As an exchange-traded fund tied to the global agriculture industry, the VanEck Vectors Agribusiness ...
2 ETFs to Ride Long-Term Trends
08/09/2012 9:00 am EST
In recent weeks, two trends have been playing out, and now is a great time to take advantage of them with a pair of solid exchange traded funds, writes Jim Lowell of Forbes ETF Advisor.
Food and fuel prices are not calculated in the core inflation metric that is most frequently cited. But food and fuel issues are likely to give governments, businesses, and consumers more and more of a run for their money in the coming years.
So despite the fact that prices at the pump and for a barrel of Texas Sweet have come down measurably and thankfully, we did see two signposts this month for investors looking to put some long-term cash to work.
The first signpost: A power outage the size of the US. The AP reported that Northern India’s power grid crashed July 30, “halting hundreds of trains, forcing hospitals and airports to use backup generators, and leaving 370 million people—more than the population of the United States and Canada combined—sweltering in the summer heat."
The power outage forced businesses large and small to close, commuters to stand still, commerce to grind to a halt. “The blackout, the worst to hit India in a decade, highlighted the nation’s inability to feed a growing hunger for energy as it strives to become a regional economic power.”
Investors should look at the iShares DJ US Oil Equipment and Services (IEZ), which invests in everything one needs to locate, pump, process, ship, and build multiple sources of energy.
The second signpost comes from the home front, but reflects a global theme I’ve discussed time and again: consumers demanding more commodities (from oil to corn to meat) than this country, let alone any one country, can produce.
Bloomberg reports: “In the 18 states that produce most of our corn, only 31% of the crops were rated good or excellent this week,” down from 40% last week and from 66% the same time last year.
Soybean crops, used in creating diesel fuel, aren’t faring any better. “34% of the US crop was rated good or excellent, down from 40% last week.” The same week last year found 64% rated good or excellent. While the drought may be temporary, Mother Nature has a way of sending unexpected shock waves through a system that is already sorely taxed.
The longer our drought protracts, the higher food prices will go, here and around the world. I like the Invesco PowerShares Agriculture ETF (DBA), which doesn’t own the stocks of companies who are in the farming business, but invests in the commodities themselves: cattle, cocoa, coffee, corn, cotton, hogs, soybeans, wheat and more.
Related Articles on ETFs
In part 1 of our commentary, we discussed the current Fundamental Gravity of our “Slowing Drag...
In this week’s Macro Theme, we review our “Slowing Dragon” theme. We began discuss...
Robert Powell is a long-time financial journalist and retirement expert, as well as the editor of Th...