Using Commodities ETFs to fight high inflation

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What will always go up in price?  It is Food and Energy.  Every month our government releases its publication on inflation rate.  If we examine how they calculate inflation rate, we will find that the inflation rate does not include food and energy inflation.  This does not make sense to most Americans because who doesn't eat, use energy to heat their home or pay for gas to drive to work.

The reason to exclude food and energy prices from the inflation formula is politically motivated.  Politicians who share the view that social programs are a waste of money and government spending needs to be cut are supporters of this policy to exclude food and energy when calculating the inflation rate.

They came up with a clever way to pull the wool over people's eyes by messing with the COLA number.  COLA is the government's "Cost Of Living Adjustment".  Social programs use COLA to adjust for inflation.  For example, old people get increases in their fixed income checks from the government according to COLA number.  Knock off Food and Energy inflation and you knock down COLA increases.  The government is indirectly telling us this is the area where they want to hide inflation.

Trading Insight:

Now that we know where inflation is hiding, we want to be invested in those areas.  Inflation is bad if we don't own those goods and we need it.  But on the flip side, inflation is a good thing if we already own it and other people want it.  Inflation for them now becomes capital appreciation for us.

Exchange-traded funds allow the traders to own those commodities.  A word of caution, don't blindly buy commodity ETFs based solely on its catchy name.  Commodity ETFs have management fees, servicing fees and rollover costs that will wipe out all gains if you are not careful.  Even if the underlying food and energy prices has gone up, you can still lose money in commodity ETFs because of the fees and rollover costs.

Commodity ETFs are active investment.  You cannot buy it and forget about it.  You must select the commodity ETFs where management can generate alpha for you.  They must earn their fees and prove they can grow your investment.

The following are lists of commodity ETFs that you can choose and customize to hedge against specific commodity inflation risk.

  1. Energy ETFs (such as Oil and Gas)
  2. Alternative Energy ETFs
  3. Metal ETFs (such as Gold and Silver)
  4. Food ETFs
  5. Soil Related ETFs
  6. Basket of Commodities ETFs (mixture of food, energy and metal commodities)

This list of Energy ETFs aims to hedge against the instability in the Middle East.  Whenever there is unrest in the Middle East, the oil market quickly marks up the price of oil.  United States Natural Gas Fund ( ARCX Ticker Symbol: UNG ) and Energy Select Sector SPDR ( ARCX Ticker Symbol: XLE ) are the most popular Energy ETFs in this category.

Energy ETFs (such as Oil and Gas)
Ticker Description Exchange
AMJ JP Morgan Alerian MLP ETN ARCX
AMLP Alerian MLP ETF ARCX
AXEN iShares MSCI ACWI xUS Energy ARCX
BNO United States Brent Oil Fund ARCX
DBE PowerShares DB Energy Fund ARCX
DBO PowerShares DB Oil Fund ARCX
DCNG iPath Pure Beta Natural Gas ARCX
DIG Ultra Oil And Gas ProShares ARCX
EEO Emerging Markets Energy ARCX
ENY Guggenheim Canadian Energy ARCX
ERX Energy Bull 3x Shares ARCX
FCG First Trust ISE Reserve Natural Gas ARCX
FEG Focus Energy ETF ARCX
FOL FactorShares 2X Oil Bull/S&P500 ARCX
FXN First Trust Energy AlphaDEX ARCX
GAZ iPath Dow Jones UBS Natural Gas ARCX
GEX Market Vectors Global Alternative Energy ARCX
IEO iShares Dow Jones U.S. Oil & Gas ARCX
IOIL IQ Global Oil Small Cap ETF ARCX
IXC iShares S&P Global Energy Index ARCX
IYE iShares Dow Jones U.S. Energy ARCX
JJE iPath Dow Jones AIG Energy ARCX
KOL Market Vectors Coal ETF ARCX
MLPG UBS Natural Gas MLP ETN ARCX
MLPN Credit Suisse Cushing 30 MLP ARCX
MLPY MS Cushing MLP High Income ETN ARCX
OIH Oil Service HOLDRS ARCX
OIL iPath Goldman Sachs Crude Oil ETN ARCX
OLEM iPath Pure Beta Crude Oil ETN ARCX
OLO PowerShares DB Crude Oil Long ARCX
ONG iPath Pure Beta Energy ARCX
PUW PowerShares WilderHill Energy ARCX
RJN ELEMENTS Rogers International Commodity Energy ETN ARCX
RYE Rydex S&P Equal Weight Energy ARCX
UBN E-TRACS UBS Bloomberg CMCI Energy ETN ARCX
UCO ProShares Ultra Dow Jones AIG Crude Oil ARCX
UGA United States Gasoline ARCX
UHN United States Heating Oil Fund ARCX
UNG United States Natural Gas Fund ARCX
UNL United States 12 Months Natural Gas ARCX
USL The United States 12 Months Oil Fund ARCX
USO United States Oil Fund ARCX
VDE Vanguard Energy ETF ARCX
XLE Energy Select Sector SPDR ARCX
XOP SPDR S&P Oil & Gas Exploration ARCX

 


 

This list of Alternative Energy ETFs aims to hedge against run away high oil prices.  When the price of oil goes parabolic and stays flat line at the high, the conversation of alternative energy heats up again.  Previous unprofitable alternative energy sources would once again become profitable projects at these lofty levels.  Global X Uranium ETF ( ARCX Ticker Symbol: URA ) and PowerShares WilderHill Clean Energy ( ARCX Ticker Symbol: PBW ) are the most popular Alternative Energy ETFs in this category.

Alternative Energy ETFs
Ticker Description Exchange
NLR Market Vectors Uranium Nuclear ARCX
PBW PowerShares WilderHill Clean Energy ARCX
PIO PowerShares Global Water Portfolio ARCX
URA Global X Uranium ETF ARCX

 


 

This list of Metals ETFs aims to hedge against rising inflation.  Gold is a popular asset when governments around the world decide to turn on their printing presses to increase their fiat money supply.  When that happens, paper money is no longer a good medium to store wealth.  iShares Silver Trust ( ARCX Ticker Symbol: SLV ) and SPDR Gold Trust ( ARCX Ticker Symbol: GLD ) are the most popular Metals ETFs in this category.

Metals ETFs (such as Gold and Silver)
Ticker Description Exchange
AGQ ProShares Ultra Silver ARCX
ALUM Global X Aluminum ETF ARCX
BDD PowerShares DB Base Metals Double Long ARCX
BDG PowerShares DB Base Metals Long ARCX
BLNG iPath Pure Beta Precious Metal ARCX
COPX Global X Copper Miners ETF ARCX
CU First Trust ISE Global Copper NASDAQ
DBB PowerShares DB Base Metals ARCX
DBP PowerShares DB Precious Metals ARCX
DBS PowerShares DB Silver Fund ARCX
DGL PowerShares DB Gold Fund ARCX
DGP DB Gold Double Long ETN ARCX
FOIL iPath Pure Beta Aluminum ARCX
GDX Market Vectors Gold Miners ETF ARCX
GDXJ Market Vectors Junior Gold Miner ARCX
GLD SPDR Gold Trust ARCX
GLDX Global X Gold Explorers ETF ARCX
HEVY iPath Pure Beta Industrial Metal ARCX
IAU iShares Gold Trust ARCX
JJC iPath Dow Jones AIG Copper ARCX
JJM iPATH AIG Industrial Metals ARCX
JJN iPATH AIG Nickel ARCX
JJP iPath Dow Jones AIG Precious Metals ARCX
JJT iPath Dow Jones AIG Tin ETN ARCX
JJU iPath Dow Jones AIG Aluminum ETN ARCX
LD iPath Dow Jones AIG Lead ETN ARCX
LEDD iPath Pure Beta Lead ARCX
LIT Global X Lithium ETF ARCX
NINI iPath Pure Beta Nickel ETN ARCX
PALL ETFS Physical Palladium Shares ARCX
PGM iPath Dow Jones AIG Platinum ETN ARCX
PLTM First Trust ISE Global Platinum NASDAQ
PPLT ETFS Physical Platinum Shares ARCX
PSAU PowerShares Global Gold & Precious Metals NASDAQ
PSTL PowerShares Global Steel Portfolio NASDAQ
PTM E-TRACS UBS Long Platinum ETN ARCX
RJZ ELEMENTS Rogers International Commodity Metal ETN ARCX
SIL Global X Silver Miners ETF ARCX
SIVR ETFS Silver Trust ARCX
SLV iShares Silver Trust ARCX
SLX Market Vectors Steel ARCX
TBAR RBS Gold Trendpilot ETNs ARCX
UBG E-TRACS UBS Bloomberg CMCI Gold ARCX
UBM E-TRACS UBS CMCI Industrial Metals ARCX
UGL ProShares Ultra Gold ARCX
USV E-TRACS UBS Bloomberg CMCI Silver ARCX
WITE ETFS Physical White Metals Basket Shares AMEX
XME SPDR S&P Metals & Mining ARCX

 


 

This list of Food Commodities ETFs aims to hedge against food inflation.  A clever game has been played on the consumers to disguise food inflation.  Food manufacturers has been shrinking the portion size of their packages.  The price remained the same but you get less.  Market Vectors Agribusiness ( ARCX Ticker Symbol: MOO ) and ELEMENTS Rogers International Commodity Agriculture ( ARCX Ticker Symbol: RJA ) are the most popular Food Commodities ETFs in this category.

Food ETFs (such as Grains, Wheat and Corn)
Ticker Description Exchange
AGF DB Agriculture Long ETN ARCX
CAFE iPath Pure Beta Coffee ARCX
CHOC iPath Pure Beta Cocoa ARCX
CORN Teucrium Corn Fund ARCX
COW iPATH AIG Livestock ARCX
DAG DB Agriculture Double Long ETN ARCX
DIRT iPath Pure Beta Agriculture ARCX
EATX Global X Food ETF ARCX
FISN Global X Fishing Industry ETF ARCX
FUD E-TRACS UBS Bloomberg CMCI Food ARCX
FUE ELEMENTS MLCX Biofuels ARCX
GRU ELEMENTS MLCX Grains ARCX
GRWN iPath Pure Beta Softs ARCX
JJA iPath Dow Jones AIG Agriculture ARCX
JJG iPATH Dow Jones AIG Grains ARCX
JJS iPath Dow Jones AIG Softs ETN ARCX
JO iPath Dow Jones AIG Coffee ETN ARCX
LSTK iPath Pure Beta Livestock ARCX
MOO Market Vectors Agribusiness ARCX
PAGG PowerShares Global Agriculture Portfolio NASDAQ
RJA ELEMENTS Rogers International Commodity Agriculture ARCX
SGAR iPath Pure Beta Sugar ARCX
SGG iPath Dow Jones AIG Sugar ETN ARCX
UAG UBS E-TRACS CMCI Agriculture ARCX
WEET iPath Pure Beta Grains ARCX

 


 

This list of Soil Related Commodities ETFs aims to hedge against rising commodity prices.  iShares S&P Global Timber & Forestry ( ARCX Ticker Symbol: WOOD ) and iPath Dow Jones-AIG Cotton ETN ( ARCX Ticker Symbol: BAL ) are the most popular Soil Related Commodities ETFs in this category.

Soil Related ETFs
Ticker Description Exchange
BAL iPath Dow Jones AIG Cotton ETN ARCX
CTNN iPath Pure Beta Cotton ARCX
SOIL Global X Fertilizer Potash ETF ARCX
WOOD iShares S&P Global Timber & Forestry NASDAQ

 


 

This list of Basket of Commodities ETFs aims to hedge against rising inflation.  Materials Select Sector SPDR( ARCX Ticker Symbol: XLB ) and PowerShares DB Commodity Index Tracking ( ARCX Ticker Symbol: DBC ) are the most popular Commodities Basket ETFs in this category.

Basket ETFs
Ticker Description Exchange
AXMT iShares MSCI ACWI xUS Material ARCX
BCM iPath PB Broad Commodity ARCX
CFD Nuveen Commodity Fund AMEX
CRBQ CRB Global Commodity Equity Index ARCX
DBC PowerShares DB Commodity Index Tracking ARCX
DBN WisdomTree International Basic Material ARCX
DJCI UBS E-TRACS Dow Jones UBS Commodity ARCX
DJP iPath Dow Jones AIG Commodity ETN ARCX
DPU DB Commodity Long ETN ARCX
DYY DB Commodity Double Long ETN ARCX
GCC GreenHaven Continuous Commodity Index ARCX
GLTR ETFS Physical PM Basket Shares ARCX
GNR SPDR S&P Global Natural Resources ARCX
GRES IQ Global Resources ETF ARCX
GSC GS Connect S&P GSCI Enhanced Commodity ARCX
GSG iShares GSCI Commodity-Indexed ARCX
GSP iPath GSCI Total Return ETN ARCX
HAP Hard Assets Producers ETF ARCX
IGE iShares Natural Resources ARCX
IRV SPDR S&P International Materials Sector ARCX
IYM iShares Dow Jones US Basic Material ARCX
MXI iShares S&P Global Materials Sector ARCX
PYZ PowerShares Basic Materials ARCX
RJI ELEMENTS Rogers International Commodity ARCX
RTM Rydex S&P Equal Weight Materials ARCX
SBV iPath Pure Beta Broad Commodity ARCX
UCD ProShares Ultra Dow Jones AIG Commodity ARCX
UCI E-TRACS UBS Bloomberg Commodity ARCX
USCI US Commodity Index ARCX
VAW Vanguard Materials ETF ARCX
XLB Materials Select Sector SPDR ARCX

 

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