On New Commodity ETFs and Water Funds

 |  Includes: COPX, CU, MXI, PHO, PLTM, SIL, XLI
by: Roger Nusbaum

There was an email waiting for me when I got home from the gym yesterday from GlobalX, the ETF provider, with news that they are about to launch an ETF for silver mining companies and one for copper mining companies. The respective symbols will be SIL and COPX. You may recall that First Trust recently listed a copper miner ETF with ticker CU and a platinum metals miner ETF with ticker PLTM.

Both the GlobalX funds are heavy in Canada and the copper fund has a lot of overlap with CU. I wrote about both the First Trust ETFs when they launched with the expectation that they will prove to be more volatile than something like the iShares Global Materials ETF (NYSEARCA:MXI), which is a broad large cap proxy for the sector and also a holding for some clients.

For now it is too soon for the idea of more volatility to be correct or not, but I would expect both the new GlobalX funds to also be more volatile.

Candidly, I am unlikely to ever need a silver mining ETF - that seems like it would be more of a trading vehicle - but a copper ETF could have utility. Recently the swings in both directions for copper have been bigger than in past cycles, as I recall anyway, but copper, and so copper stocks, tends to be a good hold earlier in a cycle and the volatility of many of the stocks makes for an easy way to add beta.

As I said the two funds, CU and COPX, seem very similar and I don't necessarily feel the need to spend time picking the better of the two if I am not a buyer right here but I will say that access to copper miners for people who don't want to pick stocks is a good thing.

Also in the ETF news is that Direxion Funds, which amusingly is headquartered five minutes from the house I grew up in, filed for a bunch of funds including 3X Bull Water and 3X Bear Water. Triple short water? I don't know what water index these funds will track but is there really that kind of trading interest in the water theme?

I love this theme, I've held PHO personally and for clients since it first listed and, while it has done better than the S&P 500 and the Industrial Sector SPDR (NYSEARCA:XLI) in that time, I've never thought of it, or any water fund, as a trading vehicle. It's just an observation, I'm sure Direxion perceives there is demand to lever up the water theme.