Commodity producer ETF

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DPEMD
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Commodity producer ETF

Post by DPEMD »

Can anyone recommend a commodity producer ETF?
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Blueskies123
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Re: Commodity producer ETF

Post by Blueskies123 »

Put your question in the search bar at the top right of this screen.
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DPEMD
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Re: Commodity producer ETF

Post by DPEMD »

Blueskies123 wrote: Mon Sep 21, 2020 8:18 am Put your question in the search bar at the top right of this screen.
I don’t know if you did the search yourself before posting, but I didn’t see much recent information about commodity producer ETFs.
alex_686
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Re: Commodity producer ETF

Post by alex_686 »

DPEMD wrote: Mon Sep 21, 2020 8:08 am Can anyone recommend a commodity producer ETF?
Why do you want a commodity producer ETF? I am assuming you are not interested in the underlying commodities. As a commodity investment, they have the lowest correlation to commodities.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Robot Monster
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Re: Commodity producer ETF

Post by Robot Monster »

It would help if you told us your underlying goals.
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DPEMD
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Re: Commodity producer ETF

Post by DPEMD »

Robot Monster wrote: Mon Sep 21, 2020 10:09 am It would help if you told us your underlying goals.
My concern is deep risk from inflation and finding ways to hedge against that. William Bernstein’s Investing for Adults series talks about the risk and mentions commodity producers as a possible hedge.
alex_686
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Re: Commodity producer ETF

Post by alex_686 »

DPEMD wrote: Mon Sep 21, 2020 12:43 pm
Robot Monster wrote: Mon Sep 21, 2020 10:09 am It would help if you told us your underlying goals.
My concern is deep risk from inflation and finding ways to hedge against that. William Bernstein’s Investing for Adults series talks about the risk and mentions commodity producers as a possible hedge.
This is mostly bunk.

Maybe commodities are a good hedge against inflation. Lots of debate here. The problem with commodities is that they just sit there. They don't earn interest, plus they are costing you storage costs, insurance, etc.

The obvious solution is to invest in a business that invests in those commodities. Gold miners are popular. You earn a dividend in a business that has a high correlation with the underlying commodity. Intuitive, right?

Wrong. Most commodity produces are asset intensive where projects have long lead times (10+ years) and can't easy be shut down during bad times. So highly cyclical. To manage these risks many companies enter into long term contracts. The good news is that they can make a profit when commodity prices collapse. However, it also means that don't participate during the good times.

This is why gold miners are not a bet on the price of gold. They have a shocking low correlation with gold. .6 IIRC.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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DPEMD
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Re: Commodity producer ETF

Post by DPEMD »

alex_686 wrote: Mon Sep 21, 2020 12:58 pm
DPEMD wrote: Mon Sep 21, 2020 12:43 pm
Robot Monster wrote: Mon Sep 21, 2020 10:09 am It would help if you told us your underlying goals.
My concern is deep risk from inflation and finding ways to hedge against that. William Bernstein’s Investing for Adults series talks about the risk and mentions commodity producers as a possible hedge.
This is mostly bunk.

Maybe commodities are a good hedge against inflation. Lots of debate here. The problem with commodities is that they just sit there. They don't earn interest, plus they are costing you storage costs, insurance, etc.

The obvious solution is to invest in a business that invests in those commodities. Gold miners are popular. You earn a dividend in a business that has a high correlation with the underlying commodity. Intuitive, right?

Wrong. Most commodity produces are asset intensive where projects have long lead times (10+ years) and can't easy be shut down during bad times. So highly cyclical. To manage these risks many companies enter into long term contracts. The good news is that they can make a profit when commodity prices collapse. However, it also means that don't participate during the good times.

This is why gold miners are not a bet on the price of gold. They have a shocking low correlation with gold. .6 IIRC.
Thanks for your insights. On page 45 of Rational Expectations (Kindle version) Bernstein disagrees with you.
asif408
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Re: Commodity producer ETF

Post by asif408 »

I use FILL (Global Energy Producers) and RING (Global Gold Miners). There are probably others.
Robot Monster
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Re: Commodity producer ETF

Post by Robot Monster »

DPEMD wrote: Mon Sep 21, 2020 12:43 pm
Robot Monster wrote: Mon Sep 21, 2020 10:09 am It would help if you told us your underlying goals.
My concern is deep risk from inflation and finding ways to hedge against that. William Bernstein’s Investing for Adults series talks about the risk and mentions commodity producers as a possible hedge.
Ah, okay. I found an interview (December 2019) where he discusses it.
Rick Ferri: One other item that you’ve talked about in the past is owning commodity producing assets, like gold miners and such. Is that still on your radar screen, to buy things like the gold miners and—not, not buying gold—but commodity producers as a diversification hedge?

William Bernstein: Yes absolutely. And in fact, when you look at the data on how commodities producers do during hyperinflationary periods, they do extremely well...
Source

So, how about the gold miner RING etf...oh, someone already beat me to the punch in that rec.

I don't know if an etf of non-precious metal producers, like BHP Group Ltd. and Rio Tinto, but maybe one is available. Edit: There is, called PICK!
Last edited by Robot Monster on Mon Sep 21, 2020 1:56 pm, edited 2 times in total.
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alex_686
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Re: Commodity producer ETF

Post by alex_686 »

DPEMD wrote: Mon Sep 21, 2020 1:07 pm Thanks for your insights. On page 45 of Rational Expectations (Kindle version) Bernstein disagrees with you.
Acknowledged. It is a point of debate. And it will probably remain a point of debate. There are few instants of high unexpected changes in inflation. And every time they are unique so it is very hard to generalize. Partly this is because different commodities react to differently to inflation and what is driving that inflation.

I have done a fair amount of reading in the subject and it is in no ways a slam dunk inflation hedge. Precious metals seem to be the best answer, but that is fraught with issues.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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