I Am Facing Foreclosure: Shutting Down

Casey Serin at I am Facing Foreclosure.com is shutting down his website in about 18 days. I received an email notification from him about the news:

I’m shutting the blog down on August 3rd. That’s about 23 days from now.
Any publicity is good publicity. Right?

Wrong.

My marriage and my family has been affected in a big way by my actions and this toxic exposure. The internet could be a cruel place and I am the one who put myself and my family out there. If I knew things were going to get this bad I would have done investing and blogging in a much different way.

Now I may lose my wife over this.

I think he made a tough but wise decision. Family should be always first, money or fame second. You just cannot buy a happy family, no matter how much money you want to spend, but little time for them.

When I first heard about Casey’s blog, I wonder it was for real. At least personally I will never document my own crime if I commit such white-color crime. I assume that getting more publicity will only bring investigation (in his case, FBI) sooner, since one of the million readers must either be a policeman himself or know a policeman well enough.

In any case, he was able to sell his blog for some $20K to $30K, and also had a book publisher interested in his story. Frankly, he has a good chance of making himself a multi-millionaire if he simply play his cards right.

His blog and real estate experience is simply one of the housing bubble phenomena. Unfortunately, all the debts left behind by these liar’s loans (some 2 million in Casey’s case) will not be paid back, but rather get discounted after foreclosures. Well, as you are fully aware, the stratospheric housing price was simply too good to be true. The housing price is only as good as the loans and the money availability behind them.

Who is going to take the loss? Mainly the loan investors, but eventually the whole society takes up the cost one way or the other. We will be paying for the cost of housing bubble through the coming higher inflation and higher interest rates (if not already).

UNG Natural Gas ETF

After USO for crude oil, there is another energy commodity ETF for natural gas. It’s UNG. Like most of other commodity ETF, it starts falling right after debut. And it has fallen big too, down about 30% from the height. Given the recent price history of natural gas, it could fall to $4 from the current $6 (price is for the futures market, rather than UNG itself). That’s another 33% potential drop. But for sure it cannot go down to zero, unless you don’t need to pay any natural gas bill.

The advantage of diversifying into pure commodity plays is that while commodity producers are influenced by all kinds of stock market related factors, commodity itself is less swung by the up and down of the stock markets. Rather it is determined by the economics of the supply and demand. The supposed un-correlation should serve a good complement to a portfolio reducing the overall volatility.

To invest in natural gas, one can invest in UNG directly, and/or natural gas companies such as XTO, CHK, BTU, etc. I already own CHK and BTU, but XTO has been a much better performer. I have always wanted to buy XTO, but when I occasionally do remember to check its stock price, the price has never seemed right to me.

As the demand for energy goes up, I expect rotation of rising prices among all energy sources. It’s really the relative economics of different energy that matters. If crude oil prices go up too high, people will shift to other energy sources whenever and wherever it’s viable to do so. There are plenty of choices such as natural gas, nuclear energy, coal, or any other alternative energy. One should asset-allocating for different energies components, and possibly rotate through different forms of energy investment.

At the price of $6 natural gas, and $74 crude oil, it may make sense to re-balance the stakes between natural gas and crude oil bets.

By the way, UNG like USO is an ETF that employ futures contract, and is subjected to price manipulation around expiration dates. Excessive cost in rolling over the contracts will eat into the performance of the ETF. USO is probably the best example in how your pocket can be emptied even when you’re right. The crude oil price is roughly the same around $72 to $75 in May 2006 and now. But some manipulators have managed to empty USO by 20% in a little bit more than 1 year timeframe from $70 down to $56. Now if that is not manipulation, I don’t know what that is. Is that a “random walk”? Shouldn’t the average of contango and backwardation be zero? I’m sure you’ve read the story on Amaranth’s 6 billion hedge fund blowup. But probably less people paid attention to who pocketed their money.

Anyway, for the above reason, I would definitely not put my money into USO or UNG for the long haul. But as a trading vehicle, it should be fine.