Looking at the New Commodity and Currency ETFs

While I was away there was a tidal wave of new product launches.

iShares launched a Global Timber ETF under ticker WOOD. I believe that ticker symbol is a bit of a play on words, ahem.

iShares has had a fund trading in London that underlies the same index. You can look at it with symbol WOOD.L on Yahoo. It has tracked closely with, but done a little better than, the Claymore Timber Fund (CUT).

The info sheet on the iShares site for the US version of WOOD had no info but you can get it from S&P here and you will see a lot of overlap. I have not yet dissected it to see what the differences are and then see if I think the differences end up favoring one over the other.

Also out are two more currency ETFs from WisdomTree; the kiwi with ticker BNZ and the South African rand with ticker SZR. The kiwi offers the chance for a long-term ascendancy in global relevance, but short-term (6 months or so) it could be a tough hold. There are also some sophisticated strategies now easily accessed when used in conjunction with one of the Aussie dollar products (FXA, ADA).

The rand is obviously a great proxy for whatever gold is doing because we all know that a lot of gold comes from South Africa. Not so fast my friend. Despite that being an easy conclusion to draw, it has been wrong since at least November. Take a look at a chart that compared GLD (which is a client holding) and ZARUSD=X on Yahoo Finance. ZARUSD=X is not the normal way to quote the rand, but it makes for an easier chart comparison. The relationship between the two ebbs and flows, and lately they seem negatively correlated.

This will change at some point, and when it does, the rand could be a very high-yielding proxy for gold. If that is not you cup of tea I would leave that trade alone and, for what it's worth, I am very unlikely to use SZR as a gold proxy for clients.

Next up was a slew of narrow-based commodity ETNs from iPath that covers sugar, coffee, cocoa, lead, tin, cotton and a few others. Oh, and also global carbon. Go to Mebane for all the tickers. Mebane wonders whether this is the top. Let me tell you why this time is different. Oops.

The way I use commodities (and have written about them), it doesn't matter a whole lot if this is a top. I use commodities with a small portion of the portfolio to create zig versus the equity market zag. The consequence of going berserk with 5% into some sort of Jimmy Rogers commodity combo and getting it very wrong would not be very dire.

A little gold and something related to food is probably good for most folks, again in moderation and with the intention of creating the zig zag effect.

Comments

[RogerNusbaum]

The editors added FXA and ADA as examples of Aussie dollar exposure so I need to disclose that FXA is a client and personal holding.

[richjoy]

When Roger Nusbaum speaks, I listen.

I don't follow all his advise, but I have a great deal of respect for his views.

[RogerNusbaum]

thank you

[blink0404]

Hey Roger Nusbaum fans,

Here's a link to an Roger Nusbuam interview with Chip Hanlon on greenfaucet.
www.greenfaucet.com/no...

They discuss the market and why Nusbaum thinks there could more downside for stocks to come.