# The last commodity ETF I'll ever buy



## underemployedactor (Oct 22, 2011)

I bought ishares GAS (a natural gas index fund that tracks the commodity directly) a while back specifically because I wanted direct exposure to natural gas. Simple right? Well now the D-bags at ishares are telling me that my GAS is going to be rolled into their CBR or Broad commodity fund which is 25% gold and only 8% gas. It's kind of like buying Encana and then being told my Encana shares will now be traded for shares of Kinross. I don't want to come across as petulant or anything, but it is my money being treated against my wishes, so I won't be dealing with ishares or Blackrock again. And I'm going to be noisy and disruptive at the unit holders meeting. So there.


----------



## Snuff_the_Rooster (Oct 26, 2012)

I've not looked at this one before but it seems to me at first blush that this ETF suffers from the same contango issues as UNG does, which makes it a poor vehicle in general. Your money was never going to be treated well but that was known prior to entry one would have assumed.

In general all of these commodity etfs that use forward contracts are more or less garbage. In the past we've arbitraged this known contango effect for profits on certain etfs. Not guaranteed by any means, but a nice low risk trade. A little capital intensive I'll admit, so we don't do it much. There are more effective/efficient ways of gaining the exposure.


----------



## Belguy (May 24, 2010)

Use broad-based ETF's for your CORE holdings and use your left over money to EXPLORE with individual investments.

There are far too many specialty ETF's being issued and they won't all attract enough investors to survive over the long term.


----------



## andrewf (Mar 1, 2010)

You are coming across as petulant. I imagine iShares is winding down this ETF because so many investors like yourself don't understand it, and lose substantial amounts holding it. I would recommend not holding natural gas ETFs, but if you want to continue, look at Horizons.

I certainly would not hold this against iShares if I were you. Think of it as them doing you a favour.


----------



## GoldStone (Mar 6, 2011)

andrewf said:


> I imagine iShares is winding down this ETF because so many investors like yourself don't understand it, and lose substantial amounts holding it.


I bet they are winding it down because they failed to attract sufficient AUM to make it profitable.


----------



## underemployedactor (Oct 22, 2011)

Goldstone - I agree entirely, but it still annoys me.
Snuff - It seemed to me, and why I wanted to participate, that NG futures contracts were entering a period of normal backwardation which made it seem a good punt until the strategy was frustrated by the ETF windup.
andrew - ishares would be doing me a favour by maintaining the product they sold me, don't you think?


----------



## andrewf (Mar 1, 2010)

Natgas is not in anything resembling backwardation. Check this out... 170%+ annualized roll cost.

http://www.hardassetsinvestor.com/w...-price-surge.html?showall=&start=1#nymexhhgas


----------



## Snuff_the_Rooster (Oct 26, 2012)

andrewf said:


> Natgas is not in anything resembling backwardation. Check this out... 170%+ annualized roll cost.
> 
> http://www.hardassetsinvestor.com/w...-price-surge.html?showall=&start=1#nymexhhgas


Well i kind of thought so too, but since I don't trade it as a rule I didn't know it was that bad! Good link you've got there.


----------



## underemployedactor (Oct 22, 2011)

Well it looked like it was when I bought it. Maybe I was holding the graph upside down.....


----------



## Snuff_the_Rooster (Oct 26, 2012)

underemployedactor said:


> Well it looked like it was when I bought it. Maybe I was holding the graph upside down.....


I didn't see where you may have mentioned you bought it, but since the market lows of June it's certainly been working your way.

Unfortunately that's less than 5% of it's life where it has otherwise been tearing the holders a new one on a daily basis.


----------



## underemployedactor (Oct 22, 2011)

Well, it was a good trade and did work out well for a while and despite andrewf's condescending remarks was not a particularly undeducated or ill advised play. I would have wound up the position soon anyway. My point wasn't to discuss the relative merits of the strategy, so much as to complain about the nature of etfs, such that one investment can be transfered into another one that isn't the same thing at all, and that the etf middlemen, like Cat on a hot tin roof's Big Daddy, "have a lotta experience with mendacity".


----------



## andrewf (Mar 1, 2010)

The price of gas has risen over the past few months.

The trade could have moved in your favour and still have been a bad trade, from an initial risk/reward perspective.

As far as the ETF provider closing the fund: it's a reality. They're running a business. They can choose to stop running a business when it no longer makes sense. They gave you warning that they were going to make those changes, and you were free to move to a different fund. I don't understand why you would complain about this. It's like complaining that McDonald's stopped selling the McRib.


----------



## Belguy (May 24, 2010)

Really? Then we should be mad at both iShares AND McDonald's as well as any other company who decides to discontinue a product. The same goes for any mutual fund company that changes the manager of a fund for whatever reason even if that manager quits and moves to another mutual fund company as I have experienced on occasion in the past. :upset::frown::livid::grumpy:

Why can't everything just stay the same????


----------



## underemployedactor (Oct 22, 2011)

To extend the not particularly apt metaphor, it's more like ordering a McChicken and being handed a Big Mac. But I suppose in andrewf's parlance they would be "doing me a favour". Anyway, I find I don't like or trust the ETF model and will seek more direct participation wherever possible.
Belguy, I noticed you had to edit your post already. Nothing like irony served with a sledgehammer.


----------



## Belguy (May 24, 2010)

I still feel that one of the best approaches is the so-called 'Core and Explore' approach whereby you employ the lowest-priced, broadest-based ETF's for your core holdings and individual stocks for the explore portion.

I don't like all of these new fringe ETF offerings that the ever-creative financial services industry have come out with of late. Many of them will not be around for the long term.

But, heh, you pays your money and you takes your chances.:eek-new::beaten::disillusionment::friendly_wink:


----------



## andrewf (Mar 1, 2010)

Hey, these funds are second only to long VIX funds in destroying retail investors' money. I stand by the 'doing investors a favour' comment. 

By all means, go buy futures contracts. I don't think your criticism is reasonable. I suppose iShares could have just wound up the fund an returned the NAV to unitholders in cash.

Unitholders voted in favour of the change. Be angry at the other unitholders.


----------



## Snuff_the_Rooster (Oct 26, 2012)

andrewf said:


> Hey, these funds are second only to long VIX funds in destroying retail investors' money. I stand by the 'doing investors a favour' comment.
> 
> By all means, go buy futures contracts.


When first reading this topic I knew it was about Nat Gas Contango but my thoughts instantly went to the various VIX ETN's out there. The reason is as you've said there's been no worse (or better?) contango money-killer products out there like these VIX etn's.

I laugh and cry at the same time when I read various threads across the web about these products. So much effort, silliness and money has been wasted on them. It really shows just how completely uniformed a vast majority of retail traders are. I cry because it doesn't have to be this way. I get frustrated at the same time because of the continued wasted and pointless effort that these same traders expend, justifying poor decision making.

All I can say is, I'm glad its not our money.

I stop short of recommending that people go out and start trading futures contracts for no other reason than the real problem in most cases is the investor-trader, not the vehicle.

I'm not giving advice here, but with respect to the VIX etn's I know i have been guilty of offhandedly telling stock/etf/etn traders to basically just be short all that stuff whenever they pop and don't get too big too soon.

It's a lot like placing a finishing nail with a sledge-hammer and it is a horribly in-efficient and capital intensive way of playing it, but the odds a very much in your favour. 

The only way we will trade VIX is with futures. I don't suggest this simply because played poorly they can be a serious widow-maker. You just can't have too many episodes of poor decision making before they ring your bell, not to mention that you need a fair chunk of money to play even he smallest of spreads. I simply won't play them for most accounts.



> The trade could have moved in your favour and still have been a bad trade, from an initial risk/reward perspective.


That's very true, Andrewf. The sad thing is most will not see it that way. Just my opinion, but when you've come to the point where you can judge your decisions not based on outcome, but on merits, you've arrived.


----------



## underemployedactor (Oct 22, 2011)

Love it when this kind of sanctimonious pontificating masquerades as educating the poor simple ill informed retail simpleton.
In your rush to trumpet this garbled gospel or whatever it is you fail to see that this thread was not about Natural gas contango, but about the fairness or otherwise of an ETF swapping out one investment for another. But why let that get in the way of a pointless sermon.


----------



## Snuff_the_Rooster (Oct 26, 2012)

If you take nothing else away from this I hope it's that you see why these vehicle shouldn't really be entered in the first place - leaving everything else that happens after the fact, a moot point. 

I'm pretty sure everyone here understands your beef with the decision being made, but what would you have anyone do? Help you beat your head against the wall in hopes to get the verdict reversed? Or was this more of a "do not respond" sound-off on your part?

In that case had you said that you were just letting off steam I can speak for myself in saying that I likely would not have responded.

How I looked at it was as I had stated. This stuff doesn't get on my radar for the reasons stated. Oddly enough I posted this too..



> So much effort, silliness and money has been wasted on them. It really shows just how completely uniformed a vast majority of retail traders are. I cry because it doesn't have to be this way. I get frustrated at the same time because of the continued wasted and pointless effort that these same traders expend, justifying poor decision making.


As this is how I see most of these things pan out.

If I were you I'd take my second place prize of a gain in very tough odds and walk away happy - as long I knew my err in entering in the first place, I would be all smiles.


As to fairness of things in life,... well I'm not going to be the one to break it to you. It may seem funny to you but I walk into a trade wondering how I'm going to get screwed and who is going to do it. The idea that I am going to get a fair shake really never enters my mind. I guess it's to many years at the helm. You get used to -what is- and carry on.

That calls for my very first smiley face insert :biggrin:


----------



## andrewf (Mar 1, 2010)

^To echo the above. If all you wanted to do is gripe and you were not looking for comment, you could have been clearer up front. Creating a thread on a comment board is an invitation for comment. Perhaps you should have sent your complaint directly to iShares.


----------



## underemployedactor (Oct 22, 2011)

Fair enough. These last two rebukes I probably deserve.
But as I'm sure you two can attest, a good gripe is almost as satisfying as a good lecture.
Time for my happy face:encouragement:


----------



## Belguy (May 24, 2010)

:encouragement::encouragement::encouragement::encouragement:


----------



## Disgusted (Nov 9, 2012)

*Pomposity*

The pompous folk replying to this post seem intent on criticizing the investor. I fully recognized the contango effect when I bought GAS. It has been an excellent way to play the bottoming natural gas market without exposure to the risk associated with natural gas exploration and development companies. I fully agree with underemployedactor, have expressed my disgust to IShares and will not use their products again.



underemployedactor said:


> I bought ishares GAS (a natural gas index fund that tracks the commodity directly) a while back specifically because I wanted direct exposure to natural gas. Simple right? Well now the D-bags at ishares are telling me that my GAS is going to be rolled into their CBR or Broad commodity fund which is 25% gold and only 8% gas. It's kind of like buying Encana and then being told my Encana shares will now be traded for shares of Kinross. I don't want to come across as petulant or anything, but it is my money being treated against my wishes, so I won't be dealing with ishares or Blackrock again. And I'm going to be noisy and disruptive at the unit holders meeting. So there.


----------



## Eclectic12 (Oct 20, 2010)

underemployedactor said:


> Love it when this kind of sanctimonious pontificating masquerades as educating the poor simple ill informed retail simpleton.
> ... you fail to see that this thread was not about Natural gas contango, but about the fairness or otherwise of an ETF swapping out one investment for another...


Who said a general comment board was about educating anyone? It is an open public forum so some of the comments will be useful, some will be right and some will be junk.




underemployedactor said:


> To extend the not particularly apt metaphor, it's more like ordering a McChicken and being handed a Big Mac... Anyway, I find I don't like or trust the ETF model and will seek more direct participation wherever possible...


As for fairness of an ETF swapping investments - what was fair about TD Bank forcing an undervalued buyout of TD Waterhouse shares. Shares were wanted - no the cash. Should people boycott buying shares because of one incident that affects them? 

To update the analogy to include your "don't trust ETFs" comment, it's like going to McD's to order a McChicken, being handed fine print that a Big Mac will be substituted and deciding all fast food restaurants are shady.

I hate to tell you but there's a lot of unfairness in the market. If fairness by all players in an investment class determines buying or not - I suspect there little you will be comfortable investing in.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

Disgusted said:


> ... I fully agree with underemployedactor, have expressed my disgust to IShares and will not use their products again.


Just curious ... where you sent notification of the change, with lead time before a vote? Or was it a change with no notification?


Cheers


----------



## Four Pillars (Apr 5, 2009)

underemployedactor said:


> And I'm going to be noisy and disruptive at the unit holders meeting. So there.


I think you should ask them why they shut this ETF down and then make your decision about future dealings with iShares/Blackrock/commodity ETFs etc.

Since this thread is all about analogies, it's kind of like if Tim's stopped making my favourite donut due to lack of sales and I get upset and threaten to boycott Tim's and never eat another donut again.


----------



## Rysto (Nov 22, 2010)

Four Pillars said:


> Since this thread is all about analogies, it's kind of like if Tim's stopped making my favourite donut due to lack of sales and I get upset and threaten to boycott Tim's and never eat another donut again.


In both cases, the company actually did you a favour?


----------



## Eclectic12 (Oct 20, 2010)

Four Pillars said:


> ...Since this thread is all about analogies, it's kind of like if Tim's stopped making my favourite donut due to lack of sales and I get upset and threaten to boycott Tim's and never eat another donut again.


Having more fun with analogies, isn't it more like "the walnut crunch donut you are taking delivery of today and any previously delivered ones, will convert regardless of location to a plain donut with walnut icing, three weeks from now"? :biggrin:

I'm not sure how to work in the notification and unit holder votes that someone mentioned upthread.

Cheers


----------



## underemployedactor (Oct 22, 2011)

Eclectic, I sincerely hope, for your sake, that your financial acumen is more acute than your wit.


----------



## Belguy (May 24, 2010)

underemployedactor said:


> Eclectic, I sincerely hope, for your sake, that your financial acumen is more acute than your wit.


:highly_amused::highly_amused::highly_amused::highly_amused:


----------



## Eclectic12 (Oct 20, 2010)

underemployedactor said:


> Eclectic, I sincerely hope, for your sake, that your financial acumen is more acute than your wit.


I'm just amused that neither analogy takes into account the burgers or donuts that have already been delivered .... :chuncky:

Financial acumen is far less subjective than wit so it's pretty clear I'm okay on that front. Belguy liked your comment though.


Cheers


----------

