I've not had much interest in DBC or other funds that try to take in the entire commodity complex. I'd rather not have that much in crude oil or the other energy commodities as these funds usually have. DBA has been a client and personal holding for quite a while.
The reason I wanted agricultural exposure is that it seems fairly clear that diets globally are going to improve including more protein and then a little dessert. Also I am inclined to think that demand for ag commodities are likely to be more inelastic than for industrial metals or energy (less economic sensitivity) .
The table of old DBA versus new DBA comes from IndexUniverse. The new version of the fund looks a lot like the Rogers Intl Commodity Index-Agriculture Total Return ETN (RJA). I've written positively about the index underlying RJA in a few different places but I was never comfortable enough with the ETN wrapper to choose RJA over DBA.Personally I'm thrilled for the better diversification. I like the idea of covering a lot of agricultural ground for clients and the new DBA is a better to do that, IMO, as a core holding. Keep in mind I keep all positions quite small. Core does not have to mean 10% of the portfolio. I think anyone wanting to take a flier on a single commodity could reliably use the ETNs from iPath.
Gold also has a place at this table . Some view it as an inflation hedge, some view it as actual money, I think of it as something that will very likely go up in the face of an external shock but I never want it to be the best performing thing I own because if it is then chances are stocks in general are doing poorly.
Some folks like platinum in this context. Platinum is scarcer and is consumed (palladium can be a substitute for catalytic converters) which might account for the pounding in platinum prices during the worst of the bear market while the drop in gold was much smaller. If platinum can drop that much versus gold then perhaps it can go up that much versus gold but if that were to turn out to be true then its acting as a substitute for gold loses some, ahem, luster.
The title is a reference to the movie Spinal Tap. The New Originals was one of that band's names early in their history.
6 comments:
Roger - What's your take on MOO? I am still researching, but seems to be an interesting play on the Agribusiness segment.
Personally, I've never felt comfortable with commodities, though I hitchiked on the oil price run up with DBC. Setting aside gold, do you feel that commodities are a "must have" asset class for proper diversification, Roger?
Thanks!
I wrote about MOO two years ago for RealMoney if you have access.
Along those same lines many clients own Monsanto which is obviously one of the larger holdings in MOO.
anon 5:59, i believe they are for my clients but in a small proportion.
Could be some fairly serious commodity whipsaws coming. It looks like the ongoing dollar fretting could be kicking into a higher gear, possibly a panic; e.g., http://tinyurl.com/yd8gnqp
A serious currency crisis was always in the cards but I'm inclined to doubt this is it, yet; i.e., I'm more likely to start selling into it if it gets out of control instead of buying more gold or foreign currencies.
If you are betting on stuff to go up, neither DBC nor DBA has been working. But if you just want a portfolio diversifier, the new versions should be better than the old.
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