I've been screaming at the top of my lungs, telling people not to trade oil and gas ETFs like U.S. Oil ( USO) and U.S. Natural Gas ( UNG). They're perfectly horrible investment vehicles.
But nobody will listen to me. They just love those new ETFs. So instead of screaming in this column, I'll instead play Mother Hen for a moment. OK, kids, if you're going to play in the mud, here's what you need to wear to stay relatively clean. Everyone these days it seems wants crude oil exposure as part of his or her portfolio or they just want to be able to daytrade the price of the crude barrel.
Avoid Oil ETFs, Buy Stocks
This is exactly the tendency -- actually more like a trading craze -- that I've termed "the endless bid." Investors and traders have made crude oil part of their daily diet of speculation where it barely existed even three years ago. And more and more they are getting their fix for crude oil through exchange-traded funds. And why not? They look like stocks, they sort of act like stocks and therefore are a lot more comfortable for people who have a lifetime of experience with stocks. But they're not stocks -- not at all. I could explain how the use of crude oil ETFs are a dastardly contributor to price volatility, but no one wants to listen. I could explain how ETFs have clearly inflated the average price of the crude barrel and the cost of a gallon of gas to the consumer, but no one wants to hear it.