A Nickel ETN for Your Thoughts?

What is one of the basic misunderstandings about commodity investing? You need to know whether you are investing in the spot price or futures contract of the material/mineral/resource or whether you are investing in companies that extract/produce/deliver the commodity.

For instance, Market Vectors Gold Miners (GDX) and Market Vectors Steel (SLX) are investments in companies that derive the bulk of revenue from acquiring, making or deliver the "stuff." In contrast, if you are interested in the spot price of gold, you would invest in SPDR Gold Shares (GLD).

The mistake can make the difference between being up 25% or down -35%! For a specific example, review the difference between investing in natural gas companies via First Trust Revere Nat Gas (FCG) and the commodity via United States Natural Gas (UNG).

In most cases over the last 6 months, the miners are outperforming the actual commodities. Market Vectors Steel (SLX), SPDR Metals & Mining (XME) and Market Vectors Gold Miners (GDX) are up 81%, 68% and 62% respectively. During those same 6 months, the Silver Trust (SLV) garnered 49% and Gold Shares (GLD) picked up 16%.

Yet copper, which may be found in our pennies, and nickel, which is "supposed" to be found in our nickels, have been two of the hottest commodities on the half-year stage. The iPath Dow Jones Copper ETN (JJC) is up 64%. Meanwhile, the iPath Dow Jones Nickel ETN (JJN) harvested 48%.

Most of us are familiar with copper's capabilities, especially as it may relate to electricial wiring, piping and tubing. You can't build property in China or anywhere without it!

On the other hand, less is known about nickel. Its many uses include rechargeable batteries, armor plating, coins, magnets, ship propellers and even, kitchen supplies, particularly those made of stainless steel. Its corrosion-resistant properties make it one of the more popular metals for personal and industrial uses.

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[texpat:]

Pennies are now made almost entirely of zinc. A law was passed to prohibit the export of older, copper pennies, which were leaving in large quantities to be melted down in China.

Jun 13 04:17 PM