I am thinking about throwing some ideas out there off and on into this thread, this isn’t only about Agricultural Funds. But let me start this off with Agricultural Funds.
It is not easy to consistently rebalance your portfolio in these scary times, and certainly in 2016 we are looking at least at a 20% decline in the DOW, though many say it will be worse.
I have been doing well in rebalancing but such endeavor is time consuming and requires a certain level of knowledge and skillsets. Not everyone has the time or the skillsets.
There are some who are about to, or will soon, go into full blown panic mode.
There are some things you can do, if you are about to go insane and do not know what to do but do not want to put all your money in cash or a money market. For those who are about to go full blown panic mode, here would be my recommendations on where you can put your money but still remain in the Markets but still feel safe.
1- Wheat, Corn, Soybeans and Grains ETF or ETN (Agricultural commodities – ETF or ETN fund, non-meat/dairy)
No matter what happens, an Agricultural commodities ETF or ETN that is Grains is a great option. Those with Wheat, Corn, Soybeans and Grains (including rice, of course) are a great way to move your funds out of other stocks, bonds, MFs, or sector based or commodity based ETFs and into Grains which the price per share hardly fluctuates much no matter a good market or more importantly a bad market.
I want to distinguish an Agricultural Grains ETF (Exchange Traded Fund)/ETN (Exchange Traded Note) from investing in a commodity stock that is one of the “pedigrees” (God’s Pedigree Gold/Silver, Royal Pedigree Tea/Rice, Pedigree Oil/Potash). Certainly such pedigree is of interest to investors, but these are direct futures buys or stock buys though Gold/Silver has ETFs – careful: in the Royal Pedigree you are really getting involved in futures, in all pedigrees you are mixing it up with the “big boys” and need to deal in large sums, as for oil you can see today WTI briefly dropped below $30 a barrel so you really have to know what you are doing and certainly the entire energy sector as far as stocks (including alternative) is simply participating in the normal ups and downs. This discussion is really about “stashing away” money without getting out of the market but also without simply transferring to Money Markets or CDs. CDs may make sense if Yellen continues to raise interest rates, which will cause Bond funds to go down. However, rebalancing the portfolio to “stash cash” in Grain ETFs or ETNs might be a consideration when going into full panic mode.
Keep in mind, as you can see in the examples below – you can still lose money. But at a much slower pace. In the examples below we see a peak price for GRU at about $8 dollars in the summer of 2012, and a low price as of RIGHT NOW at $4 dollars a share (loss of almost 50% !) – but you will notice in all the examples they all peeked in 2012 and at the same time. Throughout the entire last year malaise and now into our horrible bear bottoms, we see all are pretty much remaining the same price for each particular ETF or ETN and probably will do so but eventually will go up. In other words, other than the 2012 spike(s) upward in price, we are pretty stable over all.
Note: I do NOT promote ANY funds/brands/specific stocks or bonds. Below is EXAMPLES only so one can understand how to analyze these things. I DO NOT OWN ANY of the ETNs exampled below. I own a different Agriculture fund to “stash cash” which is NOT in the examples below. I provide multiple examples so that one can get an idea.
ELEMENTS MLCX Grains TR ETN (Symbol: GRU)
Fund Inception: Feb 5, 2008
The index is designed reflect the performance of a fully collateralized investment in the four exchange-traded futures contracts on four physical commodities: corn, soybeans, soy meal and wheat.
Peak $8.38 1-Aug-12
Bear $4.10 1-Dec-15
Current Price Jan 31, 2016 $4.24
Avg Price 2010 $6.33
Avg Price 2011 $6.90
Avg Price 2012 $7.16
Avg Price 2013 $6.53
Avg Price 2014 $5.56
Avg Price 2015 $4.60
iPath Bloomberg Grains SubTR ETN (Symbol: JJG)
Fund Inception: Oct 23, 2007
JJG is concentrated in soybeans, corn and wheat—the three core grains commodities—albeit with some hefty tilts in weighting. Most prominently, JJG heavily favors soybeans at the expense of wheat. While JJG typically lags its index more than we'd like, its returns have been fairly aligned to our benchmark—not a surprise here, as JJG also continuously rolls over similar front-month contracts. Simply put, investors looking for the most stable and solid grains-focused fund should look no further than JJG.
Note: ETNs (Exchange Traded Note) are structured products that are issued as senior debt notes, while ETFs (Exchange Traded Fund) represent a stake in an underlying commodity. ETNs are not free of credit risk. When you invest in an ETF, you are investing into a fund that holds the asset it tracks. That asset may be stocks, bonds, gold or other commodities, or futures contracts. An ETN is more like a bond. It's an unsecured debt note issued by an institution. Just like with a bond, an ETN can be held to maturity, bought or sold at will, and if the underwriter (usually a bank) were to go bankrupt, the investor would risk a total default. For that reason, before investing in an ETN, research into the credit rating of the underwriter is an important metric. If the underwriter were to receive a credit downgrade, shares of the ETN would likely experience a downturn unrelated to the underlying product it's tracking. Tax implications come into play with ETNs. In this case, lack of clarity may be a problem. The IRS hasn't provided clear guidance related to ETNs, but for now, tax treatment seems to be more favorable. Just like with any investment, if you sell for more than you purchased, you trigger capital gains taxes, but inside the fund is where the differences lie. Because an ETN doesn't buy and sell assets within the funds like an ETF, taxes are not triggered until the fund is sold - often years later. This will trigger long-term capital gains (which have a lower tax rate) rather than short-term capital gains.
Peak $63.44 1-Aug-12
Bear $30.35 1-Dec-15
Current Price Jan 31, 2016 $31.23
Avg Price 2010 $45.43
Avg Price 2011 $50.09
Avg Price 2012 $53.13
Avg Price 2013 $48.58
Avg Price 2014 $42.29
Avg Price 2015 $33.80
iPath Pure Beta Grains ETN (Symbol: WEET)
Fund Inception: Apr 20, 2011
WEET ventures beyond the traditional three core grains commodities of corn, soybean and wheat, dabbling into soybean meal and soybean oil. Not only does WEET have a broader scope, it also heavily overweights soybeans, with less going to wheat.
Note: See ETNs notes above in the fund JJG.
Peak $57.94 1-Aug-12
Bear $32.91 1-Dec-15
Current Price Jan 31, 2016 $33.15
Avg Price 2011 $46.51
Avg Price 2012 $48.45
Avg Price 2013 $47.31
Avg Price 2014 $44.01
Avg Price 2015 $36.31
It is not easy to consistently rebalance your portfolio in these scary times, and certainly in 2016 we are looking at least at a 20% decline in the DOW, though many say it will be worse.
I have been doing well in rebalancing but such endeavor is time consuming and requires a certain level of knowledge and skillsets. Not everyone has the time or the skillsets.
There are some who are about to, or will soon, go into full blown panic mode.
There are some things you can do, if you are about to go insane and do not know what to do but do not want to put all your money in cash or a money market. For those who are about to go full blown panic mode, here would be my recommendations on where you can put your money but still remain in the Markets but still feel safe.
1- Wheat, Corn, Soybeans and Grains ETF or ETN (Agricultural commodities – ETF or ETN fund, non-meat/dairy)
No matter what happens, an Agricultural commodities ETF or ETN that is Grains is a great option. Those with Wheat, Corn, Soybeans and Grains (including rice, of course) are a great way to move your funds out of other stocks, bonds, MFs, or sector based or commodity based ETFs and into Grains which the price per share hardly fluctuates much no matter a good market or more importantly a bad market.
I want to distinguish an Agricultural Grains ETF (Exchange Traded Fund)/ETN (Exchange Traded Note) from investing in a commodity stock that is one of the “pedigrees” (God’s Pedigree Gold/Silver, Royal Pedigree Tea/Rice, Pedigree Oil/Potash). Certainly such pedigree is of interest to investors, but these are direct futures buys or stock buys though Gold/Silver has ETFs – careful: in the Royal Pedigree you are really getting involved in futures, in all pedigrees you are mixing it up with the “big boys” and need to deal in large sums, as for oil you can see today WTI briefly dropped below $30 a barrel so you really have to know what you are doing and certainly the entire energy sector as far as stocks (including alternative) is simply participating in the normal ups and downs. This discussion is really about “stashing away” money without getting out of the market but also without simply transferring to Money Markets or CDs. CDs may make sense if Yellen continues to raise interest rates, which will cause Bond funds to go down. However, rebalancing the portfolio to “stash cash” in Grain ETFs or ETNs might be a consideration when going into full panic mode.
Keep in mind, as you can see in the examples below – you can still lose money. But at a much slower pace. In the examples below we see a peak price for GRU at about $8 dollars in the summer of 2012, and a low price as of RIGHT NOW at $4 dollars a share (loss of almost 50% !) – but you will notice in all the examples they all peeked in 2012 and at the same time. Throughout the entire last year malaise and now into our horrible bear bottoms, we see all are pretty much remaining the same price for each particular ETF or ETN and probably will do so but eventually will go up. In other words, other than the 2012 spike(s) upward in price, we are pretty stable over all.
Note: I do NOT promote ANY funds/brands/specific stocks or bonds. Below is EXAMPLES only so one can understand how to analyze these things. I DO NOT OWN ANY of the ETNs exampled below. I own a different Agriculture fund to “stash cash” which is NOT in the examples below. I provide multiple examples so that one can get an idea.
ELEMENTS MLCX Grains TR ETN (Symbol: GRU)
Fund Inception: Feb 5, 2008
The index is designed reflect the performance of a fully collateralized investment in the four exchange-traded futures contracts on four physical commodities: corn, soybeans, soy meal and wheat.
Peak $8.38 1-Aug-12
Bear $4.10 1-Dec-15
Current Price Jan 31, 2016 $4.24
Avg Price 2010 $6.33
Avg Price 2011 $6.90
Avg Price 2012 $7.16
Avg Price 2013 $6.53
Avg Price 2014 $5.56
Avg Price 2015 $4.60
iPath Bloomberg Grains SubTR ETN (Symbol: JJG)
Fund Inception: Oct 23, 2007
JJG is concentrated in soybeans, corn and wheat—the three core grains commodities—albeit with some hefty tilts in weighting. Most prominently, JJG heavily favors soybeans at the expense of wheat. While JJG typically lags its index more than we'd like, its returns have been fairly aligned to our benchmark—not a surprise here, as JJG also continuously rolls over similar front-month contracts. Simply put, investors looking for the most stable and solid grains-focused fund should look no further than JJG.
Note: ETNs (Exchange Traded Note) are structured products that are issued as senior debt notes, while ETFs (Exchange Traded Fund) represent a stake in an underlying commodity. ETNs are not free of credit risk. When you invest in an ETF, you are investing into a fund that holds the asset it tracks. That asset may be stocks, bonds, gold or other commodities, or futures contracts. An ETN is more like a bond. It's an unsecured debt note issued by an institution. Just like with a bond, an ETN can be held to maturity, bought or sold at will, and if the underwriter (usually a bank) were to go bankrupt, the investor would risk a total default. For that reason, before investing in an ETN, research into the credit rating of the underwriter is an important metric. If the underwriter were to receive a credit downgrade, shares of the ETN would likely experience a downturn unrelated to the underlying product it's tracking. Tax implications come into play with ETNs. In this case, lack of clarity may be a problem. The IRS hasn't provided clear guidance related to ETNs, but for now, tax treatment seems to be more favorable. Just like with any investment, if you sell for more than you purchased, you trigger capital gains taxes, but inside the fund is where the differences lie. Because an ETN doesn't buy and sell assets within the funds like an ETF, taxes are not triggered until the fund is sold - often years later. This will trigger long-term capital gains (which have a lower tax rate) rather than short-term capital gains.
Peak $63.44 1-Aug-12
Bear $30.35 1-Dec-15
Current Price Jan 31, 2016 $31.23
Avg Price 2010 $45.43
Avg Price 2011 $50.09
Avg Price 2012 $53.13
Avg Price 2013 $48.58
Avg Price 2014 $42.29
Avg Price 2015 $33.80
iPath Pure Beta Grains ETN (Symbol: WEET)
Fund Inception: Apr 20, 2011
WEET ventures beyond the traditional three core grains commodities of corn, soybean and wheat, dabbling into soybean meal and soybean oil. Not only does WEET have a broader scope, it also heavily overweights soybeans, with less going to wheat.
Note: See ETNs notes above in the fund JJG.
Peak $57.94 1-Aug-12
Bear $32.91 1-Dec-15
Current Price Jan 31, 2016 $33.15
Avg Price 2011 $46.51
Avg Price 2012 $48.45
Avg Price 2013 $47.31
Avg Price 2014 $44.01
Avg Price 2015 $36.31
