New ProShares ETFs Double Up Commodities Exposure

ProFunds Group is launching the first family of ETFs within the United States that gives exposure to commodities, the euro or the yen. There is leveraged commodities and currency exposure in exchange traded notes (ETNs), but not ETFs - until now.

ProShares is the largest provider of the leveraged or short ETF, and their funds began trading on the NYSE Arca yesterday. Gold and silver benchmarked funds will begin trading in a few weeks.

Currency and commodities have been among the biggest stories this year, as the price of food, oil and gas and gold shot way up, then tumbled back down. Investors have not only been seeking to get exposure to these segments of the market, but have shown interest in maximizing that exposure.

The U.S. Dollar and the Japanese yen both tumbled after the recent Citigroup Inc. (C) news. The news of the rescue for the credit giant will boost the demand for the carry trade, in the near future, according to Terry Balkas for FX Street.

The ProShares Funds are launched during a stable time for the gold, as the Q4 demand for the metal will remain at around 843 tonnes. The tone is festive and investors are sticking to the safe haven after the 10% dropoff in demand last year, reports Lewa Pardomuan for Mineweb. Brisk jewelry sales in India during the Hindu festival of lights in mid-October also helped fuel demand. The jewelry aspect of gold accounts for 60% of total demand for the precious metal. Gold prices fell in October, in one of the worst months for the metal since 1983. The stronger dollar was to blame.

Comments

[CAPT GW:]

Looks like this is something to consider for the "explore" part of someone's "Core and Explore" asset allocation.

In this environment, I now lean toward a core 30% in an ETF -- "VTI", and another 20-30% in secure bond funds or ETFs. "SHY" is fairly stable and can be traded as an ETF. (Wish there were a stable NY or national short-term municipal bond ETF!) VFIIX or USGNX are decent GNMA funds with 4.55 to 5% yields, and they certainly work. They especially work today in IRAs! The rest should be probably kept in a guaranteed money market and/or a safer basket of muni bonds, until stability returns. (As some semblance of security returns to the markets, ETF's like these commodity based ones might work when the dollar starts to weaken and as emerging markets get up steam. In addition, my "explore" allocation could possibly include up to 5% in ultra short or long postions to capitalize on obvious trends that have proven themselves. But in 4Q/08, there is no direction. The Obama rally is a good short-term event, but the fiscal crisis still will go on well-beyond 1/20/09.

2008 Nov 26 03:20 PM

[adan:]

this is really good info - thanks!

2008 Nov 27 07:07 AM