Reply To: Investment Ideas- use at own risk

One idea I keep toying with and rejecting is buying a share in GAZ or UNG. Basically, these are stock-like creations (UNG is technically an etf, while GAZ is an etn) that are supposed to track the movement of natural gas. Natural gas is at a 7-year low, and is heading down while oil has been going up. With the stabilization of the economy, it’s just a question of time until it reverts to its usual price of 9 times cheaper than oil instead of 25 times cheaper.

There are 2 big problems:

1. Natural gas is still what they call a “falling knife”. Never try catching a falling knife, although I washed out a few losses doing just that in late February.

2. The etf’s and etn’s themselves are very flawed, and don’t track it so well when there is a lot of what’s known as Contango. Contango means the stocks lose money when they have to sell the current month’s futures contract and buy the next month’s. That said, when natural gas shows an upswing I will probably buy a small position of each, as there are very few truly undervalued stocks left.