Macro Tsimmis

intelligently hedged investment

BUY Ultrashort Oil & Gas ETF (DUG)

Posted by intelledgement on Wed, 10 Sep 08

Once more into the breach…we took a brief spin with DUG back in May when we were nervous about the seemingly high valuation of crude and got badly burned: lost 12% of our investment in six days! But that was with the price of oil at $120/barrel on it’s way to $150. Oil is cheaper here—fluctuating in a range between $100 and $110—but the price is clearly in a downtrend and the economy looks worse.

Long term, energy demand will continue to grow and a lot of the easy-to-extract oil has been used up, so the price is surely headed northwards. But for now, we have a double whammy working against demand: the $150 price spike and the likelihood of a serious recession if not a depression. So we expect a significant short-to-medium term pullback in the price of crude to continue.

Proshares’ UltraShort Oil & Gas ETF seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Oil & Gas IndexSM.

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