Many ETFs are Stupid and Shouldn't Exist
Every time i hear an interview with an "investment advisor" on the radio and they say that they only invest in ETFs I cringe. I just don't get them. Sure some, like the ones that invest in a basket of actual stocks, are fine. But many of them are a complete joke. The worst of the ETFs are the ones that are supposed to track a commodity or a basket of commodities.
This week's Bloomberg Businessweek has a great article on the inherent flaws in Commodity-related ETFs and how the market's normal contango eats away at investor returns. It is a must read for anyone who owns a commodity tracking ETF, such as UNG or USO.
If I personally have an exceptionally strong feeling about where the price of a commodity is headed, I will usually attempt to play the theory by purchasing stock in a company that directly benefits from the move that I am forecasting, not by using one of the dumb commodity ETFs.
I am currently short VXX, the ETF that supposedly tracks market volatility, in CAPS. I am considering adding shorts of another commodity-based ETF or two in the future. Is anyone out there in CAPS land short commodity ETFs? If so, which ones and how is it working out thus far?
Deej Amber Waves of Pain