contracts. e121 has given you an insight into the futures curve. I don't follow these prices but he quotes $35 4 months out. This should help you understand that pricing is more complicated than you presented.
Some of the smartest guys (and girls) in finance work in futures. Oil future contracts are rolled over each month to reflect the forward pricing. You refer to an ETF targeted at retail investors - these are marketed to take the 'troubling' worry of futures out of retail investors minds - phew! At what cost?
Commodity ETF funds are the 'cannon fodder' (funds) for the futures market and those guys will rip you to pieces.
These are shorts term investments - hours to days. If you can call the oil price movement over these periods then you could make a lot of money. Can you? If so, then go for it.
You win, they lose. They win, you lose. If I was a betting man I'd put my money on the sharks. But I'm an investor and not a gambler.
Which are you?
Yes and don't you think if oil will recover significantly a leveraged etf on WTI will serve you better than a stock like ENQ?
PYUECK, an April Fools. Nice one!
PYU - you need to understand that Enquest isn't tied to WTI's performance or it's current spot price of $20, which is what you're quoting. Firstly, Enquest's pricing is tied to Brent and that's in massive contango (along with WTI admittedly). Look ahead in the futures curve and Brent futures just 4 months ahead are trading above $35/bbl. Near term, there'll be more pain for spot prices in WTI/Brent though - how much pain is what the market is discounting based on the news cycle.
ALL the time covid 19 is about oil is doomed
To be honest the one thing I am surprised about at the present climate is that ENQ hasn't fallen further. WTI is hovering just above $20. I repeat WTI is hovering just above $20. And this is for two good reasons, Saudi and Russia have turned the taps fully on just as world demand for oil slumps. Inventories are filling up world wide at such a fast rate that soon they will soon be full.
Now the price of oil may change, it may go up and it may go down. I would suggest that for ENQ to have a long life it not only needs to go up but it needs to soar. Remember a $40 price for a barrel is now almost a 100% gain, $60 a 200% gain.
I would suggest that if you think the price of oil will rebound are not Oil etf's or even leveraged oil etf's the better option. With a 3x leveraged etf, if oil returned to even $30 in the next six months the price would explode, if $40 then it would be astronomical. For me these are the better options at this time. Just too much risk in stocks such as this that you will lose you shirt and any rebound will come too late.