In mid April, the price of oil was plunging to -$37 dollars a barrel, it has since recovered as both Russia and Saudi Arabia cut production of oil, The cuts in production of oil tells you the game the two countries played was silly and the economy in general is in bad shape, if you believe the President’s projection of V shaped recovery – the economy is coming back better than before, reality maybe a better choice.
With every negative situation, somewhere there is a bullish situation or people believe there is a bullish situation. in terms of the weaknesses of oil prices, money is rushing to exchange traded ETFs for oil prices. In an article by Devika Krishna Kumas and Tim McLaughlin of Reuters, investors or “oil tourists” deposited $1.6 billion in the United States Oil Fund LP. When oil prices go up and return to what was normal, profits can be made.
John Love, chief executive of United States Commodity Funds LLC which manages the fund said the big fall in oil futures was the May crude but the fund did not hold any contracts. The fund had invested in forward contracts and short term US government debt. The fund has doubled in sized to $4.1 billion.
David Nadig of ETF Trends said all the money flowing into the fund are people trying to catch the bottom of the oil market.
The United States Oil ETF attempts to attract the price of West Texas Intermediate light sweet crude oil.
Linking to dividend paying stocks, in every market someone can see possible methods to capitalize on negative events. It is important you do that, for your own investments as people stay home longer than expected, are you invested in companies making money? Much of the analysis is how long with the situation last? one month – we can all adapt; 2 months or 3 months – we all need to make changes? You can seek opportunities but remember many investments become long term because the situation changed. If you are going to have long term investments try to ensure they produce dividends.
There are more questions than answers, till the next time – to raising questions.