It’s been a busy time at the Lazy Man household with the kids back in school. With 20 years of personal finance under my belt and a blog that loses money, my interest in writing has been at an all-time low. I’m still doing the things that I’ve done before, following the financial news, and last week a couple of headlines caught my attention.
1. Oil, Oil, Oil
The first was that oil was spiking again. Headlines also had diesel fuel break through some record numbers. News came out, that a key pipeline was badly damaged. Satellite pictures backed it up. Some “experts” (who knows if these are experts or not) were quoted as saying that it might take weeks to repair. The U.S. Government said it would take only a couple of days to repair it, with little disruption.
I’m not a big believer in the U.S. Government statements nowadays. They use some weird Orwellian Doublespeak to label any bad news as “FAKE NEWS” (often in screaming capitals like that). With that in mind, and seeing the satellite pictures and experts’ predictions, I figured oil was on its way up. In fact, it had already gone up, because the market moves quickly. I thought it would keep going up over the next couple of months as supply was cut. I had also seen news that many countries (including the US and China) have their lowest oil reserves in many years.
So I decided to invest a little money and buy the United States Oil Fund LP (ticker: USO). I had bought it before and pretty much always lost money, even with dollar-cost averaging. I didn’t realize that it uses futures contracts and other complex things. Without getting into the weeds here, it seems like the kind of thing that you don’t want to hold too long. In fact, when I bought it, my broker made me check a box saying, “Are you sure you want to do something this stupid?” (Okay, it didn’t put it quite like that.)
I clicked the box and bought, and over the next three days the price of oil dropped, and I lost 8.5%. Now you know why I used the word “Betting” in the title. Fortunately, I knew better than to buy a lot, and the loss was less than $300 in a retirement account that I won’t use for at least 9 more years.
2. Treasury Bills Reach 19 Year High
You may have noticed that I never write treasury bills. Or maybe you didn’t notice because I haven’t written about them. I don’t write about them because I don’t really know that market well. I invest more in stocks and prefer the opportunity for big growth. That’s worked out very well over the years.
Fortunately, I have a friend who I like to call ChatGPT. This friend seems to have all the world’s knowledge and is only too happy to teach me just about anything. When I see something reaching 19-year highs, I think to myself, “What goes up must come down.” Of course, that’s not always true – look at the stock markets over any reasonable number of years. In this case, the Treasury yields were at these highs.
When I asked ChatGPT how to take advantage of these high yields, it put together a $100,000 portfolio with various things I could buy. I wasn’t about to invest $100,000, but one thing that caught my eye was the Vanguard Extended Duration Treasury ETF (ticker:EDV). I like investing in ETFs because I’m familiar with how to do that with my brokerage.
You’ll want to do your own research if you go down this route, because my friend ChatGPT isn’t perfect – and my explanation of it is even less so. In any case, when interest rates go up, EDV goes down. Interest rates are fairly high and seem to be going up, so EDV is down nearly 11% this year and 58% over the last five years. Interest rates were very low in the COVID recovery and got raised to reel in inflation. That’s what’s going on now, except rates are starting high, and Trump is pressuring them to stay low despite inflation issues.
EDV caught my attention because it’s paying around 5.4% interest, and the price itself has the potential to go up a lot IF (and this is a HUGE IF) interest rates go down. I don’t expect interest rates to go down any time soon, but in the next 3-5 years? I can see that. Of course, I would have said that a few years ago and have been wrong so far. In any case, this “bet” is up 2.5% (or about $100) since I bought it.
Final Thoughts
I don’t know if you caught my warnings above, but this isn’t for the typical investor. These could backfire spectacularly. That’s why I invested a relatively small amount of my portfolio. Nonetheless, if you want to learn something, there’s nothing like having some skin in the game.
