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Aussie Rises despite Rising Unemployment 

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The popularity of ETFs and ETNs has exploded in recent decades, but some investors may not even know exactly what they are, what they offer investors and how they differ.

	An exchange-traded fund is a fund that owns underlying assets and divides up ownership of those assets into shares. Those shares are then traded on a stock exchange like shares of stock, which makes ETFs different than mutual funds.

	ETFs can track entire stock market indices, such as the SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="/stock/spy#NYSE">SPY</a>), which tracks the S&amp;P 500. They can also track a single market sector, such as the Energy Select Sector SPDR (ETF) (NYSE: <a class="ticker" href="/stock/xle#NYSE">XLE</a>), which tracks the energy sector. Certain ETFs even track other types of assets. The SPDR Gold Trust (ETF) (NYSE: <a class="ticker" href="/stock/gld#NYSE">GLD</a>) tracks the price of gold, and the iShares Barclays 20+ Ty Treas.Bond (ETF) (NYSE: <a class="ticker" href="/stock/tlt#NYSE">TLT</a>) tracks the performance of U.S. Treasury bonds with remaining maturities greater than 20 years.

	The primary advantage ETFs offer is the ability to instantly diversify without the trading fees associated with buying all of the fund&rsquo;s underlying assets. However, the biggest disadvantage to ETFs is that they charge management fees, which are measured by a number called the expense ratio. Expense ratios are typically less than 1.0 percent annually, but they vary from fund-to-fund.

	Related Link: <a href="http://www.benzinga.com/personal-finance/financial-advisors/16/08/8312789/why-reverse-churning-is-about-to-become-a-big-advi">Why Reverse Churning Is About To Become A Big Advisor Problem</a>

	An exchange-traded note is an unsecured debt note that is structured more like a bond than a stock. ETNs can be bought or sold at any time or held until they mature. The iPath Bloomberg Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) tracks the performance of a diversified basket of commodities, including WTI crude oil and copper. As the name implies, the Barclays Bank Plc iPath ETNs linked to the MSCI India Total Return Index (NYSE: <a class="ticker" href="/stock/inp#NYSE">INP</a>) tracks an index of 60 companies listed on the National Stock Exchange of India.

	While ETNs offer the same kind of instant diversification that ETFs do, they also come with risks. ETNs are subject to the health and credit ratings of their underwriters, which are typically banks.

	For investors who understand the risks and fees involved in ETFs and ETNs, the two investment products offer a number of advantages and opportunities that have never before been available to the average investor.

	Visit <a href="http://bit.ly/BZTeach">http://bit.ly/BZTeach</a> for more awesome educational content!

	Disclosure: the author holds no position in the stocks mentioned.

The state of the world commodity markets can only be described as deflationary. This year has seen falling prices across nearly the entire spectrum of commonly traded precious metals, energy, grains and industrial goods.

	While there have been limited bright spots in niche sectors such as coffee and cocoa, a broad-based index such as the iPath Bloomberg Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is down more than 8 percent this year. In fact, this index is currently sitting on its year-to-date lows.

	Not surprisingly, this weakness also extends to stocks of related industry groups that thrive off higher commodity prices. This includes global agriculture stocks, mining companies, energy names and more.

	While this recent performance in the commodity sector has been difficult to endure, many value-oriented investors may be looking at this sell-off as a potential buying opportunity.

	<bzrelatedlink> Related Link: <a href="http://www.benzinga.com/markets/commodities/14/08/4812247/global-demand-for-coffee-expected-to-hit-record-highs-will-prices-">Global Demand For Coffee Expected To Hit Record Highs</a></bzrelatedlink>

	One way to play a global rebound in commodity prices is through stocks of associated &ldquo;<a href="www.benzinga.com/topic/commodity-country">commodity countries.</a>&rdquo; The WisdomTree Intl Basic Materials Fund (NYSE: <a class="ticker" href="/stock/ccxe#NYSE">CCXE</a>) is comprised of stocks from a variety of developed and emerging market countries whose economies are heavily dependent on commodity production.
<h3>
	WisdomTree Intl Basic Materials Fund</h3>

	CCXE has approximately 170 stocks from countries such as Russia, Norway, New Zealand, Canada and South Africa. Each country within the index is given an equal 12.5 percent allocation, according to the rules-based construction methodology.

	The underlying holdings are primarily centered in the energy and financial space as a result of the fundamentally weighted index honing in on dividend paying stocks. In fact, CCXE pays an above-average dividend that is currently listed at 3.72 percent. Distributions are paid to shareholders on a quarterly basis.

	On a year-to-date basis, this unique ETF is down 6.8 percent after a rocky September that eroded all of its gains for the year.
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	While the recent momentum is uninspiring, CCXE may offer an opportunity to play a counter-trend rally in commodity-rich countries that are well off their highs. This ETF contains a well-diversified portfolio of global stocks with a potential value proposition when compared to broad-based U.S. markets that are currently at all-time highs.

The Aussie rose against the U.S. dollar and the euro on Thursday despite rising unemployment. At around 5:48 am GMT, the greenback traded around 0.9732, or 0.94% below its previous close. At the same time, the euro surrendered 0.51% of its value to stand around $1.3858.

The Aussie has managed to defy the odds and gather strength against the two major currencies despite disappointing jobs market results. According to <a href="http://au.news.yahoo.com/thewest/business/a/-/national/10018507/australian-unemployment-in-surprise-jump/">the Australian Bureau of Statistics</a>, Australia's unemployment rate increased to 5.1% in July from 4.9% in June. The results came as a surprise to the analysts, who expected the economy to add 13,750 new jobs. Instead, Australia's weakening economy slashed 100 jobs.

Australia has been the star performer among the developed countries in recent years. In fact, it was the only developed nation to avoid a recession following the financial markets meltdown. However, the Australian economy was hit hard by the Queensland floods, which have created havoc among the communities living there. At the same time, the floods interrupted mining operations in the area. Australia is abundant with natural resources and high price levels for a number of commodities have provided a lot of tailwind for its economy in recent years.

Things might be about to change. The debt crises in the United States and the Eurozone seem to be feeding on each other and there is increasing speculation that Europe and North America might be on their way to a double-dip recession. At the same time, China has to squeeze its belt ever tighter in its so far futile attempts to control rising inflation. China is the world's largest consumer of raw materials and an increasingly important trading partner for commodity exporters such as Australia. A slowdown in China might in fact be an equally big threat to the Australian economy as a debt fiasco in the Eurozone and the United States. 

With signs that global demand is faltering, prices of commodities have started to come down. Crude oil, which has been trading around $100 for a while, has dropped to low eighties. Presently, crude oil stands around $82.81, or 1.41% above its previous close. Natural gas has sunk below the $4 barrier, falling 0.2% to trade around $3.995. At the same time, copper has rebounded in Thursday's early trading session, having fallen below the $4 mark as well. At the moment, copper stand around $4.008, or 2.84% above its previous close. The one exception in the downward trend for commodities is gold. The yellow metal has briefly moved past the $1,800 mark, but has retreated since. Currently, the yellow metal trades around $1,787.35, or 0.18% below its previous close. With debt woes mounting in the Eurozone and the United States, it seems only the sky is the limit for the world's most popular safe-haven.

More positive news for the Australian economy came from inflation expectations data. According to <a href="http://www.morningstar.co.uk/uk/markets/newsfeeditem.aspx?id=155144956373135">the Melbourne University Institute</a>, consumers expect prices to increase by 2.7% in the next 12 months. In July, consumers expected prices to rise by 3.4%. The latest reduction in inflationary expectations might provide some room for the Reserve bank of Australia to cut its interest rates in an attempt to boost Australia's ailing economy. The Reserve bank of Australia has a price target for the country's inflation rate of 2%-3%. Lower interest rates might be good for the Australian economy. However, it should be bad news for the Aussie. 

ACTION ITEMS: Bullish: Traders who believe that Australia's economy, helped by high commodity prices, will remain strong compared to the rest of the developed nations, which should provide some steam for the Aussie, might want to consider the following trades: 

<ul><li>Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is a long play on commodities. DJP may rise if the prices of commodities increase.</li></ul>

<ul><li>CurrencyShares Australian Dollar Trust ETF (NYSE: <a class="ticker" href="/stock/fxa#NYSE">FXA</a>) is a long play on the Aussie. FXA may rise if the Aussie appreciates.</li></ul>

Bearish: Traders who believe that a double dip recession might push prices of commodities much lower, which should create a lot of headwind for the Aussie, may consider an alternate positions: 

<ul><li>PowerShares DB Commodity Short ETN (NYSE: <a class="ticker" href="/stock/ddp#NYSE">DDP</a>) is a short play on commodities. DDP may rise if the prices of commodities decline.</li></ul>

<ul><li>ETFS Short Australian Dollar Long US Dollar ETC ETF (<a class="ticker" href="/stock/sad#">SAD</a>) is a short play on the Aussie. SAD may rise if the Aussie depreciates.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

The Japanese yen rose on Wednesday on strong tertiary sector activity. Presently, the U.S. dollar is trading around ¥76.87, or 0.14% below its previous close, while the euro retreated 0.31% to stand around ¥110.3. 

On Wednesday, Japan's economy posted some encouraging news. According to <a href="http://www.forexjournal.com/world/asia-pacifics/15151-japan-tertiary-industry-activity-index-19-in-june-.html">Ministry of Economy, Trade and Industry</a>, tertiary sector activity index rose 1.9% in July compared to the previous month. The July figure was on top of 0.8% recorded in June and 1% expected by most analysts. The index includes sectors like retail trade, finance, accommodation, transportation etc.

Japan's economy has been hit hard by the twin natural disaster in March, which has created energy shortages and supply disruptions. Since then, the Japanese economy has been on a slow path to recovery. The latest figures might be a sign that the Japanese recovery is gaining momentum. However, Japan is an export-oriented economy, so the latest threat of a double dip recession in the U.S. and the Eurozone could hurt Japan's growth prospects. 

Asia's largest economy, China, has been posting strong results on Wednesday as well. The latest data show that <a href="http://www.ibtimes.com/articles/195317/20110809/china-trade-balance-rises-nbsp.htm">China's trade surplus</a> rose to $31.5 billion, its highest level in 2 years. The July figure comfortably beat $27.4 billion expected by most analysts and $22.3 billion reported in June. The July figure was driven primarily by rising exports. On a yearly basis, exports rose 20.4% in July, above 17.9% recorded in June and 17% expected by analysts. At the same time, imports increased by 22.9% year-over-year, slightly higher than 22% expected by most analysts and June's value of 19.3%.

China's economic performance has remained impressive throughout the current financial crisis in the developed world. The latest figures will likely reinforce analysts' belief that there is a lot more power left in the Asian Dragon. At the same time, rising trade surplus will provide more ammunition to the Western governments, which have been claiming for a while now that the Chinese authorities are using undervalued currency to give an unfair edge to Chinese exporters. 

China and Japan should be also buoyed by the recent fall in oil prices, since both countries rely heavily on importing raw materials. The price of oil has fallen sharply since the downgrade of the U.S. debt highlighted the possibility of a double dip recession in the world's largest economy. Presently, crude oil stands around $81.50, or 0.26% above its previous close. The price of natural gas fell 0.22% to $4.013, while copper retreated 0.19% to trade around $4.036.

ACTION ITEMS: Bullish: Traders who believe that low commodity prices will provide additional steam to the Japanese recovery might want to consider the following trades: 

<ul><li>CurrencyShares Japanese Yen Trust ETF (NYSE: <a class="ticker" href="/stock/fxy#NYSE">FXY</a>) is a long play on the yen. FXY may rise if the yen appreciates.</li></ul>

<ul><li>ProShares Ultra Yen ETF (NYSE: <a class="ticker" href="/stock/ycl#NYSE">YCL</a>) is another long play on the yen. However, YCL should rise more than FXY if the yen appreciates.</li></ul>

<ul><li>PowerShares DB Commodity Short ETN (NYSE: <a class="ticker" href="/stock/ddp#NYSE">DDP</a>) is a short play on commodities. DDP may rise if the prices of commodities fall.</li></ul>

Bearish: Traders who believe that strong growth in China will help push up the prices of commodities, which, along with the slowdown in the United States and the Eurozone, could damage Japan's growth prospects may consider an alternate positions: 

<ul><li>ETFS Short Japanese Yen Long US Dollar ETC (Sterling) ETF (SJPP) is a short play on the yen. SJPP may rise if the yen depreciates.</li></ul>

<ul><li>ProShares UltraShort Yen ETF (NYSE: <a class="ticker" href="/stock/ycs#NYSE">YCS</a>) is another short play on the yen. However, YCS should rise more than SJPP if the yen depreciates.</li></ul>

<ul><li>Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is a long play on commodities. DJP may rise if the prices of commodities increase.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Yen Rises on Strong Tertiary Sector Activity 

The Aussie fell against major currencies on Tuesday as Australia's economic performance deteriorates. The Aussie fell below parity against the U.S. dollar for a while, but has since recovered. Presently, the greenback trades around 0.9817, or 0.02% above its previous close. At the same time, the Aussie suffered heavy losses against the euro as the European currency added 0.49% to its value to stand around $1.3987.

Investors are panicking in the aftermath of the historic downgrade of the U.S. debt. The situation can be best described by the old saying: “When America sneezes, the whole world catches a cold.” In fact, it seems the rest of the world is suffering more than the U.S. at the moment. In light of this panic, the Aussie was not helped by weak data coming from the Australian economy. For instance, <a href="http://www.businessweek.com/news/2011-08-09/australian-home-loan-approvals-unexpectedly-held-in-june.html">home loans</a> stagnated in June, when most analysts expected them to grow 0.8%. In May, home loans increased 2.8%. At the same time, the economy shed 5,400 jobs in the June quarter, the economy's worst performance since 2001. Australia's business confidence remains subdued as well. According to <a href="http://www.theage.com.au/business/business-confidence-stuck-in-6month-rut-20110809-1ik51.html">National Australia Bank</a>, business confidence slid to -1 in July, from 2 in June, and remained close to its 6-month low. 

The Australian government has more to worry than its own economy. The government should be watching closely the situation in China, where repeated attempts to control inflation are not producing expected results. In July, <a href="http://www.bbc.co.uk/news/business-14454472">China's CPI</a> rose 6.5%, compared to the same month a year earlier. In May, the inflation number stood at 6.4%. Rising inflation comes in spite of five interest rate increases since 2010. China's economy has been growing rapidly throughout the financial crisis. Now, there are increasing signs that the world's second largest economy is overheating. Therefore, many analysts might expect further belt tightening by the Chinese authorities.

As a major commodities exporter, Australia has come to rely on China to provide steam for its economy. Presently, China is the world's largest consumer of raw materials, and its insatiable appetite for commodities has been lifting the economies of Australia, Brazil and other major commodity exporters. Many of China's trading partners might fear that any deterioration in the economic performance of the Asian Dragon will soon be felt in their own economies.

Australia's recovery from the Queensland floods might be also under threat from falling commodities' prices. On Tuesday, crude oil fell below $80 mark. Presently, it trades around $78.89, or 2.45% below its previous close. Natural gas also retreated behind psychologically important $4 barrier. At the moment, natural gas is trading around $3.904, or 1.54% below its previous close. Silver also fell 0.45% to stand around $38.88. The one exception is gold as the yellow metal continues to set new records. Presently, gold trades at $1,748.55, or 1.63% above its previous close. 

ACTION ITEMS: Bullish: Traders who believe that commodity prices can rebound, which should provide a boost to Australia's economy and currency, might want to consider the following trades: 

<ul><li>Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is a long play on commodities. DJP may rise if the prices of commodities increase.</li></ul>

<ul><li>CurrencyShares Australian Dollar Trust ETF (NYSE: <a class="ticker" href="/stock/fxa#NYSE">FXA</a>) is a long play on the Aussie. FXA may rise if the Aussie appreciates.</li></ul>

Bearish: Traders who believe that the Aussie is already overvalued, and that weaker economy will push the Aussie to more realistic levels, may consider an alternate positions: 

<ul><li>PowerShares DB Commodity Short ETN (NYSE: <a class="ticker" href="/stock/ddp#NYSE">DDP</a>) is a short play on commodities. DDP may rise if the prices of commodities decline.</li></ul>

<ul><li>ETFS Short Australian Dollar Long US Dollar ETC ETF (<a class="ticker" href="/stock/sad#">SAD</a>) is a short play on the Aussie. SAD may rise if the Aussie depreciates.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Aussie Falls as Economic Performance Deteriorates 

The Aussie fell against major currencies on Wednesday as the Australian economy produced mixed results. At around 5:37 am GMT, the U.S. dollar added 0.39% to its value to trade around 0.9312. The embattled European currency is closely following the greenback's gains, climbing 0.38% to stand around 1.3226.

On Wednesday, Australia's economy posted mixed results. In July, <a href="http://www.theaustralian.com.au/business/services-sector-contracts-in-july-aig-cba-index/story-e6frg8zx-1226107258374">Australia's AIG services index</a> rose to 48.8 from 48.5 in June. Even though the June reading shows improvement, it still indicates Australia's service sector is contracting (readings below 50 indicate contraction, while those above 50 indicate expansion). The service sector index has been in the negative territory for 10 out of last 12 months.

Retail sales followed a similar pattern. In June, <a href="http://m.theaustralian.com.au/fi318019.htm">retail sales</a> declined 0.1% compared to the previous month. The June figure is far better than -0.6 recorded in May, but also some way below analysts' expectations of a 0.3% increase. The service sector and retail sales results suggest the Australian central bank was right to leave its interest rates on hold during its meeting on Tuesday as the country's economic recovery remains fragile.

Australia's trade balance surplus remains strong, however. According to the <a href="http://www.skynews.com.au/businessnews/article.aspx?id=646189&amp;vId=">Australian Bureau of Statistics</a>, trade surplus stood at A$2.05 billion in June, slightly below A$2.2 billion expected by most analysts. In May, the figure was revised to A$2.7 billion. The slight deterioration in trade balance data was a result of flat exports, while imports rose 0.3%. In the June quarter, Australia exported A$6.4 billion worth of goods more than it imported, much above A$3 billion in the March quarter.

Australia's economy is still recovering from the aftermath of the devastating Queensland floods. The latest results prove the Australian central bank right; the economic recovery is still on shaky ground. Presently, most of the steam to the country's recovery seems to come from its exports sector. As Australia is a major exporter of commodities, its performance depends on the movement of the commodity prices.

In Wednesday's early trading, gold is setting new records. Presently, the yellow metal stands around $1,663.05 or 0.31% above its previous close. Silver is also on the rise, climbing 0.24% to trade around $40.84. The price of crude oil is slightly higher as well, trading around $93.88, or 0.15% above its previous close. However, copper made more substantial gains, rising 0.33% to stand around $4.396.

Other Asian-Pacific currencies are also retreating in Wednesday's early trading as the greenback appreciated 0.59% against the Kiwi and 0.1% against the Japanese yen. At the same time, the euro added 0.57% to its value against the Kiwi to stand around 1.6489. The European currency is also one step closer to reaching the ¥110 mark against the Japanese currency. Presently, the euro trades around ¥109.695, or 0.1% above its previous close. 

ACTION ITEMS: Bullish: Traders who believe that Australia's exporters, supported by higher commodity prices, will help the Australian economy reach full recovery might want to consider the following trades: 

<ul><li>Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is a long play on commodities. DJP may rise if the prices of commodities increase.</li></ul>

<ul><li>CurrencyShares Australian Dollar Trust ETF (NYSE: <a class="ticker" href="/stock/fxa#NYSE">FXA</a>) is a long play on the Aussie. FXA may rise if the Aussie appreciates.</li></ul>

Bearish: Traders who believe that the Aussie is already overvalued, which should start to hurt the country's exporters and its economic recovery, may consider an alternate positions: 

<ul><li>PowerShares DB Commodity Short ETN (NYSE: <a class="ticker" href="/stock/ddp#NYSE">DDP</a>) is a short play on commodities. DDP may rise if the prices of commodities decline.</li></ul>

<ul><li>ETFS Short Australian Dollar Long US Dollar ETC ETF (<a class="ticker" href="/stock/sad#">SAD</a>) is a short play on the Aussie. SAD may rise if the Aussie depreciates.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Aussie Falls on Mixed Economic Results 

The Aussie fell against major currencies on Tuesday as Australia's central bank decided to leave its interest rates on hold. At around 5:43 am GMT, the U.S. dollar climbed 0.48% higher against the Aussie to stand around 0.9157. At the same time, the euro rose 0.36% to trade around 1.3036.

The Australian economy is currently recovering from the Queensland floods. Together with global uncertainties, created by debt crises in the United States and the Eurozone, this was enough to persuade <a href="http://www.businessday.com.au/business/rba-leaves-rates-on-hold-for-another-month-20110802-1i9bo.html">the Reserve Bank of Australia</a> to leave its interest rates at 4.75%. Most analysts had predicted the move. At the moment, Australia's interest rates are still much above those in Europe and North America, which makes the Aussie an attractive investment.

On Tuesday, the Australian economy produced mixed results. In June, <a href="http://www.ibtimes.com/articles/190636/20110801/australian-building-approvals-nbsp.htm">building approvals</a> fell once more by 3.5%. The June result is much above -7.9% recorded in May, which was revised to -6.3, but also some way below a 3% increase expected by analysts. On a yearly level, building approvals fell by 15.5% in June, down from a revised 13.3% decline in May. 

Australia's <a href="http://www.ibtimes.com/articles/190637/20110801/house-price-index-in-australia.htm">house price index</a> is also continuing its fall. In the June quarter, the index fell 0.1% from the previous quarter, but most analysts had predicted a steeper fall of 1%. In the March quarter, the index declined 1.1%, which was revised from -1.7%. 

The latest data seems to suggest the central bank has been right to leave its interest rates on hold. Economic data is improving, but much of the data is still in the red. There are probably more bumps on the road to full recovery for Australia's economy and its central bank does not want to put more constraints on the country's recovery by raising interest rates.

Debt crises in the United States and the Eurozone are not the only outside threats to the Australian recovery. It seems the worst is over in the U.S. as the two sides managed to reach a deal to raise the debt ceiling and prevent the world's largest economy from defaulting on parts of its obligations. However, the situation in the Eurozone continues to deteriorate as rating agencies continue to slash credit ratings of the Eurozone members. Perhaps more importantly for Australia, China's economy is starting to cool down.

In July, <a href="http://www.bbc.co.uk/news/business-14361809">China's PMI</a> fell to 50.7 from 50.9 a month earlier. China has been working hard to prevent its economy from overheating and its efforts are starting to pay off. China is an increasingly important trade partner for Australia, primarily due to the Asian giant's insatiable appetite for raw materials. 

The Aussie should find some support in the latest commodity prices data. According to <a href="http://www.rba.gov.au/statistics/frequency/commodity-prices/2011/icp-0711.html">the Reserve Bank of Australia</a>, commodity price index rose 0.9% in July, compared to the previous month. In June the index rose 1.7%. The rising commodity price index suggests the total value of Australia's exports may increase. 

On Tuesday, most of commodities were in retreat. Crude oil lost 0.82% of its value to trade around $94.47, while natural gas declined 0.12% to stand around $4.187. At the same time, copper traded around $4.403, or 0.07% below its previous close. Precious metals are an exception to the trend of falling commodity prices as gold rose 0.27% to trade around $1,625.95, while silver added 1.11% to its value to stand around $39.76.

ACTION ITEMS: Bullish: Traders who believe that the prices of commodities will continue to rise, which should provide a boost to the Australian economy, might want to consider the following trades: 

<ul><li>Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is a long play on commodities. DJP may rise if the prices of commodities increase.</li></ul>

<ul><li>CurrencyShares Australian Dollar Trust ETF (NYSE: <a class="ticker" href="/stock/fxa#NYSE">FXA</a>) is a long play on the Aussie. FXA may rise if the Aussie appreciates.</li></ul>

Bearish: Traders who believe that a slowdown in China, as well as debt problems in the developed countries, will bring down the prices of commodities and the value of Aussie may consider an alternate positions: 

<ul><li>PowerShares DB Commodity Short ETN (NYSE: <a class="ticker" href="/stock/ddp#NYSE">DDP</a>) is a short play on commodities. DDP may rise if the prices of commodities decline.</li></ul>

<ul><li>ETFS Short Australian Dollar Long US Dollar ETC ETF (<a class="ticker" href="/stock/sad#">SAD</a>) is a short play on the Aussie. SAD may rise if the Aussie depreciates.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Aussie Falls after Interest Rates Were Left on Hold

The Kiwi and the Aussie moved separate ways on Thursday, following strong performance of New Zealand's economy in the March quarter. At around 6 am GMT, the U.S. dollar added 0.3% to its value against the Aussie to stand around 0.9323. At the same time, the greenback retreated against the Kiwi by 0.57% to 1.1875.

The Kiwi was provided with a kick following better than expected GDP growth performance in the March quarter. According to official figures, <a href="http://www.forexjournal.com/world/asia-pacifics/14297-nz-q1-gdp-tops-forecasts-.html">New Zealand's GDP</a> grew 0.8% in Q1, much above a revised 0.5% figure recorded in the last quarter of 2010 quarter and some way above 0.4% forecasted by most analysts. Strong growth came in spite of a devastating earthquake that has struck New Zealand's second biggest city – Christchurch. 

After the New Zealand economy showed surprising strength in the first quarter, <a href="http://www.businessweek.com/news/2011-07-14/n-z-growth-spurs-economists-to-see-rbnz-rate-increase-this-year.html">most economists are now convinced</a> New Zealand's central bank will raise its interest rates this year. New Zealand's economy has been performing strongly compared to other developed nations following the financial meltdown in 2008. New Zealand benefited from rising commodity prices, while its banks did not engage in ludicrous behavior like many of their American and European counterparts. It is very likely that strong growth will extend at least to the June quarter; when the full effects of the reconstruction program in earthquake affected areas start to kick in. 

Traders were less impressed by Australia's performance, however. Inflation expectations was the only major news published by Australia on Thursday. According to the Melbourne Institute data, <a href="http://www.ideq.net/australia-inflation-expectations-up-3-4-in-july/">Australia's consumer inflation expectations</a> rose 3.4% in July, from 3.3% in June. It seems that the latest figure is not enough to persuade traders to think the Australian central bank will have to step in and raise its interest rates in order to keep inflation under control. Like New Zealand, Australia was hit hard by natural disasters, namely the Queensland floods, so Australia's central bank will be under pressure not to start raising its interest rates too soon in order to avoid damaging the economic recovery.

How quickly can Australia and New Zealand leave their natural disaster woes behind them will depend a lot on the performance of the Chinese economy. The latest results from the Asian Dragon suggest its economy is cooling down, but remains very strong nevertheless. Australia and New Zealand are major exporters of commodities, while China is the world's largest consumer of raw materials. To that end, the performance of Australia's and New Zealand's economy is becoming increasingly dependent on the strength of the Chinese economy.

On Thursday, the prices of commodities provided boost for both the Aussie and the Kiwi, gold rose 0.31% to $1,586.35, while silver moved 1.66% ahead to trade around $38.09. The price of crude oil is slowly reaching the $100 level, rising 0.29% to $98.09. The price of natural gas remained flat, however, standing around $4.378, while the price of copper increased 0.52% to $4.415.

ACTION ITEMS: Bullish: Traders who believe that the Australian and New Zealand economies remain strong due to rising prices of commodities and strong growth in China, providing a lot of tailwind for the Aussie and the Kiwi, might want to consider the following trades: 

<ul><li>CurrencyShares Australian Dollar Trust ETF (NYSE: <a class="ticker" href="/stock/fxa#NYSE">FXA</a>) is a long play on the Aussie. FXA will rise if the Aussie appreciates.</li></ul>

<ul><li>WisdomTree Dreyfus New Zealand Dollar Fund (NYSE: <a class="ticker" href="/stock/bnz#NYSE">BNZ</a>) is a long play on the Kiwi. BNZ will rise if the Kiwi appreciates.</li></ul>

<ul><li>Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is a long play on commodities. DJP will rise if the prices of commodities increase.</li></ul>

Bearish: Traders who believe that the performance of the Australian and New Zealand economies will suffer due to a slowdown in China, which might also depress commodity prices, providing a lot of headwind for the Kiwi and the Aussie, may consider an alternate positions: 

<ul><li>ETFS Short New Zealand Dollar Long US Dollar ETC (Sterling) ETF (SNZP) is a short play on the Kiwi. SNZP will rise if the Kiwi depreciates.</li></ul>

<ul><li>ETFS Short Australian Dollar Long US Dollar ETC ETF (<a class="ticker" href="/stock/sad#">SAD</a>) is a short play on the Aussie. SAD will rise if the Aussie depreciates.</li></ul>

<ul><li>PowerShares DB Commodity Short ETN (NYSE: <a class="ticker" href="/stock/ddp#NYSE">DDP</a>) is a short play on commodities. DDP will rise if the prices of commodities fall.</li></ul>

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Wisdom tree Drefus New Zeland Dollar Fund

Kiwi and Aussie Move Separate Ways as New Zealand Economy Grows Strongly

The value of currencies closely linked with commodities exports fell on Friday, following a dip in prices of major commodities. At around 6 am GMT, the U.S. dollar rose 0.39% against the Australian dollar to stand around 0.9509 and 0.27% against the New Zealand dollar to trade around 1.2459. The currencies of other major exporters of commodities, like the Russian ruble and the South African rand, have also weakened against the world's dominant currency. The greenback grew 0.25% against the rand and trades at $6.8646. The dollar made its smallest gains against the ruble, however, as it trades around 28.1659, a rise of 0.21%.

The value of the commodity currencies was pushed back by falling prices of major commodities. Gold lost 0.18% to trade around $1,526.85, while silver's fall was much steeper, sliding 0.56% to $35.33. Fossil fuels had a rough day as well. Crude oil is down 0.61% to $94.35. At the same time, natural gas is trading around $4.417 (down 0.57%), while heating oil stands around $2.996 (down 0.45%).

One explanation for falling prices of commodities is demand destruction. Some analysts have been warning for some time now that the prices of some commodities have risen too high and are starting to effect demand. One piece of evidence that fits well into this story is rising natural gas storage in the U.S. According to the <a href="http://ir.eia.gov/ngs/ngs.html">U.S. Energy Information Administration</a>, the U.S. natural gas stockpile rose 69 billion cubic feet in the week ending June 10, compared to a week earlier. 

The economic recovery is major economies, including the U.S., European Union and Japan, is still on shaky ground. A subdued production in these economy will probably keep a downward pressure on the prices of commodities for some time.

One commodity currency is holding its ground against the U.S. dollar, however, as the value of the Chile peso remains flat, trading at 472.05. Chile is a major exporter of copper. In today's early trading, its currency has managed to withstand the falling price of copper, which is down 0.34% to $4.101.

Traders who believe in the demand destruction story, i.e. that the prices of certain commodities are so high they are hurting demand, will be interested in shorting commodity prices. As a result, these traders will keep a close eye on the PowerShares DB Commodity Double Short ETN (NYSE: <a class="ticker" href="/stock/dee#NYSE">DEE</a>) and the ProShares UltraShort DJ-AIG Commodity ETF (NYSE: <a class="ticker" href="/stock/cmd#NYSE">CMD</a>). At the same time, traders who believe in this scenario will be interested in shorting the commodity currencies. The following ETFs will, therefore, be of interest to these traders: the ETFS Short Australian Dollar Long US Dollar ETC ETF (<a class="ticker" href="/stock/sad#">SAD</a>) and the ETFS Short New Zealand Dollar Long US Dollar ETC (Sterling) ETF (SNZP).

Other traders will turn their attention to China, as the Asian giant is now the biggest consumer of raw materials. Continuing strength of the Chinese economy might be enough to maintain the prices of commodities high. As a result, these traders will be interested in the Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>), the E-TRACS Constant Maturity Commodity Index ETN (<a class="ticker" href="/stock/uci#">UCI</a>), and the ELEMENTS Rogers International Commodity Index ETN (NYSE: <a class="ticker" href="/stock/rji#NYSE">RJI</a>). If traders who find appeal in the scenario of rising commodity prices wish to trade in currencies as well, they should look for the CurrencyShares Russian Ruble Trust ETF (NYSE: <a class="ticker" href="/stock/xru#NYSE">XRU</a>) and the WisdomTree Dreyfus South African Rand Fund (NYSE: <a class="ticker" href="/stock/szr#NYSE">SZR</a>).

WisdomTree Dreyfus South African Rand Fund

Commodity Currencies Fall on Lower Commodity Prices

PowerShares DBmmodity Index Optimum Yield Diversified Fund

GCC Leads Broad Based Commodity ETFs

Barclays rolled out 19 new commodity-based exchange-traded notes (ETNs) last Thursday (4/21/11).  The 18 new Pure Beta products attempt to track the same commodities as 18 existing iPath ETNs, the primary difference being the process used by each underlying index to roll future contracts.  The iPath Seasonal Natural Gas ETN (DCNG) was also introduced, although it is not part of the new Pure Beta methodology.
Barclays new Pure Beta indexes intend to provide a more representative measure of commodity market returns by reducing the <a href="http://www.moneyandmarkets.com/whats-all-this-talk-about-oil-futures-and-contango-43178" target="_blank">negative impacts of contango</a>.  Instead of rolling futures contracts on a monthly basis, they may roll into one of a number of futures contracts with varying expiration dates.
Each index will attempt to provide the best proxy for the average price return of the front-year futures contracts for each commodity in the index, while avoiding parts of the futures curve that are subject to persistent market distortions.  A new Barclays' special report, <a href="http://www.ipathetn.com/pdf/pure_beta_basics.pdf" target="_blank">The Basics of iPath Pure Beta Commodity ETNs</a> (pdf), provides additional information and background on the methodology.
Barclays apparently believes they have found a better way to implement commodity-based ETNs.  However, they are hedging their bets by not making any changes to their existing lineup covering identical commodities.  The existing “non-pure beta” ETNs will not be shut down and liquidated, nor will they be absorbed or merged into the new Pure Beta products.
The new products all have a yearly fee of 0.75% and seek returns that are potentially available through an unleveraged investment in the futures contracts in their designated markets.  Following is the list of the new iPath Pure Beta Commodity ETNs along with the corresponding non-pure beta products.  A description of the new iPath Seasonal Natural Gas ETN (DCNG) is included at the end.
<ol>
<li>iPath Pure Beta S&amp;P GSCI-Weighted ETN (SBV) (<a href="http://www.ipathetn.com/SBV-overview.jsp" target="_blank">SBV overview</a>) will compete with iPath S&amp;P GSCI Total Return Index ETN (<a class="ticker" href="/stock/gsp#">GSP</a>).</li>
<li>iPath Pure Beta Broad Commodity ETN (BCM) (<a href="http://www.ipathetn.com/BCM-overview.jsp" target="_blank">BCM overview</a>) will compete with iPath DJ-UBS Commodity Index Total Return ETN (<a class="ticker" href="/stock/djp#">DJP</a>).</li>
<li>iPath Pure Beta Crude Oil ETN (OLEM) (<a href="http://www.ipathetn.com/OLEM-overview.jsp" target="_blank">OLEM overview</a>) will compete with iPath S&amp;P GSCI Crude Oil Total Return ETN (<a class="ticker" href="/stock/oil#">OIL</a>).</li>
<li>iPath Pure Beta Agriculture ETN (DIRT) (<a href="http://www.ipathetn.com/DIRT-overview.jsp" target="_blank">DIRT overview</a>) will compete with iPath S&amp;P DJ-UBS Agriculture Subindex Total Return ETN (<a class="ticker" href="/stock/jja#">JJA</a>).</li>
<li>iPath Pure Beta Grains ETN (WEET) (<a href="http://www.ipathetn.com/WEET-overview.jsp" target="_blank">WEET overview</a>) will compete with iPath DJ-UBS Grains Subindex Total Return ETN (<a class="ticker" href="/stock/jjg#">JJG</a>).</li>
<li>iPath Pure Beta Copper ETN (CUPM) (<a href="http://www.ipathetn.com/CUPM-overview.jsp" target="_blank">CUPM overview</a>) will compete with iPath DJ-UBS Copper Subindex Total Return ETN (<a class="ticker" href="/stock/jjc#">JJC</a>).</li>
<li>iPath Pure Beta Nickel ETN (NINI) (<a href="http://www.ipathetn.com/NINI-overview.jsp" target="_blank">NINI overview</a>) will compete with iPath DJ-UBS Nickel Subindex Total Return ETN (<a class="ticker" href="/stock/jjn#">JJN</a>).</li>
<li>iPath Pure Beta Livestock ETN (LSTK) (<a href="http://www.ipathetn.com/LSTK-overview.jsp" target="_blank">LSTK overview</a>) will compete with iPath DJ-UBS Livestock Subindex Total Return ETN (<a class="ticker" href="/stock/cow#">COW</a>).</li>
<li>iPath Pure Beta Energy ETN (ONG) (<a href="http://www.ipathetn.com/ONG-overview.jsp" target="_blank">ONG overview</a>) will compete with iPath DJ-UBS Energy Subindex Total Return ETN (<a class="ticker" href="/stock/jje#">JJE</a>).</li>
<li>iPath Pure Beta Industrial Metals ETN (HEVY) (<a href="http://www.ipathetn.com/HEVY-overview.jsp" target="_blank">HEVY overview</a>) will compete with iPath DJ-UBS Industrial Metals Subindex Total Return ETN (<a class="ticker" href="/stock/jjm#">JJM</a>).</li>
<li>iPath Pure Beta Sugar ETN (SGAR) (<a href="http://www.ipathetn.com/SGAR-overview.jsp" target="_blank">SGAR overview</a>) will compete with iPath DJ-UBS Sugar Subindex Total Return ETN (<a class="ticker" href="/stock/sgg#">SGG</a>).</li>
<li>iPath Pure Beta Softs ETN (GRWN) (<a href="http://www.ipathetn.com/GRWN-overview.jsp" target="_blank">GRWN overview</a>) will compete with iPath DJ-UBS Softs Subindex Total Return ETN (<a class="ticker" href="/stock/jjs#">JJS</a>).</li>
<li>iPath Pure Beta Precious Metals ETN (BLNG) (<a href="http://www.ipathetn.com/BLNG-overview.jsp" target="_blank">BLNG overview</a>) will compete with iPath DJ-UBS Precious Metals Subindex Total Return ETN (<a class="ticker" href="/stock/jjp#">JJP</a>).</li>
<li>iPath Pure Beta Lead ETN (LEDD) (<a href="http://www.ipathetn.com/LEDD-overview.jsp" target="_blank">LEDD overview</a>) will compete with iPath DJ-UBS Lead Subindex Total Return ETN (<a class="ticker" href="/stock/ld#">LD</a>).</li>
<li>iPath Pure Beta Cotton ETN (CTNN) (<a href="http://www.ipathetn.com/CTNN-overview.jsp" target="_blank">CTNN overview</a>) will compete with iPath DJ-UBS Cotton Subindex Total Return ETN (<a class="ticker" href="/stock/bal#">BAL</a>).</li>
<li>iPath Pure Beta Coffee ETN (CAFE) (<a href="http://www.ipathetn.com/CAFE-overview.jsp" target="_blank">CAFE overview</a>) will compete with iPath DJ-UBS Coffee Subindex Total Return ETN (<a class="ticker" href="/stock/jo#">JO</a>).</li>
<li>iPath Pure Beta Cocoa ETN (CHOC) (<a href="http://www.ipathetn.com/CHOC-overview.jsp" target="_blank">CHOC overview</a>) will compete with iPath DJ-UBS Cocoa Subindex Total Return ETN (<a class="ticker" href="/stock/nib#">NIB</a>).</li>
<li>iPath Pure Beta Aluminum ETN (FOIL) (<a href="http://www.ipathetn.com/FOIL-overview.jsp" target="_blank">FOIL overview</a>) will compete with iPath DJ-UBS Aluminum Subindex Total Return ETN (<a class="ticker" href="/stock/jju#">JJU</a>).</li>
<li>iPath Seasonal Natural Gas ETN (DCNG) (<a href="http://www.ipathetn.com/DCNG-overview.jsp" target="_blank">DCNG overview</a>) does not use the Pure Beta approach.  Instead, it will only hold December contracts and roll them every October.  It will compete with iPath DJ-UBS Natural Gas Subindex Total Return ETN (<a class="ticker" href="/stock/gaz#">GAZ</a>).</li>
</ol>
The competitors mentioned above are not all-inclusive.  Instead, only the existing iPath ETNs corresponding to the same commodity are listed.  The prospectus information for the new ETNs is spread across four different documents:  <a href="http://www.ipathetn.com/pdf/pb-single-prospectus.pdf" target="_blank">9 single commodity ETNs</a> (pdf), <a href="http://www.ipathetn.com/pdf/BCM-super-prospectus.pdf" target="_blank">8 multi-commodity ETNs</a> (pdf), <a href="http://www.ipathetn.com/pdf/sbv-prospectus.pdf" target="_blank">SBV prospectus</a> (pdf), and <a href="http://www.ipathetn.com/pdf/dcng-prospectus.pdf" target="_blank">DCNG prospectus</a> (pdf).   Additional information is contained in the <a href="http://www.ipathetn.com/pdf/PureBeta_launch_press_release.pdf" target="_blank">press release</a> (pdf).  The fact sheet for each ETN is provided as a link on each summary page listed above.
Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.
<img src="http://investwithanedge.com/?ak_action=api_record_view&amp;id=13065&amp;type=feed" alt="" />

iPath DJ-UBS Lead Subindex Total Return ETN

iPath Dow Jones-Goldman Sachs Crude Oil Fund

Barclays Offers New Variation of 19 Existing Commodity ETNs

Later this morning I am due to be interviewed by the WSJ about "scarcity" as an investment theme which I think means water and ag-related equities. As an amusing coincidence Robert Shiller is calling out farmland as the next bubble. Pragmatic Capitalist Cullen Roche has <a href="http://pragcap.com/bubble-spotting">more detail</a> on Shiller and he is sort of in agreement, he is focused more on commodities as a bubble in the making. The two are related but not precisely the same.
Farmland is not a bubble and I am quite certain it will not become a bubble.
Bubbles are all encompassing events that take many things down with them. For example the US housing market turned out to be a bubble taking down many world stock markets, many world fixed income markets and many world GDPs. As the bubble was inflating there were astounding statistics about equity extraction, a proliferation of mortgage products requiring no money down, an abundance of house flipping television shows and anecdotally a couple of people I know actually thought it was impossible to lose money in real estate.
Ditto the tech bubble. Since that was more of a stock market-centric event I would add that there were dozens of publicly traded, unprofitable internet stocks with little to no revenue with market capitalizations well north of $100 billion.
A few years ago I was on CNBC and asked whether solar stocks were a bubble. I think I was on to discuss this because of a couple of bearish of articles I wrote about solar for theStreet.com but either way it most certainly was not a bubble. At the time the total market cap of the Market Vectors Solar ETF (<a class="ticker" href="/stock/kwt#">KWT</a>) was less than $100 billion. Here I am talking about the sum of all the market caps of the stocks in the fund not the AUM in the fund. So the comparison was dozens of unprofitable companies each with market caps above $100 billion versus an entire industry worth less than $100 billion. The market cap of KWT now is only about $40 billion (I didn't realize it had dropped that much and stayed down until I just looked for this post).
The SPDR Gold Trust (<a class="ticker" href="/stock/gld#">GLD</a>) which we own for clients is by far the largest exchange traded commodity product in the US at $55 billion and I am quite certain it is by far the largest exchange traded commodity product in the world. I am fairly certain (but did not look up every ETP) that iShares Silver is the second largest at $12 billion. PowerShares DB Commodity Index Tracking Fund (<a class="ticker" href="/stock/dbc#">DBC</a>) is a relatively big one at $6 billion. The The iPath Dow Jones-UBS Commodity Index Total Return ETN (<a class="ticker" href="/stock/djp#">DJP</a>) used to be a very popular one and it has $3 billion AUM.
I would be surprised if all of these added up to $100 billion but there is no way they all add up to $150 billion. As for related equities , the materials sector currently comprises 3.62% of the S&amp;P 500 and 10.99% of the EAFE Index which are both a long way from the 20% level that becomes a flashing yellow light for reducing exposure.
As for farmland the numbers for the bubble case are a little more plausible. According to <a href="http://www.bis.org/review/r110218c.pdf">this from Thomas Hoenig</a>, 1/6 of US jobs and US economic activity are farm related (these numbers surprise me) and the value of of all US farmland is up a lot to now $2 trillion dollars. In doing some Googling I found a couple of estimates for the total value of all US real estate to be $20 trillion but I have a low confidence in that number.
If farmland goes down a lot in value it would be for one of two reasons as best as I can tell; one would be that food prices would drop which would be a net positive for most of the economy or due to serious distortions with interest rates making the business of farming difficult/impossible/money losing but higher rates would be bad for the entire real estate market and the entire economy for that matter and very unlikely to originate in the farming industry--so farmland hurt by the economy not farmland hurting the economy.
I would also think that a decline in commodities would have several economic benefits and that it would not be a decline in commodity prices that would hurt economic activity, more like a downturn in economic activity hurting commodity prices.
This is not to say that both farmland and commodities are not manias that will see huge price declines because anything can drop a lot in price. Not everything that drops a lot in price is a bubble. Bubbles truly hurt many people and take many things down with them. The question of whether solar was a bubble a few years ago was a popular one at the time. The industry then went supernova (whether because of it own fundamentals or the bigger economic picture) and no one cared. When the real bubble surfaced, solar as a bubble was thoroughly disregarded.
This post is neither bullish or bearish so much as an exploration of a misused term. If you are worried about commodities and/or farmland imploding then make sure you don't own so much that a massive decline could do you in. If gold somehow went to $400 in the next week I promise you there would be tales of people being wiped out for being 100% in gold on margin.
There are obvious fundamental tailwinds for commodities and farm-related investments ranging from modernization to lack of supply but there are always fundamental tailwinds for these things. A large price decline is far less of a problem than being wildly over exposed when the bottom does fall out.
On an unrelated note some of you may recall I like to watch college lacrosse, among many other sports. This season one of the big advertisers for ESPNU's coverage is Select Sector SPDRs which is very funny as my tells me I am the only person watching. 
<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/8532070-3241091957125639128?l=randomroger.blogspot.com' alt='' /></div>

Exploring Bubbles

Many investors will often say that the stock market leads the economy. While in the past this has appeared to be the case on many different occasions, is it really true? That question is open for debate. The current situation for the economy looks to be slightly different. Throughout the past 97 years every time the Federal Reserve Bank (which is the central bank to the United States) has lowered interest rates to extremely low levels the stock market has inflated higher and recovered. Currently, the Federal Reserve has the benchmark fed funds rate at zero to a quarter percent since December 2008. The central bank has also purchased over $1 trillion in U.S. Treasury bonds. At this time the Federal Reserve is in the middle of it's $600 billion quantitative easing part two program which is meant to help inflate asset prices. This is an unprecedented amount of money being thrown at these markets in order to create inflation and higher stock prices.
To the Federal Reserve Bank's credit it has worked as everything has inflated higher. The people that are employed and have jobs are also feeling better because their retirement accounts have bounced back up. When people feel better they will spend money. It is important to note that consumer spending accounts for 70.0 percent of the gross domestic product in the United States. Can quantitative easing actually work if people start feel better?
There are a few problems with inflating the markets higher by creating cash reserves. The first problem is the high inflation that it creates around the world. Every emerging market is now facing high inflation. People in the United States can see how much higher they are paying for food and energy. The other problem is that unemployment is still near 10.0 percent according to government standards. There are also a lot of people on food stamps or as we now say government assistance. It is estimated that over 43 million people are on food stamps. Food riots have also broken out around the world in various nations. Rice, wheat, cotton, coffee, and many other commodities are soaring higher on a daily basis. The iPath Dow Jones-UBS Commodity Index Total Return ETN(NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) is trading at a new two year high. The iPath Dow Jones-UBS Cotton Subindex Total Return ETN(NYSE: <a class="ticker" href="/stock/bal#NYSE">BAL</a>) is trading at a new all time high. Can these high prices be beneficial for the economies in the United States and around the world?
This morning the U.S. Dollar Index has declined lower again by 0.34 cents to $77.38. The purchasing power of those that use dollars have diminished again. Well, just about every commodity in the world is traded in U.S. Dollars. Every person that lives in America has just about every asset that they own denominated in U.S. Dollars. How can a rising stock market and a falling dollar be viewed as a positive? Wouldn't one think that a strong currency and a strong stock market should be be viewed as real wealth creation? However, our political leaders and our banking leaders tell the public differently. It is important to note that President Obama never onced mentioned the condition of the U.S. Dollar last week in his State of the Union speech. We can only wonder why?
The stock market will continue to inflate until it realizes that it cannot inflate anymore. People should remember that very similar trading action took place throughout 2003 into 2007. Unfortunately, we all saw what happened when that rally came to an end. Right now the United States has over $14 trillion in debt and the market does not seem to care yet. We shall see how far this inflation rally can last.
Nicholas Santiago 
InTheMoneyStocks.com

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Over $14 Trillion In Debt And The Market Loves It 

The U.S. Dollar Index has declined by over 2.00 points in four trading days. This is a sharp drop in the U.S. Dollar Index. The U.S. Dollar Index is measured against a basket of six leading currencies such as the Euro (57.6%), Japanese Yen (13.6%), British pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%), and the Swiss Franc (3.6%). Lately, the Asian growth countries such as China, India, and others have been raising interest rates in order to fight high inflation. Over the past two weeks there have been food riots breaking out around the world as the price of food has inflated to levels that are not affordable for many people. These are some of the negative effects of inflation.
The Federal Reserve Bank tells us that there is very little inflation in the United States. However, gasoline is now over $3.00 at the pump and this is directly felt by every U.S. consumer. In fact, spot crude is making new 52 week highs this morning and this will be felt by nearly everyone around the world.
The major stock market indexes are all still holding up fine. The major stock markets continue to rally nearly everyday. The Federal Reserve Bank continues to pump up cash reserves by buying U.S. Treasuries everyday via their quantitative easing program. In other words, the inflation rally lives on as all of this liquidity continues to prop the stock markets higher and higher.
Investors and traders at this time continue to go right along with inflation rally as the dips in the market seem to be bought up on almost every sector and index everyday. The volume trends remain at extremely light levels which tell us that there is very little participation by the public who always seems to arrive late to the party as they will usually buy the high.
Commodity ETF's and ETN's such as PowerShares DB Commodity Index Tracking Fund (NYSE: <a class="ticker" href="/stock/dbc#NYSE">DBC</a>), Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>), iPath Dow Jones-AIG Softs Total Return Sub-Index ETN (NYSE: <a class="ticker" href="/stock/jjs#NYSE">JJS</a>), and others are all trading at or near all time highs. Higher commodity prices are one of the major effects of inflation and a weaker U.S. Dollar Index.
Nicholas Santiago 
InTheMoneyStocks.com

Guidance

U.S. Dollar Index Gets Pounded

<img class="alignleft size-full wp-image-24496" title="in focus spotlight" src="http://etfdailynews.com/blog/wp-content/uploads/2010/12/in-focus-spotlight.bmp" alt="" width="110" height="110" />David Fry From <a href="http://www.etfdigest.com/" target="_blank">ETF Digest</a> goes into detail on two commodity ETFs discussing the iPath DJ-UBS Commodity Index TR ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>) and the ProShares Ultra DJ-UBS Commodity ETF(...) Read the rest of <a href="http://etfdailynews.com/blog/2011/01/08/spotlight-two-commodity-etfs-in-focus-ucd-djp/">Spotlight: Two Commodity ETFs In Focus (UCD, DJP)</a> 
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Spotlight: Two Commodity ETFs In Focus (UCD, DJP)

Stocks faltered throughout Tuesday trying to digest Monday's gains.

A Sudden Change in Season: Dave's Daily

The year 2009 saw a sharp rise in commodity prices across the world. The new highs made by gold and oil, regaining a major chunk of their previous decline, stood out in 2009. While some people may consider taking profits, this may not be the right time to do so.
With the global economy recovering and spending levels improving, living standards in the emerging economies are bound to rise in the forthcoming months. As a result, the price of consumable commodities is likely to rise.
ETFs such as Dow Jones-AIG Commodity Index Total Return ETN (NYSE: <a class="ticker" href="/stock/djp#NYSE">DJP</a>), Goldman Sachs Commodity Index (GSCI) Total Return Index ETN (NYSE: <a class="ticker" href="/stock/gsp#NYSE">GSP</a>), iShares GSCI Commodity-Indexed Trust ETF (NYSE: <a class="ticker" href="/stock/gsg#NYSE">GSG</a>) and ProShares Ultra DJ-AIG Commodity ETF (NYSE: <a class="ticker" href="/stock/ucd#NYSE">UCD</a>) may benefit in 2010.

2010: A Year To Have Commodity Shares In Your Portfolio

Yesterday, I posted my <a href="http://investwithanedge.com/etf-trivia" target="_blank">ETF Trivia questions</a>. Today, I provide the answers.
1. What was the second ETF (exchange-traded fund) launched?
Correct answer is b) SPDR S&amp;P Midcap (MDY), which was launched in May 1995, about 27 months after the first ETF. Dow Diamonds did not arrive until January 1998, and the “Cubes” did not launch until March 1999. (Disclosure: I am long QQQQ).
2. In what year was the second ETF launched?
Correct answer is b) 1995 (see explanation above). There were no new ETFs introduced in 1994.
3. How many US listed ETFs and ETNs were there at the beginning of the new millennium (1/1/2000)?
Correct answer is a) 32. Although the ETF business began in 1993, it didn’t start to hit its stride until this decade. The 132nd ETF was launched in November 2002, and it took until December 2005 for the count to reach 232. (Note: these last two numbers are not adjusted for ETF closures that happened prior to those dates.)
4. When was the first bond ETF launched?
Correct answer is a) July 2002, which was the launch of three treasury and one corporate bond funds from iShares: SHY, IEF, TLT, and LQD. November 2002 was the launch of the now defunct FITR family of treasury ETFs.
5. What was the brand name of the first family of ETFs with an international focus?
The correct answer is c) WEBS – World Equity Benchmark Series. This family launched 17 single-country ETFs in March 1996, making them the 3rd- 19th ETFs to arrive on the scene. You now know them as iShares MSCI Australia (EWA), iShares MSCI Canada (EWC), and 15 more with ticker symbols starting with the letters “EW”. The BLDRS international ETFs did not launch until November 2002.
At the time of the WEBS launch, 100% of the ETF products were named either SPDRS or WEBS, so I went and grabbed the <a href="http://www.spdrwebs.com/" target="_blank">SPDRWEBS</a> domain name (which I still own today if anyone is interested in acquiring it).
6. When was the first ETN (exchange-traded note) launched?
Correct answer is c) 2006, making ETNs a relatively young product. The first two were iPath DJ-UBS Commodity Total Return ETN (DJP) and iPath S&amp;P GSCI Total Return Index ETN (GSP), launched in November 2006.
7. When were the first leveraged and inverse ETFs launched?
The correct answer is b) June 2006 with the introduction of the first seven ProShares: Ultra Dow30 (DDM), Short Dow30 (DOG), Ultra MidCap400 (MVV), Short MidCap400 (MYY), Short QQQ (PSQ), Short S&amp;P 500 (SH), and Ultra S&amp;P 500 (SSO). The first leveraged “mutual fund” came 13 years earlier with <a href="http://investwithanedge.com/insincere-concern-the-banning-of-leveraged-etfs" target="_blank">the launch of Rydex Nova</a> (RYNVX) in July 1993.
8. How much time elapsed between the initial filing of the first leveraged ETF and its launch?
Correct answer is c) ~4 years. The ProShares (under the name ProFunds) <a href="http://www.sec.gov/Archives/edgar/data/1174610/000095016902000176/0000950169-02-000176.txt" target="_blank">original filing</a> is dated June 5, 2002. This is one of the reasons that I do not pay much attention to new ETF filings. Another reason is that many of those filings never result on actual products being launched.
9. When was the first ETF delisting?
Correct answer is c) December 2002 when the first three ETFs bit the dust. Most of you probably don’t remember iShares DJ US Chemicals (former ticker IYD), iShares DJ US Internet (former ticker IYV), and iShares S&amp;P/TSE 60 (former ticker IKC). Thus, the need <a href="http://investwithanedge.com/category/etf-deathwatch" target="_blank">for ETF Deathwatch</a> was born.
10. What was the age of the “youngest” ETF to delist?
Correct answer is a) Less than 3 months, and NETS FTSE-CNBC Global 300 Index Fund (former ticker MYG) holds that honor. Launched 11/13/08, it was part of the <a href="http://investwithanedge.com/first-wave-of-etf-closures-for-2009" target="_blank">massive NETS closure </a>on February 9, 2009. The answer c) 3 years, 8 months, was the age of <a href="http://investwithanedge.com/powershares-to-close-19-etfs" target="_blank">PowerShares High Growth Rate Dividend Achievers Portfolio</a> (former ticker PHJ), the oldest ETF to ever meet its demise.
11. When was the 1,000th ETP (ETFs and ETNs combined) launched?
Correct answer is b) November 2009, and was highlighted in an <a href="http://investwithanedge.com/1000th-etf-hits-the-tape" target="_blank">article</a> earlier this month.
12. Which of the following ETF brands are defunct?
Correct answer is n) All of the above:
<ul>
<li>WEBS are now known as iShares.</li>
<li>The streetTRACKS brand was dropped in favor of SPDRS.</li>
<li><a href="http://www.thefreelibrary.com/ETF+Advisors+Announces+Liquidation+Distribution+for+its+Four+Treasury+...-a0102501830" target="_blank">FITR</a> Treasury ETFs arrived on the scene in November 2002 and left May 2005.</li>
<li>HealthShares bit the dust in 2008, shortly after the <a href="http://investwithanedge.com/etf-deathwatch" target="_blank">inaugural issue of ETF Deathwatch</a>.</li>
<li><a href="http://investwithanedge.com/aso-delisting" target="_blank">AirShares</a>, brought to you by the same people behind HealthShares, lasted almost eight months.</li>
<li>The <a href="http://investwithanedge.com/first-wave-of-etf-closures-for-2009" target="_blank">NETS family</a> of international index ETFs met their untimely demise early in 2009.</li>
<li>Ameristock Ryan ETFs appeared in July 2007 and disappeared in June 2008.</li>
<li>Adelante Real Estate ETFs were the first group of ETFs from the HealthShares/AirShares people to go under in July 2008.</li>
<li>Opta was the brand name of the Lehman Brothers ETNs that blew up when Lehman declared bankruptcy. Many holders did not understand what <a href="http://investwithanedge.com/etns-riskier-than-they-look" target="_blank">ETNs</a> were or the fact that <a href="http://investwithanedge.com/open-letter-to-etn-sponsors" target="_blank">they are unsecured</a>.</li>
<li>FocusShares had four ETFs for about 11 months but closed up shop in October 2008.</li>
<li><a href="http://investwithanedge.com/spa-announces-closure-of-six-etfs" target="_blank">SPA MarketGrader</a> ETFs met their demise in March 2009.</li>
<li><a href="http://investwithanedge.com/shareholders-left-hanging-with-bsr-delisting" target="_blank">BearLinx was the brand of Bear Stearns</a> (remember that company?) that sponsored ETNs.</li>
<li>Fortune was one of the early ETF brands on the scene. Fortune e-50 (former ticker FEF) arrived in October 2000 and closed in December 2003. Another product, the Fortune 500 ETF (former ticker FFF) was renamed streetTRACKS Total Market ETF (TMW) on 6/13/05 only to be renamed again to SPDR DJ Total Market (TMW), thus becoming the first ETF to survive two brand eliminations.</li>
</ul>
How well did you do?
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ETF Trivia Answers

If you haven’t heard of E-TRACS, you aren’t the only one.  This family of exchange-traded products has gone nowhere.  Every product they offer, except one, is on my <a href="http://investwithanedge.com/category/etf-deathwatch" target="_blank">Deathwatch</a> list.  Their products have meager assets and almost no trading volume, but the sponsors keep on plugging along.  It’s impressive, in a way.
Now E-TRACS has launched yet another potentially doomed product: UBS E-TRACS DJ-UBS Commodity Index Total Return ETN (DJCI) began trading on October 29, 2009.  For all practical purposes, there is nothing to distinguish DJCI from several other ETFs and ETNs that track similar broad commodity indexes.  If ever there were a “Me Too” product, this is it.  The only possible reason I can see to create this fund is that regulators are trying to cap the size of commodity-based exchange-traded securities.  E-TRACS may think they will get some spillover buying from investors who are locked out of better-known funds.
This seems like a slim hope.  So slim, in fact, that I considered placing DJCI on immediate Deathwatch by declaring an exception to my normal six-month waiting period.  Think about it.  It already has three strikes against it:
Strike 1: It’s an ETN and contains <a href="http://investwithanedge.com/etns-riskier-than-they-look" target="_blank">ETN risk</a> – namely it is an unsecured debt obligation of the issuer, UBS.  Granted, many commodity based exchange traded products are ETNs, but given the choice of an ETF or ETN, I will take the ETF until such time that <a href="http://investwithanedge.com/open-letter-to-etn-sponsors" target="_blank">ETN sponsors</a> make these “secured” obligations.
Strike 2:  It’s subject to <a href="http://investwithanedge.com/cftc-camel-sticks-nose-in-etf-tent" target="_blank">CFTC regulations</a>, and the CFTC would probably prefer that this product did not exist.  One such product <a href="http://investwithanedge.com/dxo-becomes-first-victim-of-cftc-activity" target="_blank">has already been shut down</a> and others are essentially being forced to modify their indexes.  Many newer products, like those from <a href="http://investwithanedge.com/two-more-equity-commodity-etfs-from-jefferies" target="_blank">CRB-Q</a>, are bypassing the CFTC altogether.
Strike 3:  It’s from E-TRACS.  Be honest now.  How many of you are familiar with E-TRACS?  How many of you knew that UBS was the company behind E-TRACS before you started reading this article?  That’s what I thought.  This is their 11th exchange-traded product, yet most ETF investors have never heard of them.  As I mentioned earlier, nine of the existing ten are on Deathwatch.
In baseball, it’s “three strikes – you’re out”.  However, I’m going to play by my own rules and allow it my standard six-month grace period. 
Maybe UBS is trying to change their ways as this is the first time they identified themselves by placing their name prior to the E-TRACS brand as part of the product’s name.  The underlying index, which is the same index used by three other ETF/ETN products, is relatively diversified for a commodity index.  The target weights can be found on the <a href="http://www.ibb.ubs.com/mc/etracs_US/DJ-UBS-Commodity-Index.shtml" target="_blank">summary page</a> and <a href="http://www.ibb.ubs.com/mc/etracs_US/downloads/DJCI_factsheet.pdf" target="_blank">fact sheet</a>.  DJCI has a 0.50% expense ratio. 
Its primary competitor is the well-established <a href="http://www.ipathetn.com/DJP-overview.jsp" target="_blank">iPath DJ-UBS Commodity Total Return ETN (DJP)</a>.  DJP currently has about $1.9 billion in assets with an average daily value traded in excess of $16 million per day.  However, its expense ratio is currently 0.75%, which may be DJCI’s only hope of survival.
Disclosure compliant with <a href="http://investwithanedge.com/about-time-ftc-16-cfr-part-255" target="_blank">FTC 16 CFR Part 255</a> covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.
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Are You Ready For More E-TRACS?

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