10 days we warned "the sharp slide in crude prices may be leading the proverbial sheep to slaughter," [4] as we noted ther surge in Oil ETF USO's shares outstanding and the spike in Oil price contango - a potentially ugly combination for an ETF ahead of the roll. Since then, USO has indeed tumbled over 14%. However, it;s not over yet - in the last 3 days alone, the USO share count has soared 10% (the fastest pace in 2 months) almost at its Feb 2009 record highs as investors "know" the bottom is in now and continue to catch the gapping-lower-every-day, massively contango'd, ETF knife...
Carnage... (note the increaisng fequency of gap opens)
[5]
As the share count continues to soar...
[6]
We suspect a lot of the ETF creation is sell-side firms picthiung structured notes liened against USO... with principal impairments coming soon...
Charts: Bloomberg
