Protect Your ETF Portfolio If That Boom Goes Bust

When a particular "boom" goes "bust", what should investors do with their related exchange traded funds (ETFs)?

Gary Gordon for ETF Expert takes us back to 2000: the dot-com bulls were running rampant, convinced that the stock prices for those companies could do nothing but soar. In more recent years, the same craze spread through the real estate markets: the world is getting more crowded, there are fewer places to build and it can only send prices higher.

We all know very well by now how that turned out. But Gordon says that this isn't necessarily to suggest that the newest booming sector - commodities - is primed for a fall. But he does stress that investors should recognize the psychology of fear and greed.

It's a fact: booms go bust. Therefore, investors need to have a plan to sell.

Some resource ETFs are particularly attractive now, to be sure. Food is scarce. Water is scarce. Oil seems like it can't be stopped. Naturally, investors will be taking a look at such funds as S&P Metals and Mining (XME) or the PowerShares Water Resources Fund (PHO).

It's okay to get in those areas that are moving and above their trendlines. What's not okay is hanging on as it falls below that line or 8% off its high and hoping against hope that things will turn around.

Now that consumer spending is at a stand still and real estate investment trusts are unattractive, what do savvy investors do? They bargain hunt! There are values to be had if you look for them. For instance, the Vanguard REIT Index (VNQ) is above its long-term trendline and has outperformed the broader market for 2008. The Retail HOLDRs (RTH) has followed suit, sitting above its trendline.

For full disclosure, Tom Lydon's clients own shares of RTH.

As ETFs Have Evolved, So Have Investors

Exchange traded funds (ETFs) are such phenomenal investing tools they are actually changing the way investors invest.

They've come a long way since they first landed on the scene in 1993. Billy Fisher for The Street highlights some major advances arising from the advent of the ETF.

• Betting on the bears: ETFs make it much easier to take a bearish stance and hedge against downside risk. ProShares Short S&P 500 (SH) delivers performance that is the opposite of the index it tracks. Investors no longer have to buy puts or sell short. The high risk is also offset. Rydex also offers a line of inverse funds, including the Rydex Inverse 2x Russell 2000 (RRZ).

• Active management: Actively managed ETFs have finally gained approval from the Securities and Exchange Commission (SEC) and are now awaiting investor approval. PowerShares recently launched ETFs coupled with the skill of an active manager and the diversification of an ETF. PowerShares Active Low Duration Fund (PLK) or the PowerShares Active Alpha Multi-Cap Fund(PQZ) are a few examples of the ones available. XShares and State Street are also planning to launch products of this type.

• Access granted: Areas of the market individual investors once found hard to access, such as commodities or preferred equities, are now available. iShares S&P US Preferred Stock Index (PFF) and the PowerShares Financial Preferred Fund (PGF) have shown strong interest.

• Plays on the dollar: The weakening U.S. dollar has been the topic du jour, and now investors can put their money where their mouth is and invest in currency. PowerShares DB U.S. Dollar Index Bullish (UUP) is a favorite among some analysts.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Home Foreclosures and Food Prices Up and ETFs Are Mixed

Real estate and home builder exchange traded funds (ETFs) are mostly higher this morning, even after foreclosures shot higher in April.

The number of U.S. homeowners falling behind on their mortgage payments rose 65% last month over the same month last year, which sent home values down even further, reports Alex Veiga for the Associated Press. One in every 519 U.S. households received a foreclosure filing, and they increased in all but eight states.

Several real estate and homebuilder ETFs were trading higher - perhaps investors think this might be as bad as it gets? As eager as we all may be for a turnaround, we suggest sitting back and waiting for any uptrend to be on more solid footing and crosses the 200-day moving average. Trying to call the bottom can be a losing battle.

Among the related ETFs:

• iShares FTSE NAREIT Real Estate 50 Index (FTY), up 8.1% year-to-date
• First Trust S&P REIT Fund (FRI), up 8.6% year-to-date
• DJ Wilshire REIT (RWR), up 10.1% year-to-date
• SPDR S&P Homebuilders (XHB), up 10% year-to-date

Inflation in April eased up some, but food prices experienced their biggest jump in 18 years, reports Martin Crutsinger for the Associated Press. Consumer prices rose 0.2% in April, compared to a 0.3% rise in March. Energy delivered a flat reading, which helped offset a 0.9% rise in food prices across the board.

Among the agriculture ETFs, which are mostly static in early trading:

• Market Vectors Global Agribusiness (MOO), up 7.5% year-to-date
• PowerShares DB Agriculture (DBA), up 11.2% year-to-date
• iPath Dow Jones Agriculture (JJA), up 6.6% year-to-date

Run On Food Prices, Agriculture ETFs, Leads to a Tiff

The rising cost of food that has benefited agriculture exchange traded funds (ETFs) seems to have led to a squabble between India and the United States over who's to blame.

Indian politicians, economists and academics are upset that top U.S. officials have said India's growing prosperity is the reason for food inflation, reports Heather Timmons for the New York Times.

India countered that Americans should rethink their energy policy and go on a diet.

Zing!

One official said that if Americans slimmed down to the weight of middle-class Indians, many people in sub-Saharan Africa would find food on their plates.

India isn't the only country being blamed for the rising cost of food. China has been fingered as a source of greenhouse gases and rising commodity prices, as well. Many emerging markets that have seen a growing middle class in recent years are slowly adopting more Western diets (which is probably just a nicer way of saying "burgers, fries and milkshakes").

India has a point, though: the average American eats 3,770 calories a day. It's the highest caloric intake in the world. India consumes 2,440 a day per capita. It takes 3,500 calories to gain one pound.

The United States and Canada also lead the world in oil consumption per person.

Whatever side you find yourself on, you can at least capitalize on the growing demand by taking a look at some agriculture ETFs and exchange traded notes (ETNs):

• PowerShares DB Commodity Index Tracking Fund (DBC), up 26.5% year-to-date
• PowerShares DB Agriculture (DBA), up 12.7% year-to-date
• Market Vectors Global Agribusiness (MOO), up 7.6% year-to-date
• BS E-TRACS CMCI Agriculture (UAG), launched on April 4

Commodities Sector Has Many Access Points With ETFs

Exchange traded fund (ETF) investors have the most simple and diversified tool to access commodities at their disposal.

The commodity expansion taking place is evidenced by people passed out from sticker shock in the bread aisle at your local grocery store, food riots and rationing in certain countries (including here) and barren tractor showrooms in the midwestern United States, reports Dow Jones Newswires.

ETFs are one quick and diversified way to get in, and commodity funds come in various shapes and sizes. Some hold futures, others hold stock for companies involved in the making of commodities and others are exchange traded notes (ETNs).

Demand for the agricultural items are exceeding supply leading many investors to opportunity. ETFs such as PowerShares DB Agriculture (DBA), which holds futures, is up 11.4% year-to-date. Market Vectors Global Agribusiness (MOO) holds the stock of some of the world's biggest agriculture companies.

Among the agriculture ETNs available are Elements Rogers International Commodity Agriculture (RJA) and the Opta Lehman Brothers Commodity Agriculture (EOH).

One analyst prefers a broad-based ETF focusing on energy, metals and agriculture. Diversification of this nature are found in PowerShares DB Commodity Index Tracking Fund (DBC) and the note, iPath Dow Jones-AIG Commodity Index (DJP).

A list of all commodity ETFs and ETNs can be found on Seeking Alpha.

When it comes to energy ETFs, exercise caution.

Always knowing the risks is key, though. The more specialized an ETF is, the harder it can fall when the momentum is over. Commodities are volatile, and there's been talk that he sector is in a bubble. Having your exit strategy will protect you.

Filipinos in Austria and ETF Feel Effects of Inflation

Rising inflation in Austria could help eat the way to a rise in the related exchange traded fund (ETF).

Filipino workers there are getting creative on ways to satisfy their daily dietary needs. For example, instead of eating rice, the price of which has shot up 30% lately, they're looking at potatoes and salad. The products are cheaper, but still nutrient-rich.

Consumer prices overall have inflated by 0.8% during April alone. They're up 3.5% for the year. 

Among the hardest-hit areas is that of food products, which are a basic need, reports Hector Pascua for ABS-CBN News. Rising fuel prices are to blame for the rise in food prices, similar to what we're seeing in the United States.

Is the iShares MSCI Austria Index (EWO) feeling the effects of a 7.8% rise in food prices for April, and the transportation fares rising 7.3%, all driven by the 26% increase in fuel prices? Consumer services only make up 0.96% of the ETF. Financials are 34.7% of the fund, however, and energy is 14.4%, so any increase may be reflected soon.

Year-to-date, the fund is up 1.8%. In the last month, it's up 7.9%.

The Commodity ETF Picture Looks Different This Week

Gold futures and exchange traded funds (ETFs) began to stage a turnaround in trading today after the dollar once again fell and oil futures hit new records.

Gold today rose to $870.70, reports Bob Ewing for Digital Journal. Meanwhile, the dollar stepped back from its growth spurt, falling against the euro, and oil hit a record $120.01 a barrel, John Wilen for the Associated Press reports.

That sent investors once again scurrying for cover.

The gold-focused ETFs, streetTRACK Gold Shares (GLD) and iShares COMEX Gold Trust (IAU), surged higher after a difficult stretch a few days ago. They both closed on Friday down 3.1% for the week. iShares Silver Trust (SLV) was trading higher today, too. All three funds rose 2% at the end of trading today.

Last week, the situation looked a little different. Gold for June delivery closed on Friday at $858 an ounce. The U.S. dollar jumped after new of the U.S. labor market was not too shabby, as expected for April, report Polya Lesova and Mayra P. Saefong on MarketWatch.

As prices fell, the questions began: has the commodities bubble burst? Much like gold, wheat, rice, and silver were also on losing streaks. There was a slight rebound Friday as some of the losses appealed to bargain hunters, but are the commodities-as-a-safe haven thoughts in the past?

Where it goes next is anybody's guess.

New ETN Line Gives Broad Range of Commodity Exposure

UBS rolled into the exchange traded note (ETN) business last month with a line of commodity notes.

The UBS E-TRACS CMCI Total Return (UCI) is designed to track the UBS Bloomberg Constant Maturity Commodity Index Total Return. The index measures the collateralized returns from a basket of 28 commodity futures contracts ranging from three months up to three years.

The subsets are:

• UBS E-TRACS CMCI Agriculture (UAG), 0.65% expense ratio
• UBS E-TRACS CMCI Industrial Metals (UBM), 0.65% expense ratio
• UBS E-TRACS CMCI Livestock (UBC), 0.65% expense ratio
• UBS E-TRACS CMCI Silver (USV), 0.40% expense ratio
• UBS E-TRACS CMCI Gold (UBG), 0.30% expense ratio
• UBS E-TRACS CMCI Food (FUD), 0.65% expense ratio
• UBS E-TRACS CMCI Energy (UBN), 0.65% expense ratio

The futures contracts are diversified across five constant maturities, and they roll on a daily basis, as opposed to monthly. The aim of daily rolling is to stay as close to the spot price as possible instead of getting into a contango mess.

The industrial metals note gives investors exposure to copper, zinc, aluminum, nickel and lead. Energy has exposure to crude oil, gasoline, natural gas and heating oil.

The food note has exposure to live hogs, orange juice and coffee, among other things.

Four New ETNs Hit The Market, Thanks to Deutsche Bank

Deutsche Bank launched four new exchange traded notes (ETNs) with a twist, coming out ahead of rivals such as ProShares.

The new broad-based ETNs focus on agriculture and commodities, but come in long, double-long, short and double-short varieties, rounding out a complete set for a commodities index, reports Murray Coleman for Index Universe.

The new notes are tied to the Deutsche Bank Liquid Commodity Index and the Deutsche Bank Liquid Commodity Index-Optimum Yield.

• DB Commodity Double-Short (DEE)
• DB Commodity Double-Long (DYY)
• DB Commodity Short (DDP)
• DB Commodity Long (DPU)

The securities will be issued in $25 denominations. As their name implies, these new funds give investors long and short exposure to the agriculture and commodities sector. All four notes are senior unsecured obligations of Deutsche Bank.

These notes join Deutsche Bank's launch of ETNs allowing investors to go long or short on gold and agriculture.

The newest additions to the ETN family add to the growing list of launches for 2008.

Tom Lydon with Neil Cavuto

Tom Lydon appeared on Neil Cavuto's show on Fox Business earlier this afternoon to discuss rising food prices. Video of Tom's segment appears below:

Agriculture, Energy ETFs Soar, But Consumers Lose Confidence

Soaring prices for the basic necessities might be helping your agriculture and energy exchange traded funds (ETFs), but the trade-off is beaten-down consumer confidence.

A research group reported today that consumer sentiment has dropped to a five-year low in its fourth consecutive drop. Wall Street economists had been expecting low numbers, reports Anne D'Innocenzio for the Associated Press. Its previous weakest point was in March 2003, just before the U.S. invasion of Iraq.

Deteriorating confidence is a sign that consumer spending may weaken, which would in turn further hurt the economy. Consumers remain worried about inflation and the toll that rising food and gas prices could take on their wallets. The employment picture looks bleak, as well: the Labor Department is expected to show another loss of 65,000 when its April report is released on Friday.

The director of the Conference Board Consumer Research Center also noted that the number of survey respondents who planned to take a vacation in the next six months has fallen to a 30-year low.

Looks like you'll have to rely on Calgon to take you away instead.

If Commodity ETF Bubble Bursts, Your Strategy Can Be Used As a Flotation Device

Market turmoil is leading to more and more investors turning to agriculture ETFs and exchange traded notes (ETNs), reports Hannah Glover for Ignites.

Especially in places such as China and India, a rising middle class is using that extra cash to splurge on more food, cars and other consumer goods. But many are wondering, too, if agriculture is going to be the next big bubble to burst.

Bubble or not, you can protect yourself on the downside by watching the trend lines. When your holding drops below its 200-day moving average or 8% off its high, it's time to let it go.

Your Rebate Check Could Stimulate ETFs

Will exchange traded funds (ETFs) find the stimulus package stimulating?

Tax rebates will start going out today, even earlier than reported, in the hopes that they will inject a shot in the arm into our stumbling economy. Since consumer spending is 70% of the economy, the hope had been that we'll spend, spend, spend.

But President Bush says the checks will help offset the high gas and food prices that have been weighing down our wallets this year, reports Tom Raum for the Associated Press. It's a change from previous statements that the package is intended to ignite consumer spending.

In total, the Treasury will distribute more than $110 billion to 130 million taxpayers, says Catherine Clifford for CNN Money.

Depending on how you decide to use that extra cash, some ETFs could benefit.

If you use it at the grocery store, maybe an agriculture ETF such as the PowerShares DB Agriculture (DBA) or the ELEMENTS MLCX Grains Index (GRU) could reap the rewards.

Maybe if you decide to hit the mall, the Retail HOLDRs (RTH) or the SPDR S&P Retail (XRT) will get a lift.

Or if you just want to fill up your car, a trip to the pump could lift United States Oil (USO) or United States Gasoline (UGA).

How will you spend or save your rebate check?

For full disclosure, some of Tom Lydon's clients own RTH.

Washington, Speculators and Supply and Demand All Affect Commodities and ETFs

Commodities investors have had the great option of using exchange traded funds (ETFs) to get easy and efficient access in one single transaction. Now insiders are wondering if money-making commodities can continue their golden run and which ETF to choose from out of the ever-growing pool of choices.

In the past year through April 24, the Dow Jones Industrials was down 0.8% and the S&P 500 was down 6.2%. In that same timeframe, the Dow Jones AIG Commodity Index ETN (DJP) was up 16.9%.

Can commodities actually keep up the pace? Despite last month's correction, some economists believe that prices will stay strong, reports Joshua Lipton for Forbes. The real clues to their direction mostly hinge on what happens with the Federal Reserve. The number one driver of commodities, according to Brian Wesbury, chief economist at First Trust Porfolios, is monetary policy.

If the Fed continues to make rate cuts, look for the sentiment on commodities to remain bullish.

No doubt supply and demand is a factor, too. Kevin Kerr, president of Kerr Trading International, points to the rising middle class that's seeking out better food and higher-quality meats.

Kerr also cautions investors: three years ago, corn was a bargain. Now it's very expensive, it's less of a deal and there's more risk involved.

Playing commodities through ETFs has become a popular bet. TrimTabs Investment Research reports that assets in commodities are up 84%.

There are a number of ways to invest in commodities through both ETFs and ETNs. Some hold futures for certain commodities, others hold stocks for companies that deal with agriculture. Among your choices:

• MLCX Grains Index ETN (GRU)
• Market Vectors Global Agribusiness (MOO)
• PowerShares DB Agriculture (DBA)
• iPath Dow Jones Agriculture (JJA)

ETFs Might Benefit From Global Water Shortage

A water shortage has wide implications that hurts many while benefiting water-focused exchange traded funds (ETFs) in the long run.

In Yemen, Mohammed Nasser has had to change his way of life, abandoning traditional customs of hosting passer-by or politicians, now unable to supply essentials for his own family because of the water shortage affecting agriculture. Almigdad Mojalli for Yemen Times reports that 10 years ago, water was plentiful. Now, of the 20 wells that used to supply the village's water, only two are functioning.

A bit closer to home, Tim Teichgraeber for decanter reports that April frosts have caused widespread damage to vines in Northern California, and now a water shortage has hampered sprinkler usage in an effort to salvage them. Some of the more vulnerable vineyards are those that lack overhead sprinklers which protect the vines when temperatures go below freezing. Some sprinklers have used up the entire water supply for the season, too.

Around the world, in New South Wales, Australia, the drought is also taking a significant toll. The dams that supply water for irrigation to the large crops are dried up, causing many farmers to go without crops, and therefore, without income. Australia's failed rice crop will also affect the cereal and grain crop, reports Asa Wahlquist for The Australian.

The rice shortage has led to rationing in the United States and riots in Haiti and Egypt.

However, water is not quite like the other commodities, and has its own special set of circumstances. It's not priced on a global market, it's heavy and transporting it costs more than it's worth.

Water ETFs currently available are:

• PowerShares Water Resources (PHO), down 4.1% year-to-date
• Powershares Global Water (PIO), down 10% year-to-date
• Claymore S&P Global Water (CGW), down 5.6% year-to-date
• First Trust ISE Water (FIW), down 1.4% year-to-date

Rationing Leads to Hoarding of Rice and Possibly ETFs, Too

The commodities craze spread to exchange traded funds (ETFs) awhile ago - now it's reached Sam's Club.

A worldwide rice shortage has led the warehouse unit of Wal-Mart (WMT) to start rationing some types of it, reports Cotten Timberlake for Bloomberg. Where allowed by law, customers are going to be restricted to four bags a visit.

Shrinking supply and rising prices have led to hoarding. Rice is a food staple for half the world, including in China, Vietnam, India and Egypt, countries that have also started restricting sales. Thailand is also considering restricting shipments.

Some of Costco's (COST) stores are putting limits on sales of flour, in addition to those of rice.

The good news is that both stores have extensive distribution systems, enabling them to redistribute supplies.

The rice shortage is just the latest in a long line of commodities that have become more scarce and expensive recently. Rice futures have risen 26% this month. Wheat, corn and soybeans are also at record prices, which has led to riots in Haiti and Egypt.

A spokesman for the USA Rice Federation says the rice shortage should ease up with the June harvest, and may be resolved by the end of 2009.

But if you were mulling a low-carb diet, now might be the time.

Agriculture ETFs are becoming a popular way to hedge those rising prices. Some of them include:

• MLCX Grains Index ETN (GRU): The fund has 46.7% wheat, 35.4% corn, 10.1% soy meal and 7.9% soybeans.  
• Market Vectors Global Agribusiness (MOO): Tracks an index of global companies primarily engaged in agriculture.
• PowerShares DB Agriculture (DBA): Tracks corn, wheat, soybean and sugar futures.
• iPath Dow Jones Agriculture (JJA): Composed of seven futures contracts, including wheat, cotton, soybean oil, coffee and sugar.

Deutsche Bank also issued a line of long/short agriculture exchange traded notes (ETNs) last week:

• DB Agriculture Double Short (AGA)
• DB Agriculture Double Long (DAG)
• DB Agriculture Short (ADZ)
• DB Agriculture Long (AGF)

Agriculture ETFs May Mean If You Can't Beat 'Em, Join 'Em

If you've ever strolled through the grocery store wondering if there's anything you can do about those ridiculous prices, there is: agriculture exchange traded funds (ETFs).

ETFs that invest in agriculture should benefit from global food demand and alternative fuels such as ethanol, even if your household food budget doesn't.  More agriculture investing opportunities are available to investors, as new ETFs and exchange traded notes (ETNs) are launched. These funds invest in sugar, wheat, corn, soybeans, cocoa, cattle, or coffee, reports Alan Purkiss for Bloomberg.

Some of the ETFs and ETNs that have a healthy serving of agricultural commodities are:

• Market Vectors Global Agribusiness (MOO), up 11.8% year-to-date
• PowerShares DB Agriculture (DBA), up 17.8% year-to-date
• iPath Dow Jones Agriculture (JJA), up 11% year-to-date
• ELEMENTS Linked to the MLCX Grains Index (GRU), down 1.6% year-to-date

Menu of Agriculture ETFs and ETNs Expands

Some crops might not be growing, but lots of agriculture-focused exchange traded funds (ETFs) and exchange traded notes (ETNs) are sprouting up.

Deutsche Bank launched a smörgåsbord of ETNs this week, just in time for the agriculture craze.

These new products maximize the potential returns an investor can realize in the agriculture marketplace. Deutsche Bank's line of ETNs are designed as leveraged plays on the PowerShares DB Agriculture (DBA) ETF, reports Trang Ho for Investor's Business Daily:

• DB Agriculture Double Short (AGA)
• DB Agriculture Double Long (DAG)
• DB Agriculture Short (ADZ)
• DB Agriculture Long (AGF)

DBA is up 19.9% year-to-date.

There's also the MLCX Livestock Elements ETN (LSO), which tracks futures in lean hogs (30%) and live cattle (70%). Lehman Brothers stepped into the arena in February with the Opta Lehman Brothers Commodity Index Pure Beta Agriculture Total Return ETN (EOH), which gives exposure to coffee, cotton and sugar.

Hungry for more? There are also a number of other agriculture-centric ETFs and ETNs on the menu. Among them:

• Market Vectors Global Agribusiness (MOO), up 11.1% year-to-date
• MLCX Grains Index ETN (GRU), up 1.3% since Feb. 15 inception
• iPath Dow Jones AIG-Agriculture ETN (JJA), up 12.2% year-to-date
• E-TRACS UBS Bloomberg CMCI Food Index ETN (FUD), up 5.1% since April 4 inception

Rising Prices Hit Everything from Wallets to ETFs

We know you're going to be shocked - shocked! - to hear this: consumer prices rose last month, no doubt weighing on consumer exchange traded funds (ETFs).

The Labor Department says prices rose 0.3% in March, following an unchanged February. Core inflation, excluding food and energy, rose 0.2%. Both numbers were what analysts had been expecting, reports Martin Crutsinger for the Associated Press.

In the last 12 months, inflation has shot up 4%. Energy costs are up 17% and food is up 4.4%. Last month, airline prices rose 3% last month. Surely you've noticed.

The good news: got your eye on that spiffy outfit in the window? It might be time to buy it if you have any leftover cash. Clothing prices experienced their biggest drop in nearly a decade: 1.3%. It was the biggest one-month drop since September 1998.

Consumer-related ETFs bear the brunt of much of these price hikes, though they're up slightly midday. As those necessary goods such as food and gas become more costly, there's not much left over for frivolous spending.

• iShares Dow Jones US Consumer Goods (IYK), down 5.5% year-to-date
• Consumer Discretionary SPDR (XLY), down 6.3% year-to-date

Sugar Might Sweeten Agriculture ETF Performance

Sugar is one commodity whose price remains relatively low when compared with historic highs, but it may not remain that way for long, leaving room to grow for exchange traded funds (ETFs).

Take Baltimore's famous Berger cookies, the price of which one woman recently balked at: $4.59. We can personally attest to the worth-it-ness of that price. The cookies are simple: eggs, milk, sugar, flour and cocoa for that delicious mound of chocolate frosting on the top. Really, you should try them.

The price of all those ingredients has soared in recent months - except for sugar. In "real" terms, the price of sugar has been dirt cheap since the late 1980s, reports Graham Summers for Seeking Alpha.

Blame much of it on a bad reputation: sugar rots your teeth, makes you fat and makes your kids swing from the chandeliers.

But the populations of other countries are beginning to get a sweet tooth as they start eating more like we do (heaven help them), contributing to a demand for sugar that has increased 15% since 2002. Demand is beginning to outpace production: consumption has risen 4%, production has risen 1%.

The biggest sugar consumers per capita are, in order: Brazil, Mexico and Australia, according to Daniel Workman for Suite 101.

The London Stock Exchange has a sugar ETF, ticker symbol SUGA. In the United States, there is sugar futures exposure to be had in the PowerShares DB Agriculture (DBA).

Agriculture ETFs Are Hungry For Higher Food Prices

The United States is dealing with the gnarliest food inflation seen in 17 years, and Wall Street and exchange traded fund (ETF) investors may be the only side winning out.

New data to be released tomorrow may show that it's only going to get worse. U.S. food prices rose 4% in 2007. It's not likely to get any better this year, either: 2008 prices are forecast to rise by 4.5%. Compare that to an annual rise of 2.5% over the past 15 years, says Ellen Simon of Associated Press.

Market Vectors Global Agribusiness (MOO) may be primed to capitalize as rapid growth in China and India has increased demand for meat. Exports of U.S. products, such as corn, have increased, as the weaker dollar has only made them cheaper.

Many farmers have traded corn for soybeans in an attempt to fuel ethanol tanks, a more profitable endeavor. PowerShares DB Agriculture (DBA) holds corn, wheat, sugar and soybean futures, which may come out ahead this year.

The simple rise in transportation costs, with higher energy prices are mixing with the increase in high commodity costs of wheat, corn, soybeans and milk, which are creating havoc on food prices.

Biofuels Responsible for Higher Food Prices and Agriculture ETFs?

Once hailed as something that could help reverse global warming, biofuels are now being blamed for much of the high cost of food and the resulting strong performance of agriculture exchange traded funds (ETFs).

World Bank President Robert Zoellick says biofuels are a "significant contributor" to the prices. That, couples with droughts, financial market speculators and increased demand have created a perfect storm, according to a report on NPR's Morning Edition.

A 4.4-lb. bag of rice in Bangladesh eats up half the daily income of a poor family, Zoellick said. In Haiti, where most people live on less than $2 a day, riots protesting the rising cost of living there are threatening the stability of the country, reports Jonathan M. Katz for the Associated Press.

Staples aren't likely to get cheaper anytime soon, either. He said that since Europe and the United States have stepped up their biofuel production, it's going to keep prices high for the next couple of years.

One of the few good points about skyrocketing food prices is that they could benefit agriculture-focused ETFs:

• PowerShares DB Agriculture (DBA): up 18.7% year-to-date
• Market Vectors Global Agribusiness (MOO): up 2.5% year-to-date
• iPath Dow Jones Agriculture (JJA): up 11.4% year-to-date

As long as biofuels exist, there are a number of green and alternative energy ETFs around that can capture the sector, including:

• PowerShares Cleantech Portfolio (PZD)
• Van Eck Market Vectors Environmental Services (EVX)
• First Trust NASDAQ Clean Edge (QCLN)

If Food Prices Only Get Higher, Agriculture ETFs Can Rise, Too

One expert doesn't see the price of food coming off its high horse anytime soon, which makes agriculture-related exchange traded funds (ETFs) especially timely.

Jim Rogers, who co-founded the Quantum Fund in 1969, says that even if oil prices fall, the price of food is still likely to rise because of the laws of supply and demand, reports Graham Summers for Seeking Alpha.

Between 1974 and 2005, the world's population grew by more than 1.1 billion people. But during that time, most of that population wasn't eating a western diet (that is, heavy on the meat). But as these emerging economies begin eating more like developed countries, food is going to get more expensive. It takes 17 pounds of grain to generate one pound of beef.

These are just a few of the reasons food prices are climbing. Oil prices do have something to do with it, as it makes farming a more costly venture. And severe drought hurts crop production.

Michael Sullivan for NPR reports that countries where rice is a staple, such as India and China, are already curtailing how much they export. They want to have adequate supplies at home, and it's leaving a shortage in the rest of the world.

Exposure to the agriculture sector can be had in several ETFs. Among them:

• PowerShares DB Agriculture (DBA): up 18.4% year-to-date
• Market Vectors Global Agribusiness (MOO): down 0.4% year-to-date
• iPath Dow Jones Agriculture (JJA): up 10.8% year-to-date

Food Shortage Has Many Roots; ETFs Could Grow From It

The financial crisis is the talk of the country, but another crisis might be helping some exchange traded funds (ETFs), but it's hurting people around the world.

Food prices have skyrocketed over the last few years, and even more so in the last few months, says Paul Krugman for the New York Times. Even Americans who are doing relatively well are grumbling at the swiftly rising grocery bills. But in poor, developing countries, it's devastating. Food often makes up half of a family's spending.

Countries that supply food, such as Ukraine and Argentina, have been limiting their exports to protect their own consumers. This has led to protests from farmers.

How did this happen?

1) Emerging markets. For the first time, a growing number of people around the world in previously poor countries can afford to start eating the way Westerners do, and beef isn't cheap to produce.

2) Oil prices. Modern farming uses a lot of it, which drives up the cost of agriculture.

3) Bad weather. Australia, in particular, has been experiencing a massive drought. It's the world's second-largest wheat exporter, and the lack of rain has cut into their production.

Can anything be done? Krugman isn't so sure. Expensive food and expensive oil may very well remain a fact of life.

Agriculture ETFs are a way to gain exposure to this sector if the prices do continue to rise as they have been. Among the many available:

• ELEMENTS Linked to the MLCX Grains Index (GRU), down 1.4% since Feb. 15 inception
• iPath Dow Jones AIG-Agriculture ETN (JJA), up 7.6% year-to-date
• PowerShares DB Agriculture Fund (DBA), up 16.4% year-to-date
• Market Vectors Global Agribusiness (MOO), up 0.5% year-to-date

UBS Enters Commodities Arena With ETN Line

UBS is getting into the exchange traded game with commodities exchange traded notes (ETNs).

Last week, the firm launched eight ETNs focused on commodities, and the plan is to venture into other asset classes, reports Jesse Emspak for Investor's Business Daily. The UBS Bloomberg Constant Maturity Commodity Index rolled out last year, and the ETNs will track it. The bank chose to go with notes rather than funds because they're cheaper to issue and simpler to structure.

The index focuses primarily on energy, followed by industrial metals and agriculture. The latest ETNs focus on metals, agriculture, gold, silver, livestock and food, as well as a broad based set of commodities. The notes will have expense ratios of about 0.65%.

A number of funds offer a commodities play, including these exchange traded funds (ETFs):

• PowerShares DB Agriculture (DBA)
• Market Vectors Global Agribusiness ETF (MOO)
• PowerShares DB Base Metals (DBB)
• iPath Dow Jones AIG Commodity Index (DJP)
• PowerShares DB Commodity Index Fund (DBC)
  

When It Comes to Hedging, Gold and Agriculture Emerge in a Tie

There's a battle going on: which commodity exchange traded funds (ETFs) are the best hedge, gold or agriculture?

And the answer is...well, we're not sure. Roger Nusbaum for The Street says that since August 2007, streetTRACKS Gold Shares (GLD) outperformed for awhile. Then PowerShares DB Agriculture Fund (DBA) was the strong one. When all was said and done, it was a tie.

Roger suggests that when it comes to hedging, 2%-3% in GLD or GBA is sufficient enough to benefit from strong performance without causing severe anguish in the event of a correction.

As with everything else in life, it's all about moderation. Commodities are a useful tool in bear markets, but they also work like other investments: they can correct, and you can lose. Having your exit strategy in place is a good way to protect yourself if that happens.

Some of the many other commodity-based ETFs are:

• GreenHaven Continuous Commodity Index (GCC)
• ELEMENTS Linked to the MLCX Biofuels Index (FUE)
• PowerShares DB Silver Fund (DBS)
• United States 12 Month Oil Fund (USL)
• Market Vectors Coal (KOL)

For full disclosure, some of Tom Lydon's clients own shares of GLD.

Monsanto Shares and MOO ETF Dip After Profits Report

Monsanto (MON), a major holding of the Market Vectors Agribusiness (MOO) exchange traded fund (ETF), posted higher quarterly profits. That's all good, right?

But the company's stock still fell - there was disappointment that it didn't raise its full-year earnings forecast, reports Carey Gilliam for Reuters. One analyst feels the company was too cautious. Shares of the company have risen more than 10% in the last six months before falling 6%, then rebounding to -2%.

Monsanto is the global leader in the development of biotech corn, soybeans, cotton and it makes up 8.4% of MOO's assets.

It begs the question: when will agribusiness stocks and ETFs keep up with the commodity prices? While commodities have soared, the funds that hold the companies behind the commodities have been left in the dust.

PowerShares DB Agriculture (DBA) is up 11.4% year-to-date, while MOO is down 5%.
The two funds are very different: DBA holds futures for wheat, corn, soybeans and sugar. MOO invests in domestic and foreign companies engaged in the business of agriculture.

While logic would indicate that if the futures are doing well, the companies that are involved in the production of those commodities would be performing well, too. But Monsanto's news today illustrates why this might not always be the case.

Corn Planting to Decrease This Year, Helping Agriculture ETF

Corn isn't about to get cheaper anytime soon, and while it might hurt your grocery bills, it could benefit exchange traded funds (ETFs) that hold futures for the commodity.

Farmers are expected to plant less corn this year, meaning that rising prices could only go higher, reports Mary Clare Jalonick for the Associated Press. The effects of less corn to go around will hurt more than just grocery bills: high prices also hit poultry, beef and pork companies, which use corn to feed their animals.

This year, 86 million acres of corn are expect to be planted, down 8% from last year. Corn planting will still remain at historically high levels, but may go down slightly this year because it's expensive to grow and prices are better for other crops, such as soybeans. In fact, soybean planting is expected to rise by 18% this year.

To get exposure to corn and soybean futures, check out PowerShares DB Agriculture (DBA), up 13.7% year-to-date. It also holds futures for wheat and sugar.

Tapping Into the Energy Sector With a Diversified ETF

Exchange traded funds (ETFs) have allowed investors to tap into the energy market without futures or oil and gas stocks. There are a broad number of options now, as the market has grown for these types of investment tools.

Decide if this will be the anchor for your portfolio, or an added investment that will add risks and benefits associated with specialized trading.

Chuck Marvin for TheStreet has some high-performing ETF options for passive investors:

• iPath Dow Jones-AIG Commodity Index (DJP): This is a diversified portfolio of energy, metal and agricultural products. Offers protection against inflation of current commodity values. A 0.75% expense ratio.
• iShares Dow Jones US Oil and Gas Exploration Index (IEO): Holds stocks of companies involved in the exploration and production of natural gas and oil. It takes a market capitalization approach with an expense ratio of 0.48%.
• SPDR S&P Oil and Gas Exploration & Production (XOP): Holdings include domestic oil and gas producers, with a fixed weight approach to asset allocation. Expense ratio 0.35%.
• iPath S&P GSCI Crude Oil Total Return Index (OIL): An unleveraged path to investment in Nymex West Texas intermediate crude oil futures. With an expense ratio of 0.75%, it takes a fixed-weight approach determining asset allocation of its portfolio.

Tom Lydon on CNBC's Power Lunch

Tom Lydon was a guest on CNBC's "Smart Money" segment of Power Lunch earlier today. He spoke with show host Sue Herera about agriculture ETFs. Video of Tom's segment can be seen below:

Commodity ETFs Shine On a Gloomy Day

Metal and agriculture exchange traded funds (ETFs) retained their bounce today, refusing to be brought down in the wake of bad news from other sectors such as financials, consumer and housing.

Last week, there was a commodities selloff, but the sector appears to be performing well enough early this week that it calmed fears that a commodity blow-up was around the corner, reports Ellis Mnyandu for Reuters.

Among the ETFs that took part in the rally:

• streetTRACKS Gold Shares (GLD), up 2.9%
  
• Market Vectors Gold Miners (GDX), up 4.4%
• PowerShares DB Agriculture (DBA), up 2.4%
  
• iShares Silver Trust (SLV), up 5.9%
  

Agriculture ETFs Rebound After Last Week's Selloff

Last week, agriculture and other commodities experienced a selloff and exchange traded funds (ETFs) took the hit with them.

Today, the bargain hunters were alive and well, looking for wheat, corn and soybeans at bargain basement prices, reports Stevenson Jacobs for the Associated Press. All the activity sent agriculture ETFs up big: PowerShares DB Agriculture (DBA) was up 4% for the day, while Market Vectors Global Agribusiness (MOO) was up 4.4%.

The selloff last week was an anomaly in a year in which agriculture futures have climbed to new heights, thanks to poor harvests, dwindling stockpiles and growing demand in emerging markets to feed people and livestock. The flooding throughout the Midwest this weekend also contributed to the spike in prices because growing season is just about to begin.

Investors Turn to Bond ETFs As Commodities Get Rocky

Investors, feeling more skittish than ever in these "what's going to happen next?" times, are showing signs that they're moving money away from commodities and metals exchange traded funds (ETFs) and stocks, and into bonds.

The prices of gold and oil retreated this week - gold dipped to $900 an ounce and oil finally fell below the $100 a barrel mark, reports Rob Wherry for Smart Money. It's quite a turnaround for the belles of the investment ball, which for weeks didn't seem that they could make a false move.

Gold, silver and agriculture commodities ETFs are continuing to show signs of cooling off in early trading today.

On the other hand, bond funds are among those rare flashes of green when it comes to performance and investors are taking that color where they can get it these days. The markets seem to have a split personality these days, and bonds are about as safe as you can get.

Among the top performers for bond funds so far this year:

• SPDR Lehman International Treasury Bond (BWX), up 7.4% year-to-date
• iShares Lehman 7-10 Year Treasury (IEF), up 6.3% year-to-date
• iShares Lehman 3-7 Year Treasury Bond (IEI), up 5.4% year-to-date
• iShares Lehman TIPS Bond (TIP), up 4.2% year-to-date

Financial ETFs Look Different In the Afternoon

It just goes to show: these days, exchange traded funds (ETFs) and the market can turn on a dime, and today was a perfect case in point.

This morning, things kicked off nicely off yesterday's high. Financials were up, the price of oil was down. Investors were still aglow with the news that the Federal Reserve cut interest rates by three-fourths of a percent.

But it was a blink-and-you'll-miss-it turnaround: the Dow Jones industrial average fell nearly 300 points, giving back much of its 420 points gained on Tuesday, reports Tim Paradis for the Associated Press.

The metals ETFs remained down: iShares Silver Trust (SLV) lost 5.8%, while streetTRACKS Gold Shares (GLD) declined 3.6%. Agriculture also finished lower: PowerShares DB Agriculture (DBA) lost 2.3%, while Market Vectors Global Agribusiness (MOO) declined 6.1%.

But financials, which were the early stars this morning, eventually lost steam and turned south again:

• Financial Select Sector SPDR (XLF), down 2.6%
• Regional Bank HOLDRs (RKH), down 1.1%
• iShares Dow Jones US Broker-Dealers (IAI), down 3.8%

The moral here is to not get swept up in the frenzy and keep emotions out of it. Strong performance is good, but it needs to be strong over a period of time - not just a day or two. Chasing performance can only turn into a fruitless and losing game of whack-a-mole.

Wait - Financial ETFs Are Up and Commodities Are Down? What's Wrong With This Picture?

Have we entered a bizarro exchange traded fund (ETF) world?

First, financials and internet are staging a turnaround for the better. Now commodities are turning lower after being on a bull run in recent months. The shift owes much to the Federal Reserve's latest interest rate cut - it's spurred investors to take some money out of commodities and ever-so-cautiously put some back into equities.

As a result, gold has fallen by its largest amount since June 2006, report Pham-Duy Nguyen and Millie Munshi for Bloomberg. The price dropped to $946.20, after hitting a record $1,033.90 on March 17. Declines were also seen in silver, sugar, wheat and oil.

The price of oil, which had been posting new records every day recently, suddenly dipped lower after demand for both oil and gas w