In short: "My old favorite broken retail product" (2× inverse WTI across three contracts) keeps taking inflows despite "horrendous roll yield and volatility drag," printing fresh lows Thursday — and "SCO AUM is still almost 50% bigger than BNO." Sellers adding here = the consensus fading the rally; a contrarian bullish-oil tell.
SCO is a fund designed to go up twice as much as oil goes down, day by day. Over longer periods it bleeds: rolling its futures costs money and daily re-leveraging erodes value when prices swing — which is why Paulo calls it a "broken retail product."
He is not recommending it; he is using it as a crowd gauge. Money keeps flowing into SCO even as it hits new lows, and the fund is still about 50% bigger than BNO. That tells him small investors and fast money are betting against the oil rally — the "consensus view" he wants to be on the other side of.
In short: The broken -2x short-WTI ETF retail keeps crowding (~$1.2bn; ~6mm/53mm shares short, so the fund is ~26k WTI futures short). Combined with USO's synthetic -9k, these largely-retail products are ~-35k WTI futures net short — a contrarian bullish-oil tell, not something to own.
SCO is a "−2× inverse" ETF: it's engineered to go up roughly twice as much as oil goes down each day. These leveraged inverse products are notorious for bleeding value over time because of how they reset daily, which is why Paulo calls it "broken" and something to avoid owning. He's bearish on it precisely because so many small investors keep crowding into it — it's a $1.2bn fund that, under the hood, is short about 26,000 WTI futures contracts.
Add SCO's short to USO's hidden synthetic short and these mostly-retail products together are net short the equivalent of about 35,000 WTI futures. For Paulo that's a contrarian "everybody's leaning the same wrong way" tell — bullish for oil itself, and a reason not to own the inverse fund.
In short: The "broken" 2× inverse-WTI product retail keeps crowding into: assets exploded from $100mn at the war's onset to ~$1.5bn (~$1.6bn of inflows since the Mar-1 start) while -65% YTD / -53% since the war — a contrarian bullish-oil tell, not something to own.
SCO is built to move twice as much as oil but in the opposite direction — so it's how you bet that oil falls, with leverage. Two problems. First, "2× daily inverse" funds decay over time because of how they reset each day, so they're structurally poor holds — SCO is down about 65% this year. Second, and the real point: retail traders keep pouring money in anyway — assets ballooned from ~$100mn to ~$1.5bn, roughly $1.6bn of inflows since the war started.
Paulo reads that as a contrarian bullish-oil signal. When the crowd piles into a broken product to short something, it tells you sentiment is one-sided and over-positioned the wrong way — exactly the fuel for a violent reversal higher. He doesn't own SCO; he's pointing at it as evidence the market is leaning hard against the move he expects.
In short: The "broken retail product" and personal favorite tell: the -2× short (WTI Aug26/Dec26/Jun27) saw assets explode $100mn (Feb) → >$1.1bn despite a >50% price decline, now ~3× UCO's size and near the flagship USO. It is short ~10k futures in each contract — over 10k Jun27 = ~8% of that contract's total open interest in an increasingly illiquid back-of-strip. Retail bleeds NAV to vol-drag + backwardation roll; a contrarian-bullish tell, something to fade, not own.
SCO is built to move twice as much as oil, in the opposite direction, each day — a bet that oil falls. Two hidden costs eat it alive: "volatility drag" (these daily-reset 2× products lose money when prices chop around) and a "roll" cost of roughly $5 a month because the oil futures curve slopes the wrong way for a short. The tell Paulo loves: retail poured SCO from $100mn to over $1.1 billion even though the fund itself fell more than 50% — they kept buying a sinking product convinced they were "buying the lows." It's now so big it's short about 10,000 of the mid-2027 oil futures — roughly 8% of that whole thinly-traded contract — so this "dumb money" is actually moving the market. He treats it as a contrarian sign oil goes up, and something to bet against, never to own.
In short: The "twice as stupid" 2× inverse-WTI product (short June26/Dec26/Jun27 futures): assets exploded ~$100mn→$1bn+ as retail leaned in since the war, yet vol-drag + ~$5/mo negative roll left it going nowhere despite crude's correction — "quite literally the dumbest speculative money in the market thinking they are buying the lows." Contrarian-bullish oil tell; something to fade, not own. (10mn shares available to borrow at just 2.7%.)
SCO is a fund designed to move twice as much as oil, in the opposite direction, each day — so if oil falls 1% today, SCO is built to rise ~2%. The problem is the "each day" part: these 2×-daily products get eaten alive when prices chop up and down (a "volatility drag"), and this one also bleeds ~$5 a month just from rolling its futures forward in a backwardated market. The result is almost comic — retail poured nearly $1 billion into SCO thinking they were catching a falling oil price, yet the fund made essentially nothing despite a big drop in oil. Paulo treats it as the poster child of "dumb money" and a contrarian bullish-oil signal: something to fade, never to own. (He also enjoys that 'CO' is actually the Brent ticker while SCO shorts WTI — "twice as stupid.")
In short: Recurs as the larger (>$1bn) short-gamma counterpart to UCO: short front-month plus Dec26/Jun27, so its outsized footprint on the illiquid back of the strip helps explain why shale "can't hedge farther out" — a giant short ETF is sitting on the curve. Still the broken -2× product to fade, not own.
In short: Not a stance, a contrarian sentiment tell: the "broken" -2× inverse-WTI product retail keeps crowding into is one more sign the bearish oil consensus is at an extreme — a bullish-oil tell, "not something to own."
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Verbatim excerpts from the public transcripts (auto-pulled at each mention's timestamp, lightly cleaned). Timestamps link into the video; "source page" opens that commentator's full analysis at this row. Click a mention's header line to expand it (one open at a time). For personal study — not investment advice.