Taking iPath DJ Livestock Cow out of the Barn

I've mentioned this name, iPath DJ Livestock ETN (COW) recently as a play on the twin tower effects of (a) governmental ineptitude (ethanol boondoggle) and (b) Fed induced grand larceny against savers and lower/middle class (inflation). While I could see grains having a short term setback if the dollar strengthens, I do believe meat inflation is going to be the next shoe to fall, as producers cut back, creating the next shortage.

The weighting is currently 60% cattle, 40% hogs. Either way, get your freezer stocked up, by Labor Day those BBQs are going to cost a pretty penny. Inflation will eventually push up the value of all finite resources... including stocks! (always a bright side)

I'm starting a new stake with 500 shares @ $43.50s, or a 1.9% stake.

As I've said before I am unclear how useful technical analysis is with commodities but if it has use, this is a nice chart breakout formation I've been waiting for... back over the 50 day moving average and making a heck of a move off a recent bottom. 52 week high is up there around $50.

Disclosure: Long iPath DJ Livestock ETN in fund; no personal position

Comments

[sbenard:]

I've been long COW for about 10 days. There are two other livestock-related ETFs now that are very similar: LSO (by Elements ETNs) and UBC (marketed by the European Investment Banking giant UBS). LSO has an expense ratio that is half of UBC, and they are both lower than the expense ratio of COW.
As a trader, I buy and sell these ETFs/ETNs only as long as they continue to rise, so the bid/ask spread is more of a consideration to be than the expense ratio. However, I consider them both before choosing one or the other. At the time of this posting, COW and UBC have spreads of 4 cents, while LSO has a spread of 6 cents.
The two ETNs I've mentioned here are both very new, started within the past couple of weeks. As a trader, I buy and sell based upon the charts, so I won't trade either of the new ones until they have been around for at least two months, so they can establish chart patterns.
Each ETN also has a different composition of cattle vs. hogs, also. Cow is also the most liquid. All the factors must be taken into account, I believe, in making an investment.

2008 Apr 24 11:50 AM

[sbenard:]

One more thing --
Elements is the company that markets the commodity funds of the super commodity guru Jim Rogers, so they automatically have high credibility to me. Needless to say, choosing which ETF/ETN to invest in is never a decision as easy as choosing one expense ratio over another.

2008 Apr 24 11:55 AM

[TraderMark:]

Thanks sbenard, I was aware of UBC but not LSO
I have no idea if hogs or cows will go up more in price. But I think both will, along with chickens, check out the video section of CNBC for this mornings interview with Tyson Foods. Since I dont know when/which will go up most I am ambivalent towards the mix. I just know meats are destined to go up.

I also chose COW since its traded the longest.

Question - do you believe technical analysis works on these commodity ETFs ex-oil? I have been in DBA and I am mixed on whether it works since its 4 individual commodities.

2008 Apr 24 12:07 PM

[Panskeptic:]

Technical analysis works a lot better here if you consult the charts that commodity traders use. They're all over the Web, but nobody seems to be looking for them.

Traditional stock charts are helpless in identifying recurring seasonal patterns in multiple ag contracts (e.g. planting season), and have no predictive power on weather-related commodities.

You've got to treat these ETFs according to their underlying commodities - they may be registered as stocks, but they don't behave like them.

Think of them as apparently rudderless closed-end funds, actually managed by invisible and capricious minor deities. Does that help?

2008 Apr 25 01:31 AM

[TraderMark:]

Panskeptic - I'd appreciate a link to said charts - always willing to learn. Again, I am skeptical of traditional TA on these ETFs, so no need to be so sarcastic. I'd enjoy seeing how the different charts work for pure commodities.

2008 Apr 25 10:34 AM

[Panskeptic:]

I didn't mean sarcasm as in "put down," I meant sarcasm as in "dangerous."

We're often told to regard the stock market as a machine to take our money away that must be outsmarted. Well, the commodity markets are like that only much, much worse. It really is like catching javelins, as newby purchasers of commodity ETFs are discovering.

Google "ag futures" or "commodity futures" or "ag futures brokers" or "ag futures charts" and further such combinations. You'll turn up a lot of sites, some of which are more useful than others. One of them with a good Resources list is

www.site-by-site.com/u...

New and strange territory for us stock jockeys. But soybeans have made many millionaires, so there must be a way.

2008 Apr 25 10:36 PM

[mangy cat:]

all three being etns, how does the relative chances of barclays (cow), lehman (lso), and ubs (ubc) surviving a generation and longer, affect their respective valuations?

2008 Apr 26 09:23 AM