Jefferies

The latest funds from Jefferies are based upon the Thompson Reuters/Jefferies CRB-EQ series of indexes. The equity-based funds track the industrial metals and agriculture indexes, explains Ron Rowland for Seeking Alpha.

The ETFs are:

• Jefferies/TR/J  CRB Global Agriculture Index (NYSEArca: CRBA)
• Jefferies/TR/J  CRB Global Industrial Metals Equity Index Fund (NYSEArca: CRBI)
  

CRBA holds equity securities from global universe of listed companies engaged in the production and distribution of agricultural products, including grains, livestock, fertilizers, chemicals, seeds, traits (seed characteristics attained through genetic modification) and equipment. (Another Jefferies Commmodity ETF launched earlier this month).

CRBI offers investors access to shares of companies across the globe engaged in the production and distribution of base/industrial metals and base/industrial metal products, including copper, aluminum, iron ore, steel, nickel and others. (Where copper and steel prices are going).

Both funds come with a 0.65% expense ratio.

These funds will not be affected by regulations expected from the Commodity Futures Trading Commission (CFTC), because they hold equities and not futures. (How regulations could change commodity ETFs).

For more stories about new ETFs, visit our new ETF category.

For the third consecutive month, home prices rose in August. The Standard & Poor’s/Case-Shiller index showed the prices rose 1% from July in 20 major cities. Prices are still down 11.4% from a year ago, reports J.W. Elphinstone for the Associated Press.

Consumer confidence fell in October to 47.7, the second-lowest reading since May. Analysts had expected a reading of 53.1. Any reading above 90 indicates the economy is on solid footing; a reading above 100 indicates solid growth, reports Ashley M. Heher for the Associated Press. Fewer jobs, lower salaries and a gloomy business climate are bringing shoppers down and keeping them reluctant to spend. Retail Select Sector SPDR (NYSEArca: XRT) is down nearly 2% this morning. (A holiday ETF?)

BP (NYSE: BP) reported a bigger-than-expected profit in the third quarter, even though lower oil and gas prices put a dent in its earnings. BP met its target by cutting costs by $3 billion. WisdomTree International Energy (NYSEArca: DKA) is up 1.5% this morning; BP is 8.6%.

United States Steel (NYSE: X) posted its third consecutive quarterly loss, thanks to the global economic downturn, which has depressed steel demand. The company did note that production and shipments rose from the second quarter and that a narrower loss in the fourth quarter is expected. Market Vectors Steel (NYSEArca: SLX) is down nearly 2.5% this morning; United States Steel is 5.1%. (Where steel and copper are going).

Coal. China has reduced its supply of coal by clamping down on pollution while demand remains unchanged, which could result in higher prices for the commodity. Now, China will need to import coal to maintain its production and power plants. Coal is the world’s fastest-growing fuel based on consumption. Coal is also a major component in producing steel. (More on coal here).

• Market Vectors Coal ETF (NYSEArca: KOL): up 184.3% since low; up 121.7% year-to-date

Steel. Steel has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. The Chinese markets and the U.S. dollar weakness has helped prop up the base metals market. (Four ways to play base metals).

• Market Vectors Steel Index ETF Fund (NYSEArca: SLX): up 147.7% since low; up 95.4% year-to-date

Metals & Mining. These funds track indexes made up of the stock of commodity producers. One argument in favor of investing in hard asset equity ETFs is that you may know a little about a particular commodity, but the person running a company involved in mining or producing that commodity is duty-bound to know a whole lot more. Commodity producers can make brilliant business decisions, and they can also benefit when new mines are discovered. They can also cut costs and boost profits. (The benefits of hard assets).

• SPDR S&P Metals & Mining (NYSEArca: XME): up 123.1% since low; up 74.3% year-to-date

Basic Materials. Base metal prices have jumped as demand for the metals increase, more notably from China as the country recovers and hoards metals. Base metals should continue their upward journey as fundamentals in a global recovery strengthen. (More on China’s shopping spree).

• iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): up 100.9% since low; up 58.5% year-to-date

Copper. Copper prices are at their highest levels in 13 months, thanks to both a drooping dollar and concerns about supply of the metal. Prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Analysts also predict that copper will be the top performer among base metals. (Where copper is going).

• iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 81.3% since low; up 112.7% year-to-date

Commodities have been on a hot streak, but as we’ve learned from recent bubbles, it’s wise to have an exit strategy in the event of a correction. You can read more about strategies here.

For full disclosure, Tom Lydon’s clients own shares of IYM.

Max Chen contributed to this article.

The current supply of copper looks like it may be dropping and steel producers may be flooding the market.

Copper prices jumped more than 3%, hitting a 13-month high on Wednesday, and BHP Billiton (NYSE: BHP) declared force majeure at the fourth-largest copper mine in the world, reinforcing supply concerns, writes Barani Krishnan and Rebekah Curtis for Reuters. Copper, along with other commodities, rallied as the dollar dipped.

Copper futures for the December delivery finished at $3.0360 per pound on the New York Mercantile Exchange -  the last time copper hovered around $3 dollars was in September 2008. (For more information on copper, visit our copper category.)

China Steel, Taiwan’s foremost steel producer, will reduce its domestic price by 4.5% in December, indicating that steel prices could be bottoming out. The company expects steel outlook to improve in 2010 as world economies recover, reports Ken Wills for Reuters.

Analysts are not surprised by pullbacks in the benchmark hot-rolled sheet in coil (HRC) steel price as a result of weak end-use demand, comments Tom Stundza for Purchasing. Production has increased to almost 62% of capacity despite August U.S. steel mill shipments being down 37% from last year.

In a survey of steel buyers, 77% of participants think current inventory levels are sufficient for one or two months and 76% don’t plan on increasing steel orders. Over the next month, 24% expect incoming orders to decline, and 46% expect incoming orders to decline in the next three months. (For more information on steel, visit our steel category.)

Fore more information on industrial metals, visit our industrial metals category.

• iPath DJ AIG Copper TR Sub-Idx ETN (NYSEArca: JJC): up 112.7% year-to-date

• Market Vectors Steel ETF (NYSEArca: SLX): up 96.6% year-to-date

• iShares MSCI Chile Investable Mkt Idx (NYSEArca: ECH): up 67.4% year-to-date; materials constitutes 20.7%, including mining companies

Max Chen contributed to this article.

There are various ways to invest in the commodities market, each with its pros and cons, and one way to invest in hard asset ETFs is through the equities market, according to Hard Assets Investor.

“As hard assets, they are the building blocks of world economies, and they can be a building block of a portfolio,” Ed Lopez, marketing director at Van Eck Global, says. Lopez notes that as global economies recover and grow, it’s going to push demand for these commodities higher, putting pressure on prices.

Adam Phillips, director of sales at Van Eck, says that both equity commodity ETFs and physically backed or futures-based ETFs can co-exist in a portfolio and be complementary.

One argument in favor of investing in hard asset equity ETFs is that you may know a little about a particular commodity, but the person running a company involved in mining or producing that commodity is duty-bound to know a whole lot more.

Still, it is important to know that while the underlying hard asset and the company that mines it are correlated to an extent, there some differences:

• Like any other company, these firms can have things go wrong, including  mismanagement, corruption, environmental disasters, labor strikes, lawsuits and more
• Companies also hedge their exposure to commodity price oscillations by using futures contracts to lock in in prices, which means that the company may not benefit if commodity prices rise

However, commodity producers can just as likely make brilliant business decisions, and they can also benefit when new mines are discovered and they can cut costs and boost profits.

Tax-wise, long-term capital gains on equities are set at 15%. (Read more on how ETFs are taxed).

Foster and Phillips say that investors should approach hard asset ETFs as equities, since they have a higher correlation with equities than commodities. “In normal markets, they’ll have a positive correlation with the broader equity markets,” Phillips says.

For more information on commodities, visit our commodity category.

Some related miner ETFs include:

• SPDR S&P Metals & Mining (NYSEArca: XME): up 73.4% year-to-date

• Market Vectors Gold Miners Fund (NYSEArca: GDX) : up 73.4% year-to-date

• Market Vectors Steel Index ETF Fund (NYSEArca: SLX): up 73.4% year-to-date

• Market Vectors RVE Hard Assets Producers Index (NYSEArca: HAP): up 40% year-to-date

• PowerShares Global Coal (NYSEArca: PKOL): up 115% year-to-date

Max Chen and Heather Hayes contributed to this article.

Copper prices are at their highest levels in six weeks, thanks to both a drooping dollar and concerns about supply of the metal. Anna Stablum for Bloomberg reports that copper prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Investors are now speculating that demand for copper will only increase. (Read more about how copper is used here).

Meanwhile, incidents in Chile and Australia are leading to supply worries. In Chile, the BHP mines are facing a potential walkout/strike as employees are not happy with recent contract offerings. Around 20% of copper mine output is at stake. In Australia, an investigation into an accident at a mine forced the closing of the main hauling shaft.

• iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 95.7% year-to-date

Steel also has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. Sahil Mahtini and Prasenjit Bhattacharya for The Wall Street Journal report that the Steel Authority of India Ltd., India’s largest steelmaker by local capacity, expects India’s steel consumption to rise 5%-6% in the calendar year 2009, while production is expected to rise 4%-5%.

India’s leading steel companies raised prices of flat products for the second month in a row in September because of demand from automakers and a recovery in global prices.

Meanwhile, the U.S. Commerce Department launched an investigation Wednesday into whether to impose anti-dumping and duties on imports of certain steel pipes from China. Tom Barkley for The Wall Street Journal reports that trade disputes are rising as the global economy moves into recovery mode. Producers are searching for different markets to unload excess inventory.

• Market Vectors Steel (NYSEArca: SLX): up 81.6% year-to-date

For more stories about base metals, visit our base metals category.

China’s cabinet is no longer approving new projects for energy-intensive aluminum production for three years. Chuin-Wei Yap and Juan Chen and Yue Li for Dow Jones Newswires report that the State Council, also issued new rules to contain excessive capacity in seven other sectors, including revisiting a years-long campaign to curb steel output.

The ban on new aluminum capacity, a popular metal, is primarily meant to rein in the energy-guzzling and hard-to-control industry. The markets have so far shrugged off the news.

The Chinese markets and the U.S. dollar weakness has helped prop the base metals market up, and the underlying demand is strong indicator that emerging markets have some resilience to the economic downturn, says Dorothy Kosich for MineWeb.

One analyst notes that base metals prices have hit “mid-cycle” levels, something that normally takes years after a global downturn. The analyst also predicts that copper will be the top performer among base metals, and forecasts China’s consumption to grow 20% this year.

Some related ETFs and exchange traded notes (ETNs):

• iPath Dow Jones AIG Copper TR Sub-Index ETN (NYSEArca: JJC): up 91.2% year-to-date

• iPath Dow Jones AIG Lead TR Sub-Index ETN (NYSEArca: LD): up 119.3% year-to-date

• Market Vectors Steel ETF (SLX): up 80% year-to-date

For more stories about base metals, visit our base metals category.

Steel prices have begun to decline and many think this trend will continue.  According to Robert Guy Matthews of The Wall Street Journal, steelmakers may have overproduced the metal and supply will outpace demand before long.

The massive stimulus packages that were rolled out by governments, especially China, made the demand for steel soar, resulting in steelmakers mass producing the metal.  In fact, China’s inventory of steel is more than 11 million tons, and this build up was a major reason that demand for steel rose.  As stimulus packages begin to slow down, the demand for steel could likely follow.

It isn’t all bad for the commodity, though.  Thomas Ludwig, chief executive of Germany-based steel distribution group Klockner & Co., which sells and processes steel throughout Europe and North America, has said that although real demand for steel is low, it could rise for the rest of the year and steel makers need to be more disciplined to prevent a chokehold on a recovery.

• Market Vectors Steel ETF (NYSEArca: SLX): up 80.7% year-to-date.

For more stories on steel, visit our steel category.

Kevin Grewal contributed to this article.

Strong employment reports, renewed auto and housing demand and signs of a recovery in China have helped spur the base metals’ strong run, says Sara Jane Tasker for The Australian. The rebound has been so strong that analysts expect it to continue for the rest of 2009.

Some other points:

• According to Citigroup, copper has led the base metal recovery, up $600 in recent trading. So far this year, it has gained 100%.
• Aluminum has climbed around 30% despite its London Metal Exchange inventories remaining at record levels, says Michael Taylor for Reuters.
• Base metals should continue their upward journey as fundamentals in a global recovery strengthen and the demand from China remains healthy.
• China is expected to account for 38% of the world’s copper demand by 2014, up from 28% in 2008.

• SPDR Metals & Mining (XME): up 53.7% year-to-date; holds companies involved in the metals and mining industries

• iShares Dow Jones U.S. Basic Materials (IYM): up 40.7% year-to-date; composed of companies involved in the production of basic materials

• Market Vectors Steel (SLX): up 66.5% year-to-date; pure exposure to steel companies

• PowerShares DB Base Metals (DBB): up 55.4% year-to-date; holds futures contracts for aluminum, copper and zinc

For more stories about base metals, visit our base metals category.

A report by the New-York based Conference Board reported that its consumer confidence darkened in July as worries of unemployment offset any enthusiasm from the rally in the markets.  The Board’s Consumer Confidence Index fell to 46.6 from 49.3 in June – far from economists’ expectations of 49. To put it into perspective, a reading above 90 would signal that the economy is on solid footing.

On a positive note, there is more good news out of the real estate sector.  The Case-Schiller Index, which tracks home prices in 20 of the nation’s largest metropolitan cities, rose for the first time since 2006.  The index indicated that the value of U.S. homes grew 0.5% month over month and 13 of the 20 cities in the index showed gains.  Unfortunately, the sector is still not completely in the clear: on an annual basis the index is down 17.1%.  The news sent the MacroShares Major Metro Housing (UMM) up 2.3% in intraday trading.

In the earnings arena, United States Steel (X), reported a second-quarter loss as demand was badly hurt because of the global recession.  The nation’s largest steel maker reported a loss of $2.92/share and beat Wall Streets expectations of $3.45/share.

Media giant Viacom (VIA) posted second quarter earnings of $0.49/share, a hair above the $0.48/share forecast by analysts. The company cited weakness in advertising and its filmed entertainment business as the causes of its 32% profit decline.  The news sent the PowerShares Dynamic Media Portfolio (PBS) down 1% in morning trading; VIA is 5%.

Deutsche Bank (DB) reported an increase in net income of 68% driven primarily by strong investment banking numbers.

Overall, the Dow Jones Industrial Average and the Nasdaq was down 1%, while the S&P 500 dropped about 1.2% in morning trading.

For more stories on real estate, visit our real estate category.

Kevin Grewal contributed to this article.