By Michael Johnston, founder of ETF Database.
Investors have rejoiced in the rebound of the U.S. equity markets this year, but the real winners have been those who were bullish on commodities as the markets bottomed.
Hopes of a steady recovery, consistent downward pressure on the dollar, and even strikes at major South American mines have sent prices for metals used in industrial and manufacturing operations skyrocketing in recent months. Copper has been one of the bast performers: the iPath Dow Jones AIG Copper Total Return ETN (JJC) has gained more than 100% for the year.
But the significant rise in copper prices has been based largely on expectations for increases in demand that are yet to materialize. Global demand has remained weak, and warehouse inventories have been steadily rising as a result. Moreover, demand for new houses, a critical driver of copper demand due to the need for extensive wiring, is showing signs of sustained weakness.Opinions on where copper will go from here are mixed. Some industry experts believe prices will continue rising through 2011, while others think a downward correction could be just around the corner. Prices have doubled on strong demand from resource-hungry China, but still remain below year-ago levels on relatively weak domestic demand. "The demand for goods is still very soft; the United States economy is just barely recovering," Allen Sinai, president of Decision Economics, told the New York Times. "In a weak economy where consumer spending is weak, businesses have been slashing left and right. This surprisingly deflationary result reflects that."
ETF Plays On CopperFor investors looking to make a play on copper prices, JJC is one of the best options available. This exchange-traded note is linked to an index composed of futures contracts on the commodity. JJC has an average daily volume of about 100,000 shares and an expense ratio of 0.75%, making it a highly liquid, relatively inexpensive way to gain exposure to copper prices.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV