The Week's Economic Reports

Following is a summary of last week's economic reports. Rising credit card debt and robust retail sales for December highlighted the data - this will likely stoke new inflation fears in the weeks ahead. For the week, the S&P 500 Index fell rose 1.6 percent to 1,431 and the yield of the 10-year U.S. Treasury note rose 13 basis points to 4.77 percent.
Consumer Credit: Credit card debt soared in November contributing to the $8.7 billion rise in revolving credit. After falling $1.3 billion in October, overall consumer credit rose $12.4 billion in November, likely an indication that consumers were feeling confident enough during the early holiday season to continue spending, using credit cards to fund purchases as home equity withdrawal wanes. Nonrevolving credit for purposes such as auto loans rose $3.7 billion.

International Trade: The U.S. trade deficit contracted for the third consecutive month, from a revised $58.8 billion in October to $58.2 billion in November. The narrowing was due largely to an increase in exports rather than reduced imports, more civilian aircraft deliveries to international customers being the primary factor. Overall exports rose 0.9 percent while imports increased 0.3 percent.
Prices for crude oil fell from $55.47 per barrel in October to $52.25 per barrel in November, making the increase in the oil trade deficit much smaller than it would otherwise have been. The trade gap with China narrowed $1.5 billion to $24.4 billion per month while the deficit with Japan and OPEC countries narrowed by $0.4 billion and $0.7 billion, respectively. Most of the reversal in recent months is a direct result of lower oil prices and this will provide a boost to fourth quarter GDP.

Retail Sales: The undaunted American consumer is alive and well, at least according to the latest retail sales data. Exceeding expectations, retailers reported an overall sales increase of 0.9 percent in December following a downwardly revised 0.6 percent rise in November. The two most recent months convincingly reverse the trend of the three prior months where sales fell on a month-to-month basis. Excluding automobiles, retail sales gained 1.0 percent in December after a revised gain of 0.7 percent in November.
Strength in retail sales was broad based. One of the few categories losing ground was building materials which fell 1.1 percent, a result of a slowing housing market. Gains were paced by gasoline station sales and electronics, both up over three percent - rising prices at the pump were responsible for the former, however, this will be reversed in the months ahead as gasoline prices fall. On a year-over-year basis, overall retail sales were up 5.4 percent, once again exceeding wage gains over the last year, the difference being made up via new credit.

Import and Export Prices: Both import and export prices rose sharply in December, the rise in import prices largely due to a temporary rise in oil prices during the reporting period that ended in mid-December (note that the international trade report above in which falling oil prices were reported is a month behind most other reports). As oil imports are a very large component of total imports, the January report should show a hefty price decline.

The 0.7 percent increase in export prices was the largest monthly increase in nearly two decades, largely a result of higher prices for agricultural products. Prices for commodities such as corn and wheat have been rising rapidly in recent months and this is now showing up in the export data.

Summary: Higher consumer spending enabled in part by increased credit card debt has once again proved the old axiom, "Never count out the American consumer". The latest reports show that consumers are turning away from home equity withdrawal and are back to using credit cards after a long period of low credit card spending. What appeared to be capitulation during the months of August, September, and October was reversed in a big way over the last two months casting new doubt on whether a consumer led economic slowdown is in the cards for 2007.

The Week Ahead

Economic news in the week ahead will be highlighted by two inflation reports - producer prices on Wednesday and consumer prices on Thursday. Other reports include industrial production on Wednesday, housing starts and the Conference Board's index of leading economic indicators on Thursday, along with consumer sentiment on Friday.

[Note: This is one very small part of the Weekend Update published at the companion investment website Iacono Research. Since it contains no investment-specific information, it will appear here on Saturdays on a fairly regular basis. To have a look at the complete Weekend Update, including the model portfolio and much more, sign up for a no-obligation free trial today.]

All charts courtesy of Northern Trust.

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Boinggg!

Precious metals rebounded like a coiled spring today after a strong retail sales report and a sliding dollar - maybe all that tough inflation talk from the Fed is warranted.

[That title should probably read Boinggg! Boinggg! to include both gold and silver.]

Oil continued to fall with little sign of getting up anytime soon. Prices for near-month delivery plumbed new nineteen month lows early this morning after OPEC President Mohamed al-Hamli expressed his view on oil prices below $53 a barrel - "unacceptable'' was the word he used. Now if OPEC members would just follow through with promised production cuts - just once.
The big oil companies did a lot better than last week (though that's not saying much).
It was a very good day for gold - it just kind of hung around all week waiting for the weekend to arrive. At noon on Friday it jumped $10 and punched out for the weekend.
Gold goes up two percent, silver goes up four percent - that's pretty typical. Of course it's a lot more fun going up than going down - when going the other direction, it's more like gold goes down two percent, silver goes down eight percent.
Gold miners rebounded, though they made up only about a third of last week's decline - last week was pretty awful.
And the dollar continues to impress - up to 85 on the U.S. Dollar index before falling back into its old habits today. Is it time to buy Euros again?
The second week of the year was much better than the first. Hopefully, in this case, one week will make a trend.

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Friday Lite - R.I.P.

This will be the last edition of Friday Lite. As things are changing a bit around here - more frequent, mostly shorter posts (or at least an attempt at brevity) - the whole idea doesn't make as much sense as it used to.

As part of the once-a-day routine, the Friday post was intended to cap off the week with a series of shorter, lighter pieces and then the normal fare would reappear on Monday morning.

Since that routine has been broken and fingers are tapping on the keyboard here for what seems like 24 hours a day, seven days a week, continuing the year-long tradition no longer fits in.

Yes, it was almost one year ago today that the very first Friday Lite appeared:

With the week almost done, bracing for a weekend of retrospectives and next week's perhaps tumultuous conclusion of Alan Greenspan's long career as head of the world's most important central bank, there are but a few unrelated items to share today.

Uh, ahem - excuse me while I step away from the keyboard for a moment...

OK, one last time and very litely...

Friday Lite - One Last Check of the Search Engines

One last check of search engine results for the phrase "Friday Lite" shows the real reason why the regular Friday fare is being discontinued.

Two women have thwarted all attempts at dominating the search phrase "Friday Lite" since that goal was first set and then achieved last year.

It was believed that simple repetition would do the trick, but apparently website traffic is much more important - an August archive from Michelle Malkin (left) sits in the top spot at Google while the number one position at MSN is held by her (right).

Final rankings for Friday Lite here: #2 at Google, #1 and #2 at Yahoo!, and #2 at MSN.

Yahoo!

Home Prices are Falling (and not just 1.3 percent)

The drop in sales prices for real estate seems to be accelerating in these parts. Tens of thousands of dollars now seem to be casually lopped off of what a buyer asks or accepts and For Sale signs are blooming rather early, two months before the arrival of spring.

A young real estate salesman was seen setting up an "Open House" sign at noon on a Wednesday the other day. He appeared bright-eyed and bushy-tailed which was more than could be said for the sales reps at the local master-planned community that looks to be about 30 percent built and 10 percent occupied.

Not far from here an 1800 residence community with schools, shopping, parks, and an assortment of other infrastructure seems to have been stopped dead in its tracks. When the wind whips up, dust flies and tumbleweeds blow through while the few residents who call it home seem to walk around with a dazed look.

It was not more than four or five months ago that the sales office was visited to have a gander at some of the 2,200 to 2,400 square foot homes - just out of curiosity. Not long ago, the builder's price sheet was full of numbers starting with sevens and the incentive package was only four digits.

Yesterday, the price list showed numbers like $646, 625 and $654,600 along with an additional $15,000 in incentives. The local paper was right - ten to twenty percent down from last summer's prices.

MLS-2

Patrick Boyle, head of the new real estate information service MLS-2, sent mail the other day about their new software that, among other things, provides keyword searches for real estate sales listings. Here's a screenshot of how you can quickly find motivated sellers, highly motivated sellers, and sellers so desperate that they'll probably accept just about any offer with six figures.
In the press release Patrick noted, "In today's real estate market, many buyers are looking for deals. For these buyers, MLS-2.com allows them to search a complete MLS database of homes specifically for bargains, in new and unique ways."

Currently MLS-2 covers seven counties in the greater SF Bay Area, but may be coming to a county near you.

Is Someone Expecting Something Bad to Happen?

Signing up to get news or alerts from different organizations sometime results in interesting things showing up in your inbox. For example, yesterday a message from the Kansas City Fed showed up with the following subject line:

Test Your Discount Window Access for Contingency or Liquidity Purposes

Here's the message body:

Institutions are encouraged to periodically test their ability to borrow at the Discount Window to ensure there are no unexpected impediments or complications. For more information visit http://www.kc.frb.org/CRM/DiscountWindow/Discountwindow.htm to perform the test.

Here's what you see when you click on the link:
Having neither an institution or a contingency/liquidity plan, it's hard to come away from this feeling anything other than a bit unsettled as to why others are urged to conduct a test on theirs.

Is someone expecting something bad to happen?

The Thin White Duke is Now a Sexagenarian

David Bowie turned 60 the other day and yes, someone between the ages of 60 and 69 is indeed a sexagenarian (the younger age brackets sound even more strange). The story about the song TVC15 is probably typical of his early years.

TVC15 was a single by David Bowie.

The song was inspired by Iggy Pop who, during a drug-fuelled period at Bowie’s LA home, hallucinated and believed that the television set was swallowing his girlfriend.

Beyond oblique mentions to absorption via television, the lyrics are largely nonsensical. Bowie himself hasn’t been able to shed any light on their meaning beyond the Pop anecdote, having very limited recollection of the Station to Station sessions. The 1983 film Videodrome explores similar themes.

Whenever Under Pressure comes on the radio, the volume gets turned up - it's a conditioned response.

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Moskow Wins by a Mile

Fed heads have been out in force this week talking inflation down. In a trend that is sure to continue in the years ahead, the management of inflation "expectations" in an over- liquified world, accomplished through "tough talk" by Federal Reserve members, has become increasingly important.

Vice Chairman Donald Kohn got the week started on a strong note on Monday with 21 mentions of the word "inflation" in his remarks on The Economic Outlook before the Atlanta Rotary Club in Georgia.

This was followed by Michael Moskow of the Chicago Fed on Wednesday who set the bar ridiculously high with 30 mentions of "inflation" in his speech before business journalists in Iowa on the U.S. Economic Outlook.

Earlier today, New York Fed head Timothy Geithner could muster only six mentions during his remarks on Developments in the Global Economy and Implications for the United States. Clearly, Mr. Geithner realized that most of the week's work had already been done the day before and felt that a little "easing" from the Fed was in order.

Highlights from Donald Kohn:

So, despite the recent favorable price data, I believe it is still too early to relax our concerns about whether the run-up in price pressures in the spring and summer of last year is truly unwinding and whether it is unwinding rapidly enough to forestall a pickup in inflation expectations.
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Core inflation is still higher than it was just a year ago, and, as I noted, some of the very recent decline may result from one-time changes in relative prices rather than an easing in underlying inflation pressures. A very gradual decline in the trend rate of inflation continues to be the most likely outcome, but that path is still by no means assured, and in my judgment such a decline remains critically important to the sustained prosperity of the U.S. economy.

In sum, conditions appear to be in place for a good year for the U.S. economy, one marked by growth that is moderate and sustainable and by inflation that will be lower than last year's. The economy appears to be weathering the downturn in housing with limited collateral effects, and inflation appears to be easing with the aid of lower energy prices, well-anchored inflation expectations, and competitive labor and product markets.

The speech also included these remarkable comments on what caused the housing bubble:

But the current contraction in housing did follow an unusually large run-up in sales and construction and, even more so, in prices relative to the returns on other financial and real assets. Our uncertainty about what pushed home prices and sales to those elevated levels raises questions about how the market will adjust now that expectations of the rate of house price appreciation are being trimmed.

Uncertainty? Low interest rates and lax lending standards were surely the fuel for the current speculative bubble that followed the last speculative bubble that had just run out of fuel.

It probably sounds better to say that you don't know, rather than try to explain it away as the result of Wealth Creation Technology, as did the Chicago Fed not long ago.

Speaking of the Chicago Fed and its head, in addition to 30 mentions of the word "inflation", Michael Moskow threw in two instances of the Fed's most powerful word when it comes to inflation - "vigilance".

By my standards, inflation has been too high. I prefer to see it between 1 and 2 percent. The most recent news on inflation has been good, with the 12-month change in core PCE coming down from 2.4 percent in October to 2.2 percent in November. Looking ahead, core inflation likely will ease somewhat further. The deceleration in economic growth reduces somewhat the risk of sustained pressures from resource constraints. And the recent period of lower oil prices clearly is a positive factor.

Although the recent news has been favorable, risks to the inflation outlook remain. Additional cost shocks at this time would be unwelcome, or we could be wrong about reduced pressures from resource constraints. Long periods of high resource utilization are often associated with rising costs and prices.
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Another risk to the inflation outlook would be if the recent positive news on inflation turns out to be transitory. Disappointing numbers on actual inflation rates could cause inflation expectations to run too high. If firms and workers expect inflation to be high, they will want to compensate by raising prices and wages or building in plans for automatic increases. In this way, high inflation expectations can lead to persistently high actual inflation.

So the summary on inflation is that the recent price data have been consistent with some easing in core inflation. The key going forward is whether that trend can be sustained and how quickly inflation will move back to the range that is commensurate with price stability. And we need to continue to be vigilant in monitoring the risks to the inflation outlook.

Tim Geithner's comments on inflation paled in comparison:

To a significant extent, these financial developments reflect a high degree of confidence in future macroeconomic and financial stability, reinforced by the improvements in inflation performance, growth outcomes and financial resilience of the past several years.

Better monetary policy has lowered expectations of future inflation and inflation volatility and has contributed to lower risk premiums in general. Changes in the cyclical behavior of financial intermediation and credit provision, coupled with the increased stability of the real economy, seem likely to have reinforced the improvements on the monetary policy front.

It's almost like he didn't even try.

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The New Cold War

What is currently happening in energy markets could eventually have a disastrous impact on both the global economy and the tenuous peace that currently exists in many parts of the world - the combination of plunging oil prices and shaky suppliers makes for a potentially lethal combination.

To put things into proper perspective, Speigel Online, the internet version of Europe's biggest and Germany's most influential weekly magazine, has an ongoing series titled "The New Cold War - The Global Battle for Natural Resources".
Is this over dramatizing the energy situation?

Probably not if you live in Europe and are dependent upon imports from Russia - the events of earlier this week demonstrate why this is so.

On Monday, the pipelines from Russia temporarily ran dry:

Russia Halts Oil Deliveries to Germany
The conflict between Moscow and Minsk over energy prices worsened on Monday, with potentially serious consequences for Western Europe. Russian pipeline operator Transneft shut down its Druzhba pipeline, which is the source of 20 percent of Germany's oil imports.

Transneft has accused Belarus of illegally tapping oil from the Druzhba pipeline, whose name translates as "friendship".
...
"I view the closure of the important Druzhba pipeline with concern," German Economics Minister Michael Glos said Monday. "I expect the deliveries through the pipeline to resume completely as soon as possible."
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Earlier on Monday, deputy Polish economy minister Piotr Naimski told Polish TV station TVN24 that the pipeline had been shut off because of the ongoing energy dispute between Minsk and Moscow. Russia dramatically increased gas prices on Jan. 1 and acquired a controlling interest in Belarussian natural gas pipeline operator Beltransgas. In addition, the Russian government imposed an export duty of $180 per ton on petroleum.

On Tuesday, Ms. Merkel was none too pleased:

Merkel, EU's Barroso Condemn Russian Pipeline Shut-Off
German Chancellor Angela Merkel and European Commission President Jose Manuel Barroso have criticized Russia for shutting down a pipeline pumping oil to Europe. Russia's move has dented its image as a reliable energy supplier, said Merkel. She also hinted that Germany may reconsider its phaseout of nuclear power.

Chancellor Angela Merkel, who holds the rotating European Union presidency, said Russia's move to halt oil supplies to Europe pumped through Belarus was "unacceptable."

"That hurts trust and it makes it difficult to build a cooperative relationship based on trust," Merkel told a news conference.
...
The pipeline is the source of 20 percent of Germany's oil imports. Germany, Poland, Hungary, the Czech Republic and Slovakia have been affected by the shutdown.

Much of Europe was talking about their unreliable energy supplier to the East:

Russia Becoming 'Frighteningly Arrogant' Over Oil
The latest energy spat between Russia and one of its former Soviet neighbors has cut off oil supplies to western Europe and led to fresh concerns over the west's dependence on Russian oil. It highlights how ruthless and arrogant Russia has become with its energy policy, and forces Europe to step up its search for alternative supplies, say German media commentators.

Business daily Handelsblatt writes:

"The case of Belarus harbors a lesson for western Europe: Russia is once again showing how irresponsibly it is handling its increased global role. The world's second largest oil exporter and most important gas producer should be aware that trust and reliable supplies are the most important assets in the energy industry."

"It's precisely this asset that Moscow is putting at stake in its row with Belarus. And in the wake of the conflict with Ukraine, the Kremlin is again proving that it's prepared to use energy supplies as a political weapon. That is why Europe must lessen its dependence on Russian oil and gas despite all Moscow's assurances of friendship."

"And Russia must accept the rules on dispute settlement enshrined in the European Energy Charter. The Russian mechanism of simply turning off oil and gas supplies or doubling prices whenever there's a row is more than impertinent."

Wednesday saw the crisis averted, but not without a lasting impression:

Belarus resumes Russian oil flow, ending 3-day halt
Belarus said on Wednesday it had restarted the flow of Russian oil through a major pipeline across its territory, ending a three-day stoppage that rattled Europe.

The resumption came hours after Belarus scrapped an oil transit duty it imposed last week on shipments of crude through the Druzhba ('Friendship') pipeline linking Russia's Siberian oilfields to central and eastern Europe.
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The shutdown marked the climax of a trade dispute in which Moscow doubled gas export prices to Belarus at the New Year and imposed a crippling crude oil export duty equivalent to 10 percent of the gross domestic product of its western neighbor.

Minsk retaliated last week by imposing its own oil transit duty. Transneft shut off the oil flow on Sunday night, accusing Belarus of siphoning 80,000 metric tons of oil from the pipeline to take payment of the levy in kind.

Minsk caved into pressure from Moscow after Putin said on Tuesday Russian oil firms should prepare to cut production if no compromise was reached, threatening prolonged supply cuts to Europe just a year after a Russia-Ukraine gas crisis.

Russian Energy Minister Viktor Khristenko met oil bosses on Tuesday night and Wednesday to discuss reductions. But further discussions were called off when Belarussian Prime Minister Sergei Sidorsky said that Minsk had withdrawn the transit duty.

As the world's number two exporter of oil, this will likely not be the last time that the flow of oil temporarily stops - it's a long way from number two to number three and the Russians know it (chart courtesy of The Oil Drum).

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The New GSCI

An update on how the Goldman Sachs Commodity Index (GSCI) has changed over the last six months is shown in the table below.

These changes relate to various theories about how energy prices have been affected during that time, as discussed yesterday and last summer. The net result of all the changes is that gasoline is now weighted at two percent instead of eight percent last July.

The most recent data in the table below appears in the commodities section of the Goldman Sachs website. No historical data could be found - the 2006 data was retrieved after recording it here for other purposes.

There were a number of announcements about changing the gasoline weighting as a result of moving away from the New York Harbor Unleaded Gasoline futures contract to the Reformulated Gasoline Blendstock for Oxygen Blending (RBOB) futures contract - see these notices in June, July, and August. The most recent announcement about the annual re-weighting came earlier in the week.
What this means is that there really is nothing new since last summer's announcement that the weighting of gasoline would be reduced by six percentage points by the end of 2006 as reported in the New York Times - the New York Post story from yesterday seems to be much ado about nothing.

The conclusion to this saga does raise the larger question of why the index was changed at all. The explanation from the Goldman Sachs website about how the components are weighted is as follows:

Economic Weighting

The GSCI is world-production weighted; the quantity of each commodity in the index is determined by the average quantity of production in the last five years of available data. Such weighting provides the GSCI with significant advantages, both as an economic indicator and as a measure of investment performance.

For use as an economic indicator, the appropriate weight to assign each commodity is in proportion to the amount of that commodity flowing through the economy (i.e., the actual production or consumption of that commodity). For instance, the impact that doubling the price of corn has on inflation and on economic growth depends directly on how much corn is used (or produced) in the economy.

From the standpoint of measuring investment performance, production-weighting is not only appropriate but vital. The key to measuring investment performance in a representative fashion is to weight each asset by the amount of capital dedicated to holding that asset. In equity markets, this representative measurement of investment performance is accomplished through weighting indices by market capitalization.

So, apparently, the production and consumption of gasoline is now surpassed by not only gas oil and gold, but live cattle and corn.

Does that make sense?

There's more gold "flowing through the economy" than gasoline?

For a thorough discussion of the entire mess that Goldman started last summer when the whole thing began, see this fine write-up - many of your questions will be answered there (the author cast the pre-election conspiracy theory in a dismissive light, but liked the Goldman makes even more money conspiracy theory).

As it stands today, the Economic Weighting section of their website appears to be in need of an update.

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Wither the Oil Price

Crude oil prices continue to fall amid cuts in Russian oil supplies, talk of cuts from OPEC, revolt in Nigeria, more nationalization in Venezuela, and a tinderbox in the Middle East.

What's driving the price of oil down? It must be the weather.

Well, that and an apparent exodus of investors and speculators.

In this story from CBS MarketWatch, at least one analyst doubts that warm weather is involved.

"I can find very little reason for a big movement in oil prices," said Charles Perry, chairman of energy-consulting firm Perry Management.

"Weather is really not that big of an influence on oil prices, when most crude is converted to gasoline -- plus the natural-gas prices have not moved," he said. Since the start of the year, natural-gas futures have moved less than 1%.

Hmmm...

Most crude oil is converted to gasoline.

The $6 billion of gasoline futures that are no longer needed for commodity funds based on the Goldman Sachs Index are surely involved somehow.

No one seems to believe that OPEC is going to cut production, no one but Royal Dutch Shell seems to care what's going on in Nigeria, and news of a million barrel a day interruption in Russian oil supplies doesn't seem to matter either.

Hugo Chavez? Mahmoud Ahmadinejad? Irrelevant.

Like stock markets, fear seems to have been completely removed from the oil market.

Worse for Investors

What's worse is that if you're invested in oil through a fund that tracks futures prices, purchasing near month oil futures contracts and then rolling them over every month, you're losing money with each new month due to what is now an extreme form of "contango".

This story($) from the Wall Street Journal explains.

Oil-futures contracts expire every month. Investors holding the most current contracts have to buy new ones to replace them if they want to maintain their positions. In the past couple of years -- in part, because of the influx of financial investors making long-range bets -- these contracts have gotten pricier the further into the future they are scheduled to be delivered, something known as contango. That raises the cost of keeping a position in the market. It's almost like the difference between walking a mile, and walking a mile uphill.

About two years ago, spot prices of crude were higher than future months, something known as backwardation, which boosted investors' returns every month.

In practical terms, for most investors with oil in their portfolio, the cost of rolling over the expiring near-month futures contract into the one for the next month's delivery is now more than $1.25 a barrel. The price of oil could be unchanged at $50 per barrel, and an investor would still lose 2.5% because of these costs.
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This is affecting large institutional investors, such as pension funds, which have been pouring into commodities in recent years, seeking to diversify their portfolios. A few years ago, they were happy to pay the "roll cost" to hold oil, because its price was rising and canceled out carrying costs in the futures markets.
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Nobody is predicting an end to investors' interest in commodities as a way to diversify their portfolios. The California Public Employees' Retirement System, or Calpers, approved a pilot program this past fall to invest directly in commodities-futures markets, and it is one of a growing number of pension funds planning to devote a much larger allocation to the sector.

But these investors also may seek to adjust their allocations to indexes that are less energy-focused than, say, the Goldman index. Because roughly $60 billion is invested in funds linked to the Goldman index, pulling out or switching allocations rapidly could cause further downward pressure on the oil markets, some traders and economists say.

This condition was particularly noticeable a couple months ago when a futures contract plunged about two dollars just before it expired while prices for all other delivery dates held steady. Anyone selling an expiring contract would have had an immediate loss of two dollars when moving to the next month's contract.

Different funds investing in oil futures have novel approaches to counter this condition - selling the near month contract at opportune times each month or using a mix of contracts with later delivery months are two approaches - but investing in oil futures seems to be fraught with difficulty if the intent is simply to track the price of crude oil.

For anyone owning the United States Oil Fund (AMEX:USO) since its inception last spring, your buy-and-hold experience looks a lot like the chart below - the gap between the near month futures contract and the share price of the fund has widened from $3 last March to as much as $9 in recent weeks.
There has got to be a better way for the ordinary investor to obtain exposure to the most important of all commodities.

Hedge funds are now reportedly buying and storing the stuff themselves - similar to the gold and silver ETFs that buy and store the physical commodity, then offer shares to others. Paying a couple percent a year in storage costs would seem to be an attractive alternative to the chart above.

Losing $6 a barrel on top of a 20 percent decline since the highs last summer doesn't seem like a very good long-term approach.

Naturally, if oil heads back toward $100 a barrel, few will care how well an oil fund tracks the price of oil.

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