Commodities

[ochotona]

I had been buying AAAU with my spare change in a taxable brokerage account but then... nah, the stupid collectibles tax! So I noticed AAAU was trading at exactly the same price I bought it for, so I sold it, and bought the BCI Commodity ETF.

BCI is still 1/5 precious metals, but it's a broad basket. ER 29 bps. No Schedule K-1 tax form. No collectibles tax. No dividend. I'm going to buy this one with my spare change.

I think commodities are forming a base, just like gold formed a base. Oil spot prices near zero? This kind of environment may outlast my career, but it won't last for long.

Oh yeah, I also wanted to participate in the oil industry recovery, but then I thought, do I really trust the clowns in oil industry management? I realized, no, I do not. So then I thought, well, just buy the underlying and flush the clowns.

Screenshot 2020-04-21 at 3.08.30 PM.png (46.16 KiB) Viewed 2633 times

[pmward]

Technically they're not basing yet, as they just hit a lower low. If they would have bounced off that 2016 low it would have been constructive. I'm not very keen on general buy and hold commodities index at the moment. It is possible that this is the final capitulation wave down before commodities finally start trending higher again. But capitulation can get really ugly (see oil this week). At some point commodities are going to be an amazing mean reversion play. I'm just not sure when that time is. The chart is currently too weak for my interest. And that super contango in the oil markets can destroy you even if the price goes up. Might be worth looking into how much June contract exposure they have for oil. It's possible the oil portion in that ETF goes to 0 this month if it's structured similar to USO.

[ochotona]

They have some time to get rid of these contracts. They won't be bag holders. What was CLN0 today... $7? $11? Does it matter? It's like talking about $250 gold. Could it go lower? Sure. Is it likely? Mmmmm...

CON0 BRENT CRUDE 05/29/2020
CLN0 WTI CRUDE 06/22/2020

https://www.aberdeenstandard.com/docs?e ... fb970c5ccb

[pmward]

They have some time to get rid of these contracts. They won't be bag holders. What was CLN0 today... $7? $11? Does it matter? It's like talking about $250 gold. Could it go lower? Sure. Is it likely? Mmmmm...

CON0 BRENT CRUDE 05/29/2020
CLN0 WTI CRUDE 06/22/2020

https://www.aberdeenstandard.com/docs?e ... fb970c5ccb

But the thing is... if they do the same as USO they do the roll every month the week prior to the roll you're screwed. USO did all of their roll last wed-fri. Sure, in May they missed the biggest plunge. But it's likely the June contract plunges much earlier than the final week. I honestly think USO can hit 0 this month, even after the reverse split they are doing. If the ETF you're in uses the same rules... well it's going to hurt. Not to mention the price you have to pay in a super contango market to roll the contracts every month. You can get destroyed even if the price goes up. The cost of carry is HUGE right now. Be careful is all I'm saying. I think you're much better off with the collectables tax, imo. I would not invest in broad based commodities or oil in any shape or form right now.

[Kbg]

+1

Very careful

[ochotona]

I have one share. Just to keep my attention.