Last week Bryce highlighted that commodities continue to get decimated and this post prompted a question: should the contrarian investors out there start taking a closer look at commodities? The short answer is investors are much better off keeping their capital in the equity market rather than trying to scoop up a few commodity ETFs.
In the charts below we show the our relative (to the MSCI All-Country World Index) and absolute point and figure charts of the five largest commodity ETFs by AUM. Those five ETFs in descending order are SPDR Gold Trust (GLD), iShares Gold Trust (IAU), iShares Silver Trust (SLV), PowerShares DB Commodity Index Tracking Fund (DBC) and iPath Bloomberg Commodity index Total Return ETN (DJP).
GLD, which has an expense ratio of 40 bps, has declined by -8.2% annually for the past four year. On both a relative and absolute basis GLD is squarely in a downtrend. In fact, on an absolute basis it just made a new low.
Not surprisingly, IAU looks just as bad as GLD. However, you at least only had to pay 25 bps in order to have had the pleasure of experiencing a four-year annualized drop of -8.1%.
SLV has had a very tough go of it over the last four years. It has fallen, annually, over 21% with a standard deviation about 3x that of the MSCI All-Country World Index! Unfortunately, the pain doesn’t look like it will stop anytime soon. SLV just made new lows from a relative and absolute perspective.
DBC, which charges 87 bps for commodity exposure across metals, agriculture, energy, etc, has declined annually by -13.6% over the past four years. From an absolute perspective, it may be due for a short bounce but overall the trend is definitely down for now.
DJP, which charges 75 bps for exposure to the Bloomberg Commodity Index, has declined annually by -13.5% for the past four years. DJP is squarely in a downtrend from a relative and absolute perspective with zero positive technical characteristics that we can point to.
