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What will always go up in price? It is Food and Energy. Every month our government releases its publication on inflation rate. If we examine how they calculate inflation rate, we will find that the inflation rate does not include food and energy inflation. This does not make sense to most Americans because who doesn't eat, use energy to heat their home or pay for gas to drive to work.
The reason to exclude food and energy prices from the inflation formula is politically motivated. Politicians who share the view that social programs are a waste of money and government spending needs to be cut are supporters of this policy to exclude food and energy when calculating the inflation rate.
They came up with a clever way to pull the wool over people's eyes by messing with the COLA number. COLA is the government's "Cost Of Living Adjustment". Social programs use COLA to adjust for inflation. For example, old people get increases in their fixed income checks from the government according to COLA number. Knock off Food and Energy inflation and you knock down COLA increases. The government is indirectly telling us this is the area where they want to hide inflation.
Trading Insight:
Now that we know where inflation is hiding, we want to be invested in those areas. Inflation is bad if we don't own those goods and we need it. But on the flip side, inflation is a good thing if we already own it and other people want it. Inflation for them now becomes capital appreciation for us.
Exchange-traded funds allow the traders to own those commodities. A word of caution, don't blindly buy commodity ETFs based solely on its catchy name. Commodity ETFs have management fees, servicing fees and rollover costs that will wipe out all gains if you are not careful. Even if the underlying food and energy prices has gone up, you can still lose money in commodity ETFs because of the fees and rollover costs.
Commodity ETFs are active investment. You cannot buy it and forget about it. You must select the commodity ETFs where management can generate alpha for you. They must earn their fees and prove they can grow your investment.
The following are lists of commodity ETFs that you can choose and customize to hedge against specific commodity inflation risk.
This list of Energy ETFs aims to hedge against the instability in the Middle East. Whenever there is unrest in the Middle East, the oil market quickly marks up the price of oil. United States Natural Gas Fund ( ARCX Ticker Symbol: UNG ) and Energy Select Sector SPDR ( ARCX Ticker Symbol: XLE ) are the most popular Energy ETFs in this category.
Energy ETFs (such as Oil and Gas)| Ticker | Description | Exchange |
|---|---|---|
| AMJ | JP Morgan Alerian MLP ETN | ARCX |
| AMLP | Alerian MLP ETF | ARCX |
| AXEN | iShares MSCI ACWI xUS Energy | ARCX |
| BNO | United States Brent Oil Fund | ARCX |
| DBE | PowerShares DB Energy Fund | ARCX |
| DBO | PowerShares DB Oil Fund | ARCX |
| DCNG | iPath Pure Beta Natural Gas | ARCX |
| DIG | Ultra Oil And Gas ProShares | ARCX |
| EEO | Emerging Markets Energy | ARCX |
| ENY | Guggenheim Canadian Energy | ARCX |
| ERX | Energy Bull 3x Shares | ARCX |
| FCG | First Trust ISE Reserve Natural Gas | ARCX |
| FEG | Focus Energy ETF | ARCX |
| FOL | FactorShares 2X Oil Bull/S&P500 | ARCX |
| FXN | First Trust Energy AlphaDEX | ARCX |
| GAZ | iPath Dow Jones UBS Natural Gas | ARCX |
| GEX | Market Vectors Global Alternative Energy | ARCX |
| IEO | iShares Dow Jones U.S. Oil & Gas | ARCX |
| IOIL | IQ Global Oil Small Cap ETF | ARCX |
| IXC | iShares S&P Global Energy Index | ARCX |
| IYE | iShares Dow Jones U.S. Energy | ARCX |
| JJE | iPath Dow Jones AIG Energy | ARCX |
| KOL | Market Vectors Coal ETF | ARCX |
| MLPG | UBS Natural Gas MLP ETN | ARCX |
| MLPN | Credit Suisse Cushing 30 MLP | ARCX |
| MLPY | MS Cushing MLP High Income ETN | ARCX |
| OIH | Oil Service HOLDRS | ARCX |
| OIL | iPath Goldman Sachs Crude Oil ETN | ARCX |
| OLEM | iPath Pure Beta Crude Oil ETN | ARCX |
| OLO | PowerShares DB Crude Oil Long | ARCX |
| ONG | iPath Pure Beta Energy | ARCX |
| PUW | PowerShares WilderHill Energy | ARCX |
| RJN | ELEMENTS Rogers International Commodity Energy ETN | ARCX |
| RYE | Rydex S&P Equal Weight Energy | ARCX |
| UBN | E-TRACS UBS Bloomberg CMCI Energy ETN | ARCX |
| UCO | ProShares Ultra Dow Jones AIG Crude Oil | ARCX |
| UGA | United States Gasoline | ARCX |
| UHN | United States Heating Oil Fund | ARCX |
| UNG | United States Natural Gas Fund | ARCX |
| UNL | United States 12 Months Natural Gas | ARCX |
| USL | The United States 12 Months Oil Fund | ARCX |
| USO | United States Oil Fund | ARCX |
| VDE | Vanguard Energy ETF | ARCX |
| XLE | Energy Select Sector SPDR | ARCX |
| XOP | SPDR S&P Oil & Gas Exploration | ARCX |
This list of Alternative Energy ETFs aims to hedge against run away high oil prices. When the price of oil goes parabolic and stays flat line at the high, the conversation of alternative energy heats up again. Previous unprofitable alternative energy sources would once again become profitable projects at these lofty levels. Global X Uranium ETF ( ARCX Ticker Symbol: URA ) and PowerShares WilderHill Clean Energy ( ARCX Ticker Symbol: PBW ) are the most popular Alternative Energy ETFs in this category.
Alternative Energy ETFs| Ticker | Description | Exchange |
|---|---|---|
| NLR | Market Vectors Uranium Nuclear | ARCX |
| PBW | PowerShares WilderHill Clean Energy | ARCX |
| PIO | PowerShares Global Water Portfolio | ARCX |
| URA | Global X Uranium ETF | ARCX |
This list of Metals ETFs aims to hedge against rising inflation. Gold is a popular asset when governments around the world decide to turn on their printing presses to increase their fiat money supply. When that happens, paper money is no longer a good medium to store wealth. iShares Silver Trust ( ARCX Ticker Symbol: SLV ) and SPDR Gold Trust ( ARCX Ticker Symbol: GLD ) are the most popular Metals ETFs in this category.
Metals ETFs (such as Gold and Silver)| Ticker | Description | Exchange |
|---|---|---|
| AGQ | ProShares Ultra Silver | ARCX |
| ALUM | Global X Aluminum ETF | ARCX |
| BDD | PowerShares DB Base Metals Double Long | ARCX |
| BDG | PowerShares DB Base Metals Long | ARCX |
| BLNG | iPath Pure Beta Precious Metal | ARCX |
| COPX | Global X Copper Miners ETF | ARCX |
| CU | First Trust ISE Global Copper | NASDAQ |
| DBB | PowerShares DB Base Metals | ARCX |
| DBP | PowerShares DB Precious Metals | ARCX |
| DBS | PowerShares DB Silver Fund | ARCX |
| DGL | PowerShares DB Gold Fund | ARCX |
| DGP | DB Gold Double Long ETN | ARCX |
| FOIL | iPath Pure Beta Aluminum | ARCX |
| GDX | Market Vectors Gold Miners ETF | ARCX |
| GDXJ | Market Vectors Junior Gold Miner | ARCX |
| GLD | SPDR Gold Trust | ARCX |
| GLDX | Global X Gold Explorers ETF | ARCX |
| HEVY | iPath Pure Beta Industrial Metal | ARCX |
| IAU | iShares Gold Trust | ARCX |
| JJC | iPath Dow Jones AIG Copper | ARCX |
| JJM | iPATH AIG Industrial Metals | ARCX |
| JJN | iPATH AIG Nickel | ARCX |
| JJP | iPath Dow Jones AIG Precious Metals | ARCX |
| JJT | iPath Dow Jones AIG Tin ETN | ARCX |
| JJU | iPath Dow Jones AIG Aluminum ETN | ARCX |
| LD | iPath Dow Jones AIG Lead ETN | ARCX |
| LEDD | iPath Pure Beta Lead | ARCX |
| LIT | Global X Lithium ETF | ARCX |
| NINI | iPath Pure Beta Nickel ETN | ARCX |
| PALL | ETFS Physical Palladium Shares | ARCX |
| PGM | iPath Dow Jones AIG Platinum ETN | ARCX |
| PLTM | First Trust ISE Global Platinum | NASDAQ |
| PPLT | ETFS Physical Platinum Shares | ARCX |
| PSAU | PowerShares Global Gold & Precious Metals | NASDAQ |
| PSTL | PowerShares Global Steel Portfolio | NASDAQ |
| PTM | E-TRACS UBS Long Platinum ETN | ARCX |
| RJZ | ELEMENTS Rogers International Commodity Metal ETN | ARCX |
| SIL | Global X Silver Miners ETF | ARCX |
| SIVR | ETFS Silver Trust | ARCX |
| SLV | iShares Silver Trust | ARCX |
| SLX | Market Vectors Steel | ARCX |
| TBAR | RBS Gold Trendpilot ETNs | ARCX |
| UBG | E-TRACS UBS Bloomberg CMCI Gold | ARCX |
| UBM | E-TRACS UBS CMCI Industrial Metals | ARCX |
| UGL | ProShares Ultra Gold | ARCX |
| USV | E-TRACS UBS Bloomberg CMCI Silver | ARCX |
| WITE | ETFS Physical White Metals Basket Shares | AMEX |
| XME | SPDR S&P Metals & Mining | ARCX |
This list of Food Commodities ETFs aims to hedge against food inflation. A clever game has been played on the consumers to disguise food inflation. Food manufacturers has been shrinking the portion size of their packages. The price remained the same but you get less. Market Vectors Agribusiness ( ARCX Ticker Symbol: MOO ) and ELEMENTS Rogers International Commodity Agriculture ( ARCX Ticker Symbol: RJA ) are the most popular Food Commodities ETFs in this category.
Food ETFs (such as Grains, Wheat and Corn)| Ticker | Description | Exchange |
|---|---|---|
| AGF | DB Agriculture Long ETN | ARCX |
| CAFE | iPath Pure Beta Coffee | ARCX |
| CHOC | iPath Pure Beta Cocoa | ARCX |
| CORN | Teucrium Corn Fund | ARCX |
| COW | iPATH AIG Livestock | ARCX |
| DAG | DB Agriculture Double Long ETN | ARCX |
| DIRT | iPath Pure Beta Agriculture | ARCX |
| EATX | Global X Food ETF | ARCX |
| FISN | Global X Fishing Industry ETF | ARCX |
| FUD | E-TRACS UBS Bloomberg CMCI Food | ARCX |
| FUE | ELEMENTS MLCX Biofuels | ARCX |
| GRU | ELEMENTS MLCX Grains | ARCX |
| GRWN | iPath Pure Beta Softs | ARCX |
| JJA | iPath Dow Jones AIG Agriculture | ARCX |
| JJG | iPATH Dow Jones AIG Grains | ARCX |
| JJS | iPath Dow Jones AIG Softs ETN | ARCX |
| JO | iPath Dow Jones AIG Coffee ETN | ARCX |
| LSTK | iPath Pure Beta Livestock | ARCX |
| MOO | Market Vectors Agribusiness | ARCX |
| PAGG | PowerShares Global Agriculture Portfolio | NASDAQ |
| RJA | ELEMENTS Rogers International Commodity Agriculture | ARCX |
| SGAR | iPath Pure Beta Sugar | ARCX |
| SGG | iPath Dow Jones AIG Sugar ETN | ARCX |
| UAG | UBS E-TRACS CMCI Agriculture | ARCX |
| WEET | iPath Pure Beta Grains | ARCX |
This list of Soil Related Commodities ETFs aims to hedge against rising commodity prices. iShares S&P Global Timber & Forestry ( ARCX Ticker Symbol: WOOD ) and iPath Dow Jones-AIG Cotton ETN ( ARCX Ticker Symbol: BAL ) are the most popular Soil Related Commodities ETFs in this category.
Soil Related ETFs| Ticker | Description | Exchange |
|---|---|---|
| BAL | iPath Dow Jones AIG Cotton ETN | ARCX |
| CTNN | iPath Pure Beta Cotton | ARCX |
| SOIL | Global X Fertilizer Potash ETF | ARCX |
| WOOD | iShares S&P Global Timber & Forestry | NASDAQ |
This list of Basket of Commodities ETFs aims to hedge against rising inflation. Materials Select Sector SPDR( ARCX Ticker Symbol: XLB ) and PowerShares DB Commodity Index Tracking ( ARCX Ticker Symbol: DBC ) are the most popular Commodities Basket ETFs in this category.
Basket ETFs| Ticker | Description | Exchange |
|---|---|---|
| AXMT | iShares MSCI ACWI xUS Material | ARCX |
| BCM | iPath PB Broad Commodity | ARCX |
| CFD | Nuveen Commodity Fund | AMEX |
| CRBQ | CRB Global Commodity Equity Index | ARCX |
| DBC | PowerShares DB Commodity Index Tracking | ARCX |
| DBN | WisdomTree International Basic Material | ARCX |
| DJCI | UBS E-TRACS Dow Jones UBS Commodity | ARCX |
| DJP | iPath Dow Jones AIG Commodity ETN | ARCX |
| DPU | DB Commodity Long ETN | ARCX |
| DYY | DB Commodity Double Long ETN | ARCX |
| GCC | GreenHaven Continuous Commodity Index | ARCX |
| GLTR | ETFS Physical PM Basket Shares | ARCX |
| GNR | SPDR S&P Global Natural Resources | ARCX |
| GRES | IQ Global Resources ETF | ARCX |
| GSC | GS Connect S&P GSCI Enhanced Commodity | ARCX |
| GSG | iShares GSCI Commodity-Indexed | ARCX |
| GSP | iPath GSCI Total Return ETN | ARCX |
| HAP | Hard Assets Producers ETF | ARCX |
| IGE | iShares Natural Resources | ARCX |
| IRV | SPDR S&P International Materials Sector | ARCX |
| IYM | iShares Dow Jones US Basic Material | ARCX |
| MXI | iShares S&P Global Materials Sector | ARCX |
| PYZ | PowerShares Basic Materials | ARCX |
| RJI | ELEMENTS Rogers International Commodity | ARCX |
| RTM | Rydex S&P Equal Weight Materials | ARCX |
| SBV | iPath Pure Beta Broad Commodity | ARCX |
| UCD | ProShares Ultra Dow Jones AIG Commodity | ARCX |
| UCI | E-TRACS UBS Bloomberg Commodity | ARCX |
| USCI | US Commodity Index | ARCX |
| VAW | Vanguard Materials ETF | ARCX |
| XLB | Materials Select Sector SPDR | ARCX |
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