“While I cannot claim that every source of financial media has failed in attempting to fully assess the rot that represses The Natural Gas ETF UNG (UNG), I can assert that every source I have been made aware of has.  Although most are not incorrect, they are incomplete, often going 2 of the required 200 feet to fully understand what is wrong with UNG and every other ETF that employs a long-only, prompt-only consumable-commodity futures strategy,” The Business Insider Reports.

The Insider goes on to say, “Natural Gas ETF (UNG) carries prompt-month gas futures, perpetually, through time.  Carry and carry and carrying away, in essence morphing long-term (UNG) holders into Natural-Gas Sherpas.  While none of UNG’s activities are in the physical arena, the profit/loss profile of their strategy is identical to holding physical length for 30 days and then contracting to carry it – at going market rates – for another 30 days.  Rinse and repeat.”

“Carrying natural gas (and most other consumable commodities) is not an activity free of expenses.  Storing this fuel costs money.  How much?  It depends upon who you ask and what modified form of “carrying” you are involved in.  If you owned a parcel of physical gas and contracted to hold it in a storage facility until January, you would pay an explicit, determined rate to an actual pipeline/storage operator. If, however, you are involved in a strategy of constantly holding prompt Natural Gas futures, your storage cost (you probably didn’t even know you had one) is far less obvious.  This is where that frightfully odd sounding word “contango” comes in – a property absolutely foreign to almost all non-futures participants until the advent of these Bouncing Betty ETFs,” The Business Insider Reports.

“UNG works well for those seeking short periods of prompt natural-gas exposure.  It is utterly ruinous for long-term holders – as long-term length in UNG is nothing but being a Natural-Gas Sherpa.  UNG is capable of sustaining advancements in price, in so far as NG prices are advancing faster than storage costs accumulate.  But in this new era of Shale Gas, where storage is the constrained variable, not production, the prospects for such developments are bleak.    With UNG in the Shale Gas Era, you are short the constrained and long the plentiful – not an advantageous place to be.”

See The Rest Of The Story: HERE (Recommended)

Here are some details on the Natural Gas ETF (UNG) below:

The United States Natural Gas ETF (“UNG”) is a new way for investors and hedgers to manage their exposure to energy. The United States Natural Gas Fund LP (UNG) is an exchange traded security that is designed to track in percentage terms the movements of natural gas prices. UNG issues units that may be purchased and sold on the NYSE Arca.

The investment objective of UNG is for the changes in percentage terms of the units’ net asset value to reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the price of the futures contract on natural gas traded on the New York Mercantile Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire, less UNG’s expenses.

UNG