How to Short Commodities using ETF

In my last post we talked about how to make money from  increased food prices and looked at the  impact these prices would have on livestock such as Live cattle and Lean Hogs. I mentioned that for the more adventurous amongst you you might also wish to look at shorting the grains as they have risen very far very quickly.Shorting Commodities has traditionally been very difficult until the recent advent of Contra ETF's.

These ETF's will move higher when the price of the commodity goes lower allowing you to benefit from declining prices by buying the ETF.One of the most forward thinking of the companies involved in these Contra ETF's is ETF Securities   http://www.etfsecurities.com/csl/short/index.asp   ETF Securities will allow you to go short a number of the major traded commodities and since you are buying and not selling they should be  tradable in most accounts.

A major shortcoming of many  brokerage accounts has been the inability to make money when markets are doing anything but going up, now with these new ETC/ETF that is no longer a problem.It also allows for some quite sophisticated trades to be placed-for example if you are bought in to the story of the last two posts of mine and you are an aggressive trader you might consider going long livestock and short grains by buying one of the livestock ETF's such as CATL (Live Cattle) and buying one of the Short ETF such as SWEA (Wheat).

 

The volatility in the stockmarket currently is very difficult to invest in and is being driven back and forward by news and by the manipulations of the big boys, the commodity markets however are more fundamentally driven by supply and demand and so are easier to predict in the medium term.

 

Best Wishes

 

 

Alan

Technorati Tags: Commodities,ETF,Short ETF,Grains,Live Cattle,Trading,ISA,IRA

Go East Young Man-Made in Taiwan and the China Syndrome Part 1

The US Markets are closed today so I thought this might be an opportunity to look beyond the US shores to another favourite market of mine-the Far East.For many years the Asian Markets have lagged far behind the US and Europe.I think we may be seeing the tentative shoots of recovery in certain markets.Japan is still a wildcard but I believe that 2007 may prove to be a good year for Taiwan. In 2006 a number of emerging mkts including some in Asia have hit all time highs but Taiwan still lags and is over 43% below its high from Feb 1990.Taiwan is home to some of the largest Tech and Electronics companies in the World. Companies that produce I-Pods and the Mini Mac as well as supply major IT companies such as Dell and Hewlett Packard-the link therefore to PC and Semi-conductors is inextricable-when these markets boom so does the Taiwanese economy.If you believe that these sectors are likely to start to move in 2007-(think Vista and PC's) then Taiwan is a good place to invest.For me the best way to play this is via the iShares MSCI Taiwan Index Fund(EWT-NYSE).This fund is broadly based and diversified but heavily weighted to Technology Companies. Another boost for Taiwan is that it is one of the major trading partners of China. The Chinese economy is still one of the fastest growing economies in the world and as the mass Chinese become more affluent then they will increase their expenditure on goods such as PC's and Technology-this can only be good for the Taiwanese economy and for the iShares MSCI Taiwan Index Fund(EWT-NYSE).I will be opening a position in this fund at the mkt tomorrow.I will also post Part 2 of this communication looking in a bit more detail at opportunities to gain some exposure to China such as Hong Kong Shanghai Bank (HBC) , Templeton Dragon Fund (TDF-NYSE) and China Medical Technologies (CMED-NYSE).



Best wishes for the New Year and Good Trading

RT

And Now...The end is Near....How to use Currency ETFs in your investing and Trading

Well it could be a requiem for ol Blue Eyes, but I am referring to a couple of things, firstly 2006-isn''t it amazing as you get older how a year seems to get shorter and shorter.When I was younger a year seemed to last forever-nowadays a year feels like a long weekend !!

I am also referring to my view regarding the US Dollar, I feel 2007 will be the year where the fundamentals catch up on the dollar and we see a weakening, possibly with the Dollar Index making new lows.

This is of interest to me for two reasons, one -can we make money from this perception and two-being a UK based investor with a large portion of my investments in US $ how do I manage the currency risk, well there are a number of possible ways.Futures, Options, Certificates of Deposit and Multi Currency funds.My Pension fund is set up in such a way that I could utilise Futures and Options-these are highly leveraged and may not be for everyone but there is another option....Currency ETF's..

I have added below some background to these instruments but they trade on the NYSE just like shares so are easy to get in and out of and also are not leveraged like Futures and Options and are also not subject to Time decay like options.I am likely going to utilise some of these early in the New Year but this may serve as a primer and some background for those of you not so familiar with them.

Foreign Currency ETF Funds

ETFs (exchange traded funds) have made it easier for investors to to invest in all kinds things, usually with very low expense ratios. In December of 2005, Rydex launched their first CurrencyShares for Euros, trading under the symbol FXE (the FX stands for foreign exchange). Similar to the gold funds, Euros would be held in a trust at the JP Morgan Chase Bank in London, with each share purchased representing 100 Euros. With a slight twist, the currency would also be held in interest bearing accounts, meaning the funds expense ratio would be paid out of the interest, and any additional interest accrues to the share holders. So why would you want to invest in a Euro ETF? Well, if you think the value of the dollar is going to decline and the value of the Euro is going to increase, you buy some of these shares and they go up in value, and you can later sell them and have more dollars to spend. Pretty simple. Funds like these are a world away from the old school style of investing in foreign exchange futures. They give investors an easy way to diversify beyond stocks and bonds, to take financial positions for opportunities in the currency markets, and they do all this through easy access of a brokerage account. You can learn about the various Rydex funds at CurrencyShares.com. The the popularity of the Euro fund, Rydex also launched a number of other foreign currency investment funds:

• CurrencyShares Australian Dollar Trust (06/2006) - FXA
• Currency Shares British Pound Sterling Trust (06/2006) - FXB
• Rydex CurrencyShares Canadian Dollar Trust (06/2006) - FXC
• CurrencyShares Euro Trust (12/2005) - FXE
• CurrencyShares Mexican Peso Trust (06/2006) - FXM
• CurrencyShares Swedish Krona (06/2006) - FXS
• CurrencyShares Swiss Franc (06/2006) - FXF

Best Wishes and Good Trading

RT

Why am I here ?

Well if you are reading this far then maybe you are asking the same question.If like me you want to give up the day job as soon as possible or retire with a big enough wedge of cash to finance the lifestyle you always wanted then this Blog and my journey may be for you.

I dont know about you but I got fed up receiving letters each year from my Pension Fund informing me that they had charged me 5% of the fund to only lose 15% when after all the market was down 20% so didnt they do well-Huh !!!

So I decided to start to invest for myself...........in the past year my fund has grown just over 20% and only had drawdowns of less than 5% ..not too shabby .

There seemed to be a dearth of information about doing this so I decided to set up this blog to allow anyone who is interested to see what I was doing.I am not giving trading advice just an insight into my thoughts and trades-but by all means if you wish to join in then feel free to do so.

I may on occasions meander and muse on life in general and on the odd occasion I may even rant.I would love to hear your views and thoughts and if anyone out there is doing something similar ..then hey let us know.

I will in the next couple of days post the list of current positions in my Pension and start to inform you of the buys and sells and the reasons behind it.

If anyone has any questions or comments would love to hear them-all for now


RT