Commodity ETF Flow
A Bloomberg article today noted an outflow from commodity ETFs this year, an exception to past years.
It's an illuminating item, however it does get one thing wrong, which is something we will commonly see during year-end reviews.
It noted that energy ETFs saw an inflow of cash as investors tried to bet on a bottom.
http://assets.bwbx.io/images/iBYBcIzKgHF4/v3/-1x-1.png
Source: Bloomberg
As we've discussed multiple times, however, this is misleading. Many times, commodity funds, in particular, have seen a sudden "infux" of money as shares are creating while the funds are diving lower.
But this is not driven by investors betting on a rebound. Many of the new shares are created to satisfy a surge in demand for short sales. So, in fact, what looks like an inflow is actually an outflow. Witness 2008 in the chart above.
This is an important point we need to consider when looking at ETF flows. If the flow is going against the immediate trend, then it is likely not a contrary indicator.