Buying Commodities ETF: Anyone has experience in them ?

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09-03-2011, 08:49 AM
Butterfly

Buying Commodities ETF: Anyone has experience in them ?

I have been reading Jimmy Roger book on commodities, and he makes a convincing case about commodities and how they are needed for diversification of your assets. I have read those same lines in some more "credible" books by other academic authors, but Jimmy Rogers did a nice job explaining it in simple terms.

However, as he points out, there are certain issues with Commodities Index, most are poorly constructed and will not represent the "market" and therefore you might missed on the "exposure", meaning you will not benefit from all the gains in commodities.

There are quite a few ETFs out there and I was wondering if anyone knew of a good one for full exposure to most commodities. I don't need a bet on oil or gold like so many have tried and failed over the long term, but a full diversified portfolio of commodities.

Jimmy Rogers reckon that the cycle will last 17 years, it started in 1999, so we have until about 2015 to make gains. After that, it will be 20 years of flat misery for commodities unless you start doing active Rollover strategies.
09-03-2011, 09:24 AM
DrAndy

Quote:

Originally Posted by Butterfly

unless you start doing active Rollover strategies.

I have been doing those for a while
09-03-2011, 10:35 AM
socal

Quote:

Originally Posted by Butterfly

I have been reading Jimmy Roger book on commodities, and he makes a convincing case about commodities and how they are needed for diversification of your assets. I have read those same lines in some more "credible" books by other academic authors, but Jimmy Rogers did a nice job explaining it in simple terms.

However, as he points out, there are certain issues with Commodities Index, most are poorly constructed and will not represent the "market" and therefore you might missed on the "exposure", meaning you will not benefit from all the gains in commodities.

There are quite a few ETFs out there and I was wondering if anyone knew of a good one for full exposure to most commodities. I don't need a bet on oil or gold like so many have tried and failed over the long term, but a full diversified portfolio of commodities.

Jimmy Rogers reckon that the cycle will last 17 years, it started in 1999, so we have until about 2015 to make gains. After that, it will be 20 years of flat misery for commodities unless you start doing active Rollover strategies.

Who tried and failed over the long term with gold ? Are you aware that gold was at $35 in the early 70's ? The rock bottom low for gold in 2000 was $260:mid: $35 to $260 to $1440. Sure doesn't look like a long term failure to me.

No matter what commodity index you invest in, have the balls to hang on through the volatility. If you cant stomach 50% downs then don't invest at all.
09-03-2011, 10:48 AM
Spin

You have to be shitting me right?

You were laughing at me when I bought commodities heavily in 2009. Most of the stocks I bought are up 75 - 100%

And now here you are, picking the top, two years late :rofl: :rofl:

* Note on oil, every single oil price spike in history has led to recession. This time will be no different.
09-03-2011, 11:11 AM
Muadib

^^ Allowing a 50% drop in a position is not what I would call smart investing...

^^^^ If you've been reading Jim Rogers, then you know about RJI...

Others you may be interesting in are: GSG, AGCP and DBC...
09-03-2011, 11:28 AM
socal

Another investment thread with the typical "anything but gold" moniker. Sure not the sentiment of an asset bubble.
09-03-2011, 11:59 AM
DrAndy

Quote:

Originally Posted by Spin

Note on oil, every single oil price spike in history has led to recession. This time will be no different

it is a bit different in that the recession came first
09-03-2011, 12:05 PM
socal

Quote:

Originally Posted by Muadib

^^ Allowing a 50% drop in a position is not what I would call smart investing...

^^^^ If you've been reading Jim Rogers, then you know about RJI...

Others you may be interesting in are: GSG, AGCP and DBC...

I am in the highly volatile gold exploration sector. Anything can happen but if you are in the right place, you hold out for the takeover. Jumping in and out is the cardinal sin for gold mining speculators.

Either way , I can tell that Butternuts is rightfully playing the inflation trend. Some central bank like the ECB or the Fed could easily bump up interest rates tomorrow and temporarily tank some commodity markets but who is to say they wont ease a few days later, only to have them shoot up and make new highs again ? The easy part about this one is that they must ease again because if they don't, the US govt goes broke.

At a blended 5% interest rate, the US govt would be paying 700 billion in interest alone. George Bushes last total deficit including the wars was 400 billion.
09-03-2011, 12:13 PM
socal

Quote:

Originally Posted by DrAndy

Quote:

Originally Posted by Spin

Note on oil, every single oil price spike in history has led to recession. This time will be no different

it is a bit different in that the recession came first

Its all just inflation of the money supply, not an oil price spike. The simple concept of dilution. A real oil price spike would mean the price of oil in relation to all other commodities would be way up. Oil is lagging everything in this list.

* Copper is trading at 4 per pound, up 26% in the last year.
* Corn is trading at 573 a bushel, up 49% in the last year.
* Soybeans are trading at 1,300 a bushel, up 23% in the last year.
* Wheat is trading at 779 a bushel, up 41% in the last year.
* Pork is trading at 104 a pound, up 23% in the last year.
* Beef is trading at 106 a pound, up 28% in the last year.
* Cotton is trading at 130 per pound, up 78% in the last year.
* Sugar is trading at 29 per pound, up 32% in the last year.
* Coffee is trading at 205 per pound, up 40% in the last year.
* Oil is at $89 a barrel, up 21% in the last year.

Yes, this list is a few months old now. Nothing has changed though. Oil is at $104, cotton is at $206.
09-03-2011, 06:54 PM
Butterfly

Quote:

Originally Posted by Spin

You have to be shitting me right?

You were laughing at me when I bought commodities heavily in 2009. Most of the stocks I bought are up 75 - 100%

And now here you are, picking the top, two years late :rofl: :rofl:

* Note on oil, every single oil price spike in history has led to recession. This time will be no different.

agree about the oil price, the next recession is going to be brutal

I was simply laughing at you for only buying commodities, not as a diversification tool, but as the main strategy

and the stocks are not the same as the pure commodities, actually JR don't recommend investing in commodities stock, they usually lag in performance for several technical reasons. This has been confirmed independently by different sources, so buying stocks with "commodities" exposure is a dangerous exercise, might as well go for the full package :p
09-03-2011, 07:11 PM
Butterfly

Quote:

Originally Posted by Muadib

If you've been reading Jim Rogers, then you know about RJI...

Others you may be interesting in are: GSG, AGCP and DBC...

yep, investigating those, but only ETNs for JR index seem to be a viable option

Quote:

Originally Posted by socal

Either way , I can tell that Butternuts is rightfully playing the inflation trend. Some central bank like the ECB or the Fed could easily bump up interest rates tomorrow and temporarily tank some commodity markets but who is to say they wont ease a few days later, only to have them shoot up and make new highs again ? The easy part about this one is that they must ease again because if they don't, the US govt goes broke.

The cycle is 17 years, it's only for a couple of more years. As soon as more commodity supply come in line, it will be time to bail out. Futures of course will be influenced by the interest rates since they are used as an input for pricing

Quote:

Originally Posted by socal

At a blended 5% interest rate, the US govt would be paying 700 billion in interest alone.

actually many bonds interests are paid to the Fed reserve itself, imagine that :)
10-03-2011, 11:53 AM
socal

[quote=Butterfly;1700851]

Quote:

Originally Posted by Muadib

If you've been reading Jim Rogers, then you know about RJI...

Others you may be interesting in are: GSG, AGCP and DBC...

yep, investigating those, but only ETNs for JR index seem to be a viable option

Quote:

Originally Posted by socal

Either way , I can tell that Butternuts is rightfully playing the inflation trend. Some central bank like the ECB or the Fed could easily bump up interest rates tomorrow and temporarily tank some commodity markets but who is to say they wont ease a few days later, only to have them shoot up and make new highs again ? The easy part about this one is that they must ease again because if they don't, the US govt goes broke.

Quote:

The cycle is 17 years, it's only for a couple of more years. As soon as more commodity supply come in line, it will be time to bail out. Futures of course will be influenced by the interest rates since they are used as an input for pricing

Commodity prices can only be effected by real interest rates. If inflation is running at 5% and interest rates are at 3%, that is really a negative 2 interest rate. Interest rates are around .25% now and inflation is around 3% (thats the government numbers, real numbers are around 8%)

That is why there will be intense volatility because all the yahoo's will be selling commodities the minute interest rates rise but unless they out pace inflation by 2% for a long period of time, it will not matter and commodities will bounce back.

Quote:

Originally Posted by socal

At a blended 5% interest rate, the US govt would be paying 700 billion in interest alone.

Quote:

actually many bonds interests are paid to the Fed reserve itself, imagine that :)

Yes I know. It is commonly known as a pozi scheme.
10-03-2011, 04:09 PM
Butterfly

Quote:

Originally Posted by socal

Commodity prices can only be effected by real interest rates. If inflation is running at 5% and interest rates are at 3%, that is really a negative 2 interest rate. Interest rates are around .25% now and inflation is around 3% (thats the government numbers, real numbers are around 8%)

no, again your are confusing Futures with actual commodities, speculators are needed for Futures and yes the pricing will rely on interest rates. Regardless, actual commodities pricing will be based on actual supply and demand imbalance. Futures volatility will only be aggravated with the interest rates, but not the fundamental underlying. The level to which prices increase is however another matter, and can be heavily debated.

Quote:

Originally Posted by socal

That is why there will be intense volatility because all the yahoo's will be selling commodities the minute interest rates rise but unless they out pace inflation by 2% for a long period of time, it will not matter and commodities will bounce back.

In the Futures market yes, and also on the Spot because of the speculators bet, usually highly leveraged