Hey, anyone can sell an ETF!
State Street (purveyors of SPDRs and StreetTracks ETFs) ran a full-page ad in the Wall Street Journal last week. It featured a guy walking the city streets with a sandwich board. On the sandwich board, it read, "ETFs for Sale." The caption next to the photo said, "Everyone and their brother sells ETFs. But that doesn't mean you should trust them like family."
I love it.
Everyone and his brother IS selling ETFs.
Consider The United States Oil Fund (USO), which opened on the American Stock Exchange on April 10, 2006. The fund is technically not an ETF, but a very similar animal called a “commodity pool." For all practical purposes, we can call it an ETF. The United States Oil Fund, as awsome and official as that sounds, is run by a group called Victoria Bay Asset Management. And what exactly is Victoria Bay Asset Management?
According to the fund's prospectus, Victoria Bay Asset Management, LLC, is “a wholly-owned subsidiary of Wainwright Holdings, Inc. a Delaware Corporation…that also owns an insurance company organized under Bermuda law.”
Gee whiz.
And who runs this wholly-owned subsidiary?
Two of the top people running the fund also manage a mutual fund called Ameristock, and a third, Malcolm R. Fobes III (no relation to Malcolm Forbes) is the founder of the Berkshire Focus Fund …(no relation to the fabulously successful Berkshire Hathaway.) Both Ameristock and Berkshire Focus (both with Morningstar one-star ratings) have track records that would positively make you cringe.
But the part of the prospectus that really grabbed me was the part where it explains that “the managing and directing of day-to-day activities and affairs [of the fund] relies heavily on...Mr. John Love,” who, we later learn, is not only employed by Ameristock, but also “holds a BFA in cinema-television from the University of Southern California." Furthermore, the prospectus, continues, "Mr. Love does not have any experience running a commodity pool.” His experience: “from December 2000 to February 2001 [sic], Mr. Love was employed by Digital Boardwalk, Inc.”
Anyone and their brother, indeed.
Don’t mistake this fund for anything like the Vanguard Energy VIPERS (VDE) or the SPDR Energy (XLE) funds, both of which invest in oil companies, like ExxonMobil. Don’t mistake this fund for something like any of the precious metal commodity funds run by Barclays and State Street. Those funds maintain vaults filled with gold and silver. Victoria Bay deals in paper... futures contracts, to be exact.
In other words, they use your money to speculate on tomorrow’s price of oil.
I don't like speculation. I'd rather see you invest wisely. But if you are going to speculate on oil futures, don't you want someone as wise (and lucky) as Jed Clampett or as cunning as JR Ewing? Mr. Malcolm R. Fobes III and Mr. John Love, given their miserable track records, and unimpressive resumes, don't seem especially wise or lucky.
But are they cunning? Only if they get your money.
Oh, by the way, the United States Oil Fund, which will likely never pay a dividend (and therefore capital appreciation will be your only return), opened at around $70 back in April. It is now trading at around $50. Woooeeee.
Russell
I love it.
Everyone and his brother IS selling ETFs.
Consider The United States Oil Fund (USO), which opened on the American Stock Exchange on April 10, 2006. The fund is technically not an ETF, but a very similar animal called a “commodity pool." For all practical purposes, we can call it an ETF. The United States Oil Fund, as awsome and official as that sounds, is run by a group called Victoria Bay Asset Management. And what exactly is Victoria Bay Asset Management?
According to the fund's prospectus, Victoria Bay Asset Management, LLC, is “a wholly-owned subsidiary of Wainwright Holdings, Inc. a Delaware Corporation…that also owns an insurance company organized under Bermuda law.”
Gee whiz.
And who runs this wholly-owned subsidiary?
Two of the top people running the fund also manage a mutual fund called Ameristock, and a third, Malcolm R. Fobes III (no relation to Malcolm Forbes) is the founder of the Berkshire Focus Fund …(no relation to the fabulously successful Berkshire Hathaway.) Both Ameristock and Berkshire Focus (both with Morningstar one-star ratings) have track records that would positively make you cringe.
But the part of the prospectus that really grabbed me was the part where it explains that “the managing and directing of day-to-day activities and affairs [of the fund] relies heavily on...Mr. John Love,” who, we later learn, is not only employed by Ameristock, but also “holds a BFA in cinema-television from the University of Southern California." Furthermore, the prospectus, continues, "Mr. Love does not have any experience running a commodity pool.” His experience: “from December 2000 to February 2001 [sic], Mr. Love was employed by Digital Boardwalk, Inc.”
Anyone and their brother, indeed.
Don’t mistake this fund for anything like the Vanguard Energy VIPERS (VDE) or the SPDR Energy (XLE) funds, both of which invest in oil companies, like ExxonMobil. Don’t mistake this fund for something like any of the precious metal commodity funds run by Barclays and State Street. Those funds maintain vaults filled with gold and silver. Victoria Bay deals in paper... futures contracts, to be exact.
In other words, they use your money to speculate on tomorrow’s price of oil.
I don't like speculation. I'd rather see you invest wisely. But if you are going to speculate on oil futures, don't you want someone as wise (and lucky) as Jed Clampett or as cunning as JR Ewing? Mr. Malcolm R. Fobes III and Mr. John Love, given their miserable track records, and unimpressive resumes, don't seem especially wise or lucky.
But are they cunning? Only if they get your money.
Oh, by the way, the United States Oil Fund, which will likely never pay a dividend (and therefore capital appreciation will be your only return), opened at around $70 back in April. It is now trading at around $50. Woooeeee.
Russell
posted by Russell @ 1:05 PM
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