History tends to repeat itself.
"Sept. 25 (Bloomberg) -- Mutual fund investors, captivated by oil's 88 percent appreciation in two years, increased their energy holdings in 2006
just in time to lose $4.5 billion.
That's the damage U.S. oil and gas funds recorded as crude plunged 23 percent from a record in July, according to data compiled by Bloomberg. The Guinness Atkinson Global Energy Fund is down 14 percent, and Fidelity Investments' $2.7 billion Select Energy Portfolio has lost 12 percent. The U.S. Global Investors Inc. $1.3 billion Global Resources Fund slid 12 percent.
``The perception has been that the energy sector was a great performer, but in reality it peaked 13 months ago,'' said James Paulson, who oversees $174 billion as chief investment strategist of Minneapolis-based Wells Capital Management, an adviser to mutual funds, pensions and endowments. ``There's going to be nowhere to hide on the way down.''
A total of $23.5 billion poured into energy funds in the 12 months ended July 31, according to Financial Research Corp. in Boston. From 2003 to 2005, the funds had provided average annual returns of 33 percent, better than any other category.
They now lag behind all except health-care and technology investments on speculation the U.S. economy, the world's largest, will slow following two years of Federal Reserve interest rate increases. Since oil's peak July 14, energy funds are down 8.2 percent, while the Standard & Poor's 500 Index has gained 6.4 percent.
Bad Timing
Declines in these mutual funds are approaching the $6 billion loss at Amaranth Advisors LLC, the Greenwich, Connecticut, hedge fund that bet wrong on natural gas, which has dropped 59 percent this year. Hedge funds are private pools of capital that can only accept money from individuals with more than $1 million because regulators figure they can take more risks than people in mutual funds.
3M Co.'s $9.2 billion retirement fund and the $7.2 billion San Diego County Employees Retirement Association lost money when Amaranth's returns plummeted.
Crude oil has now given up all its gains for 2006. Investors in energy mutual funds who got in this year were too late, said Lou Holland, who oversees $2.4 billion at Holland Capital Management in Chicago. They risk losses similar to investors who chased technology stocks in 1999 and held on as the Nasdaq Composite Index lost more than three-quarters of its value in the next three years.
About $67.4 billion is invested in 525 energy and commodity hedge funds, more than double the $30 billion at the start of the year, according to the Energy Hedge Fund Center, based in The Woodlands, Texas. There were 180 such funds in October 2004, when the center started compiling data."
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFx0wiU7XlDQ&refer=home
buttons need to be dropped by helicopter.