Physically unable to perform (PUP) is a term thrown around training rooms, generally to describe players whose injuries are not severe enough for the injured reserve list but still are incapable of playing at that particular time. The term could also be used when looking at the recent debacle in the  crude oil markets. While commodity related  ETF’s and ETN’s have been around for awhile, they have always had issues when the shape of the underlying futures curve forced some type of disconnect in the publicly traded vehicle. While we maintain that the move into negative territory for spot oil was going to happen (and was happening already) sooner rather than later, the illiquidity of an expiring futures contract into a spot market short of prompt storage simply pushed the inevitable along. The lessons learned from the action on Monday are many, but the main takeaway should be : Financially constructed proxies involving physical delivery of actual commodities are rife for manipulation and extreme dislocation, particularly when the product has been sold to a public unaware of its particular nuances.

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