Agriculture ETFs

[cubical]

Hopefully someone can help me on here with this subject.

I am looking to invest in some commodity ETF, namely agriculture ETFs, but I have some concerns when looking at ETFs that actually hold agriculture futures. In the case of DBA, how much money is lost in rolling over the contracts? It appears they hold such short term contracts that they would have to roll over each one every year. So money is lost in the commissions and fees of selling and purchasing the contracts and money is also lost due to contango in the futures chain.

I am interested in the ETF, MOO. It is an agriculture fund, but backed by actual companies like POT, MOS, MON etc.

And while we are on the subject I am also looking at VWO for some overseas exposure. Any other overseas, commodity or forgein currency ETFs you guys would recommend I would be happy to hear about it. Thanks

 

[Arklatex]

DBA isn't bad neither is MOO. You can do a lot worse. I'm not much for any equities though because when the market crashes they will all tank, DBA is sort of like a rock but it's doesn't really give any return. Check out one of MOOs top 10 holdings SQM, small dividend and fertilizer miner in Chile

 

[clb09]

Check out DAG:

http://www.google.com/finance?q=dag

http://www.powersharesetns.com/ps/pdf/P-DBAG-ETN-PC-1.pdf

 

[cubical]

I do not like the double longs. They will eventually go to 0. I would also rather stick with ETFs rather than ETNs. Any good farm stocks out there?

 

[Dforkus]

I do not like the double longs.

wise choice, all of these 2x-3x bear this/bull that funds are all just smoke and mirrors. Your playing with other people's money, in a floating crap game, and neither privilege is free...

There was no shortage of folks pimping FAZ in late 2008 early 2009...

Moo isn't a bad etf at all. Vanguard has ETFs with a lower expense ratio, but I'm not sure if they have any that play this particular sector.

I've done well with VDC, which I bought around this time last year...

 

[cubical]

wise choice, all of these 2x-3x bear this/bull that funds are all just smoke and mirrors. Your playing with other people's money, in a floating crap game, and neither privilege is free...

There was no shortage of folks pimping FAZ in late 2008 early 2009...

Moo isn't a bad etf at all. Vanguard has ETFs with a lower expense ratio, but I'm not sure if they have any that play this particular sector.

I've done well with VDC, which I bought around this time last year...

Agree. They are selling 2012 puts on FAS and FAZ. I might just buy $5 puts on both. I think both will be near 0 in 2 years.

I do agree with a post above that the market will drop and will take everything with it. I believe I will wait till the down is below 9000 before I start buying. I am looking at BHP as a foreign commodity play. Hopefully they drop with the rest of the market. Also, the PFF is paying about 8% right now. I know the dollar is dead, but I hope the dollar is oversold when panic hits and I will be able to buy this fund cheap as well as other corporate debt.

 

[mtj458]

I own GCC which is an ETF with a bunch of futures contracts and some exposure to PM's as well.

 

[cubical]

I own GCC which is an ETF with a bunch of futures contracts and some exposure to PM's as well.

What is different between this and DBA? DBAs expense ratio is also much lower.

 

[clb09]

The leveraged ETFs can never go to zero.

They may get close...but never zero.

To go to zero there would have to be zero buyers. If options are being sold against the ETFs or ETNs then there must be buyers.

Also the fund manager would liquidate the assets before they would approach zero.

Also, The Direxion 3x funds are FAR more volatile than the 2x funds.

Direxion makes it clear that their funds are to be held for a MAXIMUM of 24 hours.

Holding the leveraged funds for long periods (over a week...more or less) will expose the investor to decay due to daily repricing.

If you like to gamble a little (5% or less of your portfolio) you can try to catch the beginning of an uptrend in a sector and ride a leveraged etf up to the moon.

e.g. - I bought UYM in late 2008 and sold most of it in early 2010

http://www.google.com/finance?q=uym

Again, this is almost pure gambling...not for the family nest egg.

The core of your holdings should be held directly in objects that cannot be printed and hold value over time (precious metals, farm land, timber, freshwater sources, petroleum, gas pipelines, etc.).

There is nothing wrong with holding unleveraged ETFs or ETNs. But leveraged funds do have their place if you know what your doing.

 

[cubical]

Of course it can never go to 0, but it will approach it. If I wanted to buy a leveraged fund like FAS I would prefer to short FAZ first.

 

[Thrashertm]

I own some JJG

 

[clb09]

Of course it can never go to 0, but it will approach it. If I wanted to buy a leveraged fund like FAS I would prefer to short FAZ first.

Buying a 3x leveraged fund is dangerous...but SHORTING such a volatile fund is even more dangerous.

Don't take my word for it...try it on paper. Beware...you may get seasick!

 

[mtj458]

What is different between this and DBA? DBAs expense ratio is also much lower.

The main difference is GCC is more diversified. If you look at the holdings you'll see what I mean. They're both pretty similar though, so DBA might turn out to be the better option.

 

[Dforkus]

Buying a 3x leveraged fund is dangerous...but SHORTING such a volatile fund is even more dangerous.

Don't take my word for it...try it on paper. Beware...you may get seasick!

So true.

I just don't get it: i.e shorting a fund that itself is short, and oh by the way leveraged 3X. Its more convoluted than a MC esher painting...

The built-in short, your short of the short, and the 3X leverage are not free, they all have built in costs that get you in either direction, kinda like the way sports books operate...

 

[tmosley]

So true.

I just don't get it: i.e shorting a fund that itself is short, and oh by the way leveraged 3X. Its more convoluted than a MC esher painting...

The built-in short, your short of the short, and the 3X leverage are not free, they all have built in costs that get you in either direction, kinda like the way sports books operate...

It works because the decay is so great. The money they lose to volatility and fees is enough to make you some nice bank, IF you can find the shares. My broker never can, it seems.

Shorting a leveraged ETF is like buying shares in a casino, you know, where the house always wins

 

[clb09]

It works because the decay is so great. The money they lose to volatility and fees is enough to make you some nice bank, IF you can find the shares. My broker never can, it seems.

Shorting a leveraged ETF is like buying shares in a casino, you know, where the house always wins

Nothing personal...but this is flat out bad, dangerous advice.

If you short a 3x short fund and it has one or, God forbid, two up days while the short is on you can expect a phone call from your broker regarding margin payments.

You will have to pay up and get out.

If you go long and the fund goes against you then you have only lost your principle.

Either way is bad...but only one way will suck the cash out of your account like a gang of leeches.

 

[tmosley]

Nothing personal...but this is flat out bad, dangerous advice.

If you short a 3x short fund and it has one or, God forbid, two up days while the short is on you can expect a phone call from your broker regarding margin payments.

You will have to pay up and get out.

If you go long and the fund goes against you then you have only lost your principle.

Either way is bad...but only one way will suck the cash out of your account like a gang of leeches.

THEY are on margin. YOU don't have to be. Keep plenty of cash in your account, and it would take a hell of a series of days to knock you out of your position.

If you are concerned about fluctuation, then you can hedge by shorting the fund that goes in the opposite direction. Then you are making money solely off of the decay.

 

[cubical]

Nothing personal...but this is flat out bad, dangerous advice.

If you short a 3x short fund and it has one or, God forbid, two up days while the short is on you can expect a phone call from your broker regarding margin payments.

You will have to pay up and get out.

If you go long and the fund goes against you then you have only lost your principle.

Either way is bad...but only one way will suck the cash out of your account like a gang of leeches.

I never said I wanted to buy or short a 3x fund. I only said I would rather be short in one than long in the other.

You can short both the FAS and FAZ. Just make sure your two positions are relatively close in value. I did this for about a month and a half in the summer/fall. It works great if the market is volatile, but constantly changing direction. Unfortunately for me FAS kept going up and FAZ kept going down, thus my position in FAZ kept getting smaller so I was losing more in my FAS than FAZ. When FAS would get twice as expensive as FAZ I would double my FAZ position(and adjust accordingly). I had to close my positions because I was transferring to a different broker, but if I had held I would be up in the trade. Its a great idea if you have the capital.

 

[clb09]

Its a great idea if you have the capital.

The more time you need for the trade to work out due to decay...the more capital you need to be able to sleep soundly while being patient.

I think this is why, over time, the "trade the decay" play doesn't work unless you have a hell of a lot of OPM.

Even a little uptick in the VIX can throw your stategy out of whack like an angry bull at a bullriding competition!

This game should be left for the institutional guys.

 

[cubical]

The more time you need for the trade to work out due to decay...the more capital you need to be able to sleep soundly while being patient.

I think this is why, over time, the "trade the decay" play doesn't work unless you have a hell of a lot of OPM.

Even a little uptick in the VIX can throw your stategy out of whack like an angry bull at a bullriding competition!

This game should be left for the institutional guys.

No, you are hedged on both sides.