As I said in my last blog post, investing in commodities has been a hot ticket for investors in 2007, no doubt about it. Crude oil has surged about 44% this year, while wheat prices have nearly doubled in 2007!
Over the last several years, some of the biggest moves in the commodities complex have come from these two “headline commodities. In fact, crude oil alone has jumped 215% just since the beginning of 2001. Gold isn’t far behind, with 201% gains since ‘01.
The industrial (or base) metals have also performed very well thanks to a strong global economy and robust construction activity earlier this decade. For instance, copper prices jumped over 300% in the past five years. In fact, copper even outperformed crude oil over that stretch.
A Commodity Correction in the Making
But base metals have corrected sharply in recent months, due to concerns over potentially slowing global growth. Copper prices alone have fallen about 20% since early October. Crude oil and gold may also be subjected to more profit-taking pressures ahead in 2008.
In the current commodity bull-market cycle, the time has come for you to be more selective with your commodity plays.
A “shotgun” approach won’t work as well in 2008 and beyond. Instead, you should consider a “rifle-shot” strategy for investing in commodities to target the biggest gains.
Fortunately, the ever-growing landscape of exchange traded funds (ETFs) gives you a great opportunity to zero in on some specific sub-sectors of the commodity market, to zero in on potentially bigger gains. Let’s take a quick look at the growing lineup of commodity ETFs…
Barclays Bank is already one of the global leaders in ETFs with its popular iShares family of funds. This ETF innovator recently launched eight new exchange traded notes (ETNs) that track individual commodity sub-indexes.
Which Commodity-Backed ETFs Are On the Way Up in 2008
As mentioned above, wheat prices have been on fire this year, along with soybeans and corn. If you think the “grains” will continue to perform well in 2008, then Barclays has a new ETN for you. It’s called the iPath DJ-AIG Grains Total Return Sub-Index ETN (symbol: JJG). This ETN gives you indirect exposure to wheat, corn, soybeans and more; all of the leading soft commodities in a single transaction.
Perhaps you’re more of a meat-eater than a cereal consumer. Well Barclays has also rolled out the iPath DJ-AIG Livestock Total Return Sub-Index ETN (symbol: COW) which tracks live cattle and lean hogs. And you’ve gotta love that ticker symbol!
There are other new iPath offerings that target specific industrial metals including copper (JJC), nickel (JJN) and all the industrial metals as a group (JJM)! These ETNs are worth keeping an eye on as good barometers for the health of the global economy.
Should the U.S. economy avoid recession in 2008, and growth begin to reaccelerate next year, JJC should break out to the upside, providing an early signal of recovery. There’s one of Barclay’s new ETNs that I’ve got my eye for a big potential move over the next few months too; it’s the iPath DJ-AIG Natural Gas ETN (GAZ).
If Old Man Winter would just cooperate with some frigid weather in January and February, depressed natural gas prices should experience a nice rally.
Bottom line: the wide world of ETFs and ETNs keep expanding by the day offering today’s global investor more choices than ever before. In fact, I just recommended a NEW ETF to my subscribers in Global Market Investor that tracks all of the red-hot agriculture commodities in a single fund. To find out more about this ETF that’s poised to soar in 2008, and all of my Global Market Investor picks, click here to find out more.
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