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Too Much Crypto, Not Enough Stuff

May 18, 2021 12:57 AM ETProShares Ultra Silver ETF (AGQ), GUSH, SLV, JO
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  • There are 9,888 crypto currencies but the world economy is running low on everything from coffee to steel.

Coffee is one of the commodities the world economy is running low on, per Bloomberg. 

Too Much Crypto, Not Enough Stuff

According to CoinMarketCap.com, there are currently 9,888 different crypto currencies. While so much money and brainpower has poured into this new class of intangibles, the world economy is apparently running low on all sorts of tangibles. Bloomberg's Big Take on Monday was that "the world is suddenly running low on everything": 

Mattress producers to car manufacturers to aluminum foil makers are buying more material than they need to survive the breakneck speed at which demand for goods is recovering and assuage that primal fear of running out. The frenzy is pushing supply chains to the brink of seizing up. Shortages, transportation bottlenecks and price spikes are nearing the highest levels in recent memory, raising concern that a supercharged global economy will stoke inflation.

Copper, iron ore and steel. Corn, coffee, wheat and soybeans. Lumber, semiconductors, plastic and cardboard for packaging. The world is seemingly low on all of it. “You name it, and we have a shortage on it,” Tom Linebarger, chairman and chief executive of engine and generator manufacturer Cummins Inc., said on a call this month. Clients are “trying to get everything they can because they see high demand,” Jennifer Rumsey, the Columbus, Indiana-based company’s president, said. “They think it’s going to extend into next year.”

Bloomberg goes on to note that there's "no end in sight" to the shortages, as far as anyone can tell. 

A Nice Bit Of Synergy 

In a nice bit of synergy, Bloomberg licenses its commodity indexes to the sponsors of exchange traded products. So not only does it report on rising commodity prices, but it also profits from them. Coincidentally, one of those exchange traded products, the iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO) was one of our system's top ten names on Monday. 

Screen capture via Portfolio Armor. 

We went into more detail on how our system selects those top names in the second part of our previous post, but, in a nutshell, it analyzes total returns and options market sentiment to estimate potential returns over the next six months. As you can see, our top ten on Monday included a few other names consistent with a continued commodities rally: the iShares Silver Trust (SLV), the ProShares Ultra Silver ETF (AGQ), and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares ETF (GUSH). Here, we'll focus on the coffee ETN JO.  

A Hedged Bet On Coffee

In the video below, we show a couple of ways you can use JO to bet on coffee continuing to go up, while hedging in case it drops. 

There are options traded on the other commodity names in our top ten, so you could use our app to scan for optimal hedges on SLV, AGQ, and GUSH as well. 

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