"Of Mutual Interest" -Jason Zweig, Investing Columnist for "Money" Magazine
Tuesday, June 17, 2008SUSIE GHARIB: The calendar may say June, but in tonight's "Of Mutual Interest" segment, we have an idea about planning for January. Joining me now, Jason Zweig, investing columnist for "Money" magazine and author of "Your Money and Your Brain." Jason, welcome back to NIGHTLY BUSINESS REPORT.
JASON ZWEIG, INVESTING COLUMNIST, MONEY MAGAZINE: Thanks, Paul.
KANGAS: So, the idea here is for small investors to be able to hedge, hedge against rising prices for home heating oil.
ZWEIG: Yeah. I think this is an interesting -- this is an interesting thought, Paul because in the northeast where I live, and in other cold parts of the country, increasingly, the heating oil and natural gas suppliers are telling customers they may not be able to get the customary guarantee or cap against rising prices they have gotten in previous years. A lot of people are quite anxious about this and there is a technique that you can try, if you are feeling worried about it.
KANGAS: All right. Give us the details on how this works.
ZWEIG: Well, what would you do is you would take one of two exchange traded funds that both trade on the American Stock Exchange, the one we'll talk about first is called United States Heating Oil Fund. The ticker symbol is UHN. And what you would do is you would buy an amount of this fund roughly equal to what you spent on last winter's heating oil bill and if oil prices continue to go up, you will make money on the fund, which will compensate you for the extra amount of money you had to pay for the heating oil.
KANGAS: You'll make money on paper, but if you actually take a profit, you incur a tax liability, right
ZWEIG: Yes, that's correct. But of course, you could do worse things than making money.
KANGAS: That's true.
ZWEIG: You will owe a capital gains tax, very likely, a short term capital gains tax, but if oil prices go up rapidly, that's probably a penalty that you would be willing to incur, because you could take your gain and use it to pay part of your oil bill.
KANGAS: Now, this is a relatively new exchange traded fund, correct?
ZWEIG: Yeah, that's correct, Paul. It's only been out roughly since April, but as you can see, it's done approximately as well.
KANGAS: Mm-hmm.
ZWEIG: As the price of oil in general, namely it's gone up as we all know.
KANGAS: We have less than a minute left, Jason. Are there other ETFs that track similar energy issues?
ZWEIG: Yeah. The second one, which is kind of a sister fund to this one is the United States Natural Gas Fund and the ticker there is UNG. And you could do the same thing with this fund if you heat with natural gas. Buy a matching amount compared to your last winter's bill.
KANGAS: I see.
ZWEIG: And if goes up, then you can use some of the proceeds to pay your heating bill. If goes down, you at least have the --
KANGAS: OK.
ZWEIG: The pleasure of knowing your heating oil bill went down.
KANGAS: That's always very interesting from you, Jason, and thanks for being with us again.
ZWEIG: My pleasure, Paul. Thank you.
KANGAS: My guest, Jason Zweig, investing columnist for "Money" magazine, and author of "Your Money and Your Brain."
