| | | I'd say... short term... two different issues... leverage and survivability...
If your venue allows it... CFD brokers would be the leverage. Not allowed in the U.S. or most of Europe... but, holy crap... leverage of 100x, 200x, 400x. Trading oil contracts allows for serious leverage. Get it right... good for you. Get it wrong... ? Makes zero sense for most investors in the U.S. to participate without having access to CFD brokers... as otherwise the contract minimums on oil are... 1,000 bbls... plus the collateral as required to keep the thing in the green with your broker ?
Dividing contracts into bite size chunks makes good sense... most people don't expect to take delivery unlikely to take the risk on a full contract... but, even with 400% leverage... a sub-contract on 1 barrel, 10 or 100 is probably manageable enough scale in risks ?
Might make it worth it for me to consider moving to a Caribbean island ? Hong Kong no problem.
Short of that... most of the oil ETF's got wiped out in the downdraft... the survivors have all throttled back to 2X versus 3X leverage... but they're still the only game in town for a bet on crude:
UCO at + 2X and DTO at - 2X seem the bets left on crude prices. Don't want to be left out, but think the price is too high ? Buy both... minimize price change risks... and decide at what price point to close one or the other. The U.S. markets closed on Friday... sort of obviates that here... since I expect the price decisions will be announced on Friday. The ETFs at least have early and extended hours trading robust enough to matter.
But hold both until trading ends in the U.S,.. and U.S. traders won't have much of a bet in place when trading picks up again on Monday... with cancelling moves.
GUSH and DRIP, ERX and ERY... are related as focused on the oil stocks with 2X leverage...
Did note oddities in the trading yesterday... as the UCO traded flat and then down... the long producers ETF's like GUSH and ERX were all up 10% and more in the morning... faded in the afternoon... but traded DIFFERENTLY than the crude contracts and tied ETFs... A suppression trade in physical oil, now, too ?
Why would people be quite optimistic about oil shares... when oil traders aren't optimistic about oil prices ?
Other leverage... same as last recession... some in time sequencing in investments... The tankers move counter to the market first... as they load up oil with higher day rates because of the decline. The services companies are last... get hard pressed to survive... lag the crude price, and lag the producers by a lot... only recover the business as drilling increases, not as prices rise...
Tanker stocks... set to do well for a while... give some nice leverage because their leverage in boat ownership tends to be so high... and few people understand the nature of change in the tanker day rates... and the impact it has if the rates are sustained is huge. DHT is a great pure play company, but has size limits. Tankers are "marine mid-stream".
Otherwise... land based distribution... the land based mid-stream survivors after a shake out are great long term holds. They''re all cutting dividends just now and being punished for it... but when the economy recovers... so should the dividends paid, so its a bit of built in "future growth" that happens on an accelerated schedule with recovery. On sale now in cheap shares that still sport healthy yields... 25% to 50%... but, you do need them to survive... not distribute the seed corn ? So analyst skills and diversification... patience... trading skills. Since you want them on sale... minimizing holding risks... timing trades... and it might mean not picking the best of them, when they are still not cheap and have more limited upside... but looking to find the likely survivors among the lesser choices... the best of the worst.
In normal times... you'd pick a pipeline stock based on growth potential... requiring the right geography. Currently, those that have been most focused on growth by taking bigger risks are suddenly... struggling to manage the debt they took on to fund acquisitions.
That's not different than OXY... which is still choking on the acquisition they've made... they're still tying to digest Anadarko... from a deal done at the high end of value before the wheels came off.
Pair higher oil with lower rates... it won't fix OXY overnight... but there's more leverage there than in reducing risks by choosing a Total S.A., TTL.L that I'd otherwise say is by far the best bet in the industry for stability, debt, value. But, OXY ? Maybe after change in the oil price and market dynamic makes it a more likely survivor...
Survivability ? Make good trades... then get the money out of risky financial institutions... into gold or silver.
I do like that direct registration of PHYS and PSLV thing... as a trustworthy market based alternative to physical ownership that's not illiquid... but also not "part of the problem" in the PM suppression trades.
The cost of rescuing the global economy from the virus... is going to be the ending of the Fed's tight money and pro-deflationary policies... that have been driving the dollar higher... and throttling growth.
Inflation is coming as one result... so gold and silver are moving a bit more now... but are still far more of a suppressed trade than oil...
But... as we're swimming in oil now... fixing the price higher is going to be... not a free market solution ? |
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