I am mainly interested in investing in commodities (well, technically adding them to my existing portfolio). However, I am having a tough time finding what I want.

I want a fund (or something similar) that doesn't sit the collateral in T bills paying about 0%. I feel that that is very inefficient since I can get a return of 0.75% (or so) myself in some sort of a high yield account at a bank. I don't mind so much, though, if the fund sits the money in inflation protected bonds. This at least gives me some additonal hedge against inflation. The inflation protected bonds at least stay in line with my objective of providing an inflation hedge with this investment while mostly avoiding what could be a bubble in precious metals (could very well be not a bubble, though).

Now, on to my question. When you look at the holdings of RRF (a wisdom tree ETF), their total holdings add up to about 200%. Here is their spreadsheet of their holdings from a few days ago:
http://www.wisdomtree.com/etfs/fund-...s_LookThru.xls

are they buying on margin or are they shorting some of the bond/ bill/ cash holdings?

Does anyone here know about master limited partnerships? MLPS

anyone ever fill out a K1 form? Because it's a partnership form?

How did it effect your overall tax situation?

I'm currently holding the below and rebalancing once a year. Is anyone not concerned with how far equity prices have diverged from macro fundementals? For ETF index holders like me, would it be better to sell off and sit on the side lines? Looking at the underlying it seems like a major correction like 08-09 will happen once again.


Canadian equity 20% BMO S&P/TSX Capped Composite (ZCN)
US equity 15% Vanguard Total Stock Market (VTI)
International equity 15% Vanguard Total International Stock (VXUS)
Real estate investment trusts 10% BMO Equal Weight REITs (ZRE)
Real return bonds 10% iShares DEX Real Return Bond (XRB)
Canadian bonds 30% iShares DEX Universe Bond (XBB)

Well, since almost half of your portfolio is in non equity holdings, you shouldn't take a huge hit anyway.

I mean, when you set this portfolio up, you did it with the long term in mind and for it to withstand downturns correct?

Corrections happen. The people who held through the last one up until now have been rewarded, right?

Thanks for posting and sorry for what I feel like must be a ridiculous question, but I couldn't find a satisfactory answer - is the downside of buying this as non-NY U.S resident that the fund is specifically geared towards avoiding NY state taxes?

Thanks for putting this into perspective for me. Indeed the intent is very long term with a portfolio composition like that - I really do believe we are due for a major correction and maybe in some odd way I find I can time the market

Okay got clear on this - anybody have an MA bond ETF they like?

learning more about leveraged ETF's and don't like what i see.

everyone points out the arcane math of double longs (let's say something simple like s&p 500) and then points to outperformance. but if you model a spreadsheet on a daily double long it keeps up to a double leveraged monthly fund in the long term.

every brings up a stock going up and then down the same amount the next day, but if it goes up two days in a row the double levearge wins AND if it goes DOWN two days in a row, the double leveraged daily wins too (2nd point isn't so obvious).... double leveraged shorts do have some really strange results.

but 3 things that kill double leverage:

1) fees. management fee. and i presume it's on the double leveraged investment. not sure though. 60 bps times 2 is alot in an 8% return environment.

2) leverage has a cost. it's embedded in futures, swaps or an interest rate paid if the stocks are owned physically. say the cost is 3%. again, with 8% return, double leverage should return 13% vs. 8% unleveraged. I'VE ONLY SEEN ONE OR TWO PEOPLE TALK ABOUT IT.

3) this one i was aware of but hadn't never really researched. if the market is very strong or weak from the previous close till about 2:30 pm then the leveraged ETF's have to buy or sell alot of stock. but of course wall street trading desks started legally front-running this. and not sure what happens when stocks start running like crazy (down or up) late in the day. i think you can have a giant tracking error (or they always buy very high and then the market often down the next few days.

cliff notes: very concerned about double leveraged etf's but not for the obvious reason that is constantly cited (arcane math). they pay leverage fee, they have management fees and they get legally front-run/gamed by trading desks

are leveraged ETF's fees on the leveraged portfolio? obvious answer is yes.

Not sure what an MA Bond is, but i own PFN which is an actively managed Bond fund, by Pimco. It has a nice dividend yield. Should do well in a downturn and as a hedge. I think.

CEF Connect has a screener. Looks like there are 5 MA Muni CEFs available. I'm not familiar with them.

It isn't arcane math. They will go down over a sufficient period of time (all of them). They are only appropriate for short term speculation.

The only reason to not short all of them in pairs is because they can fly and get you stopped out of positions.

If you want to use leverage, get $100k and open an account on Interactive Brokers.

Anyone hve thoughts on how to navigate this environment? How do we hedge and diversify? Im at a loss.

Gonna obviously hold long, but dont love my positions much at all at this point.

You mean how to deal with it emotionally?

Have enough cash to deal with life's inevitable ups and downs.

Learn to get some enjoyment out of other people freaking out and running back and forth. It makes it all a bit surreal which helps to mitigate your emotional response. I lost just under $6k today (and I own no gold!) and just sat still. Didn't like it, but it made all the difference in the world that other people were running back and forth in mitigating my freaking out.

Think of the market dropping as it being on sale. Sales are good, but you shouldn't get too excited about them. It isn't like you go to the market to buy eggs and see them buy one get one free that you go home to sell the eggs you bought yesterday back to them, right? You also don't buy all the eggs that they have simply because they are on sale, right?

Remember that only idiots and fortune tellers love their positions. Don't listen to them for anything more than entertainment value.

Don't put more on the table than you are willing to lose. Nothing worse than being one of the people I will laugh at. Losing money is bad. Being laughed at for running back and forth amusingly will make you feel even worse. The people laughing will point and laugh out loud.

I lost more. I own gold, but its only a small percentage.

Im talking about specific strategies to hedge against a possible equity bubble and the fact that hedging with gold is dubious at best.

I cant buy bonds right now for obvious reasons.

Europe is....

Cash is losing money and could potentially lose more.

I can handle the pyschological ride for sure. I woke up, looked at the big dip and went about my day anddidnt think about it too much. Poker has taught me as much.

+1

Buy lots of different asset classes and rebalance when things get out of whack. Keep some amount in cash just in case something gets cheap.

Fwiw getting destroyed in on AGNC and Commodities......so much so it's eating practically all of my equites. Thank god for dividends or I'd be even on the year practically in a bull market....

Are we talking stuff like SH maybe?

Yeah, i mean what are the merits of taking the money i have in commodities and reallocating it to SH?

What would that mean on a deeper level?

I mean, for me its so hard to know anything. No matter what i read about there are always exactly opposing opinions from seemingly smart people.

Ive heard great rationale for holding gold and commodities long, and ive always heard great rationale for not.

So far, my commodities have been fairly inverse to my equities.....

Question is, when to re balance? Do i sell gold now, take the loss for tax purposes, and buy back in at a lower price?

Seems counter intuitive to me to ever sell things when they dip if you specifically bought them long. Then again, you could be holding junk for years and years that way too.

This is my problem so far with investing. Its impoosible to know anything with confidence.

Do you own gold, or the miners? I wouldn't sell either right now frankly. Particularly not the miners.

I'm looking at the rest now...

Ya honestly I wouldn't have the depth to figure out how you can diversify more than you have. You can certainly reduce a portion of your US equities basket, and replace it with SH if you're concerned about things going the other way on you.

I'd put the question in the May trading thread to the Financier. He'd probably say the 10 year treasury note, and he's probably right. Assuming it's still under-valued.

Commodity ETFs are pretty crappy as a long term hold (except for GLD, which actually holds physical gold, if you think it will go back up) because they just hold futures contracts (basically, every month they are selling expiring contracts and buying new ones) and don't track commodity prices very well at all.

The easiest way to think of them is buy them if you have a really good idea on what commodities will do in the near term. I have no idea, because so many things go into their pricing, so I don't mess with them.

As far as buying SH, the only reason to do it is if you are long specific stocks or market segment ETFs, and you think that the broad market is going to do worse than your specific picks. Buying both SPY and SH would be pretty silly.

Yep. Sucks, doesn't it?

There isn't really a way to hold commodities (other than GLD and SLV) long. There isn't an ETF that keeps gasoline or oil in some bunker somewhere.

You could overweight stocks in companies that benefit from higher commodity prices to hedge if you think that commodities might crush stocks in general. The nice thing is, if you buy broad market ETFs you are already equal weighting them.

You just have to wait at least 30 days to rebuy it. Google "wash sale" for more info.

The general way to rebalance is to decide ahead of time what your asset allocation should be, and when your actual holdings get out of line with that

There is a reason to sell things if you bought them long - namely, you realize that you were wrong or if the reason why you bought them no longer exists (it was undervalued in your opinion and the price rose to being overvalued). If you are still correct (nothing has changed other than the price), buying more of them because they are on sale would be the correct move imo.

I just hedge by holding loads of cash so I can buy when something is ridiculously cheap. Usually I hold bonds and REITS, but right now (with where yields on bonds are and interest rate risk being present) I am in cash.

I will admit (aka brag) that I got extremely lucky with getting out of bonds and reits within a day or two of being perfectly correct.

First of all. Thanks a lot for taking the time to respond. I really appreciate it. I need all the help I can get and you seem to fall in line with my general thinking more than most.

I'm convinced to get out of GLTR. I never really wanted to get into it in the first place.....I might wait until the end of the year though.

Here's my question about hedging by holding lots of cash. What happens when you use that extra cash to buying things on the cheap and you run out of cash? Seems like it's hard to always have cash on hand. Are you selling something else when you use the cash to buy? ie, re-balancing to make sure you always have cash on hand?

I like writing to help me clarify my own thoughts and because others will occasionally find a flaw in my thinking and mention it to me for my benefit.

GLTR holds physical, so it doesn't have the problems I specifically mentioned. I was thinking more of the ones like DBC, DBO and DJP, which I wouldn't touch unless I had a really good short-term thesis.

The problem with GLTR (and other precious metal etfs) is that all things being equal they should just keep up with inflation minus expenses. There are some pretty decent theses about demand outstripping supply as India gets richer.

Very smart question. It is one I struggled with for years (still struggling a bit).

OK, lets say that VTI drops to $42 over the next few weeks (it closed Friday at $84.25). After a very short break to drink a bottle of pepto bismol and a significant quantity of whisky, I would put all of my remaining cash in it.

If it dropped from there to $21 I would just make a sad face (and drink lots of pepto and whisky) that I already got my money in good but could have done better had I waited. You do have to pick a point at which you will be fully invested and be willing to be a short-term loser if you are looking to buy stuff on the cheap.

I'd also cut expenses to the bone and throw more money at it from each paycheck.

Since I do some stuff with momentum, if VTI drops by a couple percent per month for a few months, I wait for what I think is a full blown bear market to get my money in instead of buying the whole way down. Historically, most bear markets have 1/3 of their price drop happen over the first 2/3 of their length in time and 2/3 of the price drop happen over the last 1/3 of their length in time. I don't try to accurately time it, and don't mind if I am fully in before the bottom if it is a market I understand.

Muni CEFs are getting crushed...