"These new investors are not funding a pyramid per se, but they are helping to fund storage. That is to say, with global demand in the doldrums, the contango will persist. And, as long as it lasts, traders will continue to front-run the rolls, which in turn will exacerbate the contango, which will then incentivize storage builds further, which will then ultimately weigh..."
Is the USO Oil Fund "like a Pyramid Scheme?"
"Should a bank guaranteed by public funds and the FDIC be active operators in speculative markets? Or should they be confined to the more conservative realms of commercial banks as they were under the Glass - Steagall regime?"
USO: A Self-Propelled Pyramid? - Financial Times
USO Oil Fund or Just a Pyramid Scheme? Stockmaster.com
USO Oil Fund: All of the Drop and Some of the Gain - Phil's Stock World
"If one of these NYMEX traders happens to be Goldman Sachs and, 3 days before USO is forced to roll their contracts, they put out a call raising their prediction for the price of oil by 30%, they can front-run that trade against the $3Bn worth of retail suckers sitting in USO and make $2 a barrel ($1 for July and $1 for August) on 100M barrels in just a few day. The NYMEX sharks can do this every month like clockwork and it’s not just USO as there is DIG and DUG and USL and DBC and ultra short ETFs (don’t even get me started on how they chew up your cash!) etc, etc…. "
jessescrossroadscafe.blogspot.com
Since valuations are being driven by futures, this is worth considering, IMO. If true, this is becoming a very dangerous game for retail investors, with potential effects on all oils.
There must be some explanation for the disconnects were seeing; if not here, close by.
Jim |
