The fund has nice diversification between things like coffee and cocoa to corn, sugar, and wheat. Notice how severely the ETF performed after topping out relative to the stock market in the middle of August when the summer crash was in force.
The decline has been significant for the fund also because it suffers from the continuous rolling over of futures contracts, meaning that to maintain exposure in the those contracts, the ETF must buy contracts further out in time which are currently more expensive than spot prices. At some point this likely will reverse, and we may be closer to that moment that most think given the very real possibility of a reflationary environment for 2012.
What makes me say that? Take a look at the equity side of agricultural stocks through the Market Vectors Agribusiness ETF (MOO) which is showing some nice leadership against the S&P 500.
Could it be that equity investors in agriculture are anticipating a pickup to come, and that this could eventually filter through to the commodity side itself? While DBA has not returned to an uptrend just yet, its very important to keep an eye on the asset class for those interested in a trade which could perform better than equities at some point this year.
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter.