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Possible hedging of our costs

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Piper

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The CME thread reminded me of something I stumbled across a couple months ago and forgot to post about.

Some new ETF’s have hit the market recently that might enable us small guys to actually hedge some of our costs, including cheese, flour and meat.

Teucrium Corn Fund - This fund is designed to track the price of corn, which can be somewhat correlated to the price of cheese (corn is a major input cost). Take a look at the graph and it has been mainly running with cheese, even giving back in the past few days (when cheese prices finally fell.)

Teucrium is also planning a fund that tracks the price of wheat.

UBS E-TRACS CMCI Livestock ETN - Tracks the price of cattle and lean hogs. I buy raw pork, so this would be a great one for me but it could also hedge all of your pork related meat products.

If somebody purchased the appropriate amount of CORN six months ago you could have been mostly hedged against the cheese price run-up. We are not nearly big enough to negotiate long term contract with suppliers to hedge commodity prices, but these funds could allow at least some control.

Disclaimer - I haven’t done a full amount of research on these yet, I don’t know how good the correlation is, I don’t know what the management costs are, I haven’t done the financial engineering to determine the proper amounts to purchase to hedge. Don’t buy these on my recommendation! I just think they’re an interesting possibility.
 
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pizza2007:
For the greater part, FUNDS only make the FUND MANAGERs money.
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These are exchange traded funds, not mutual funds. Even with respect to mutual funds, I’m not certain where you get your information from because your statement is completely incorrect.
 
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Ok, thats your opinion.

If you’ve invested in a fund, please tell me what your profit was (and forgive me, but average a couple of years at least), also, tell me how much the manager of the fund made. Convince me - does your fund guarantee a return?? Do they refund fee’s when you lose $$s??? Please do tell.
 
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pizza2007:
Ok, thats your opinion.

If you’ve invested in a fund, please tell me what your profit was (and forgive me, but average a couple of years at least), also, tell me how much the manager of the fund made. Convince me - does your fund guarantee a return?? Do they refund fee’s when you lose $$s??? Please do tell.
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I’m formally trained in finance, I know all about funds. It doesn’t seem that you even know the difference between an exchange traded fund and a mutual fund, so I don’t think it’s worth arguing with you about to be honest.

The CORN ETF is not actively managed, so the management doesn’t have a whole lot to do with it.

The point of the CORN ETF would be to purchase an asset that moves contrary to the price of cheese with a fairly high correlation. When the price of cheese goes up, the ETF goes down and vice versa. That’s called a hedge.

But just for fun, go take a look at the PIMCO Total Return Fund. Yeah, that one’s been a real dog. Bill Gross is the only person to make money there :roll:
 
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Piper, you’re interesting…

I’m glad you’re formally trained. So was Bernie. And we know where that ended up. So much for formal training.

Explain to me what a fund is? Wait, save it. A fund (financial service) is developed by someone with a specific goal of earning that someone a fee for the service. They sell it, like any other (insurance, stock, bond, any other finance instrument), on the speculation that it will earn the investor money. Did I miss anything?
 
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