New Replacement for PCRIX, PCRDX!!!

[saluki9]

Well, we knew it was coming soon, but it is here

Barclays has finally dropped their commodity Exchange Traded Notes (ETN)

they have both a GSCI and AIG-DJIA version

http://www.ipathetn.com/dj_aig_overview.jsp?c=DCA01&ch=z


symbols are DJP and GSP

ER is 75bps

 

[brewer12345]

So these are basically the underlying notes that PCRIX has shifted to? I will have to read the prospectus.

ER is about the same as PCRIX, but significantly lower than PCRDX. If it delivers the same exposure, this is a godsend for those of us with access to only PCRDX.

 

[Dawg52]

So these are basically the underlying notes that PCRIX has shifted to?  I will have to read the prospectus.

ER is about the same as PCRIX, but significantly lower than PCRDX.  If it delivers the same exposure, this is a godsend for those of us with access to only PCRDX.

Check it out and let us know. 

 

[haha]

Well, we knew it was coming soon, but it is here

Barclays has finally dropped their commodity Exchange Traded Notes (ETN)

they have both a GSCI and AIG-DJIA  version

http://www.ipathetn.com/dj_aig_overview.jsp?c=DCA01&ch=z


symbols are DJP and GSP

ER is 75bps

Thanks, Saluki!

Ha

 

[brewer12345]

OK, here is the skinny. DJP is cheaper than PCRDX, but not PCRIX. Plusses are:

- potentially lower cost
- better transparency (no PIMCO mucking around with credit default swaps on GMAC, etc.)
- exchange traded
- the big one: MUCH MORE TAX EFFICIENT, since you don't get taxed until you sell and then it is a cap gain.

Minuses:

- Have to pay attention to discount/premium to NAV when you buy it
- Trading volume may or may not be high enough for one's liquidity purposes
- Credit exposure to Barclay's (Aa1/AA ratings, but still)


Bottom line: if you hold PCRDX, this looks like a slam dunk (probably a wash if you have access to PCRIX). If you hold or want to hold commodities in a taxable account, this is a no-brainer.

I am probably going to liquidate my PCRDX and buy DJP.

 

[saluki9]

I'm very excited about these for tax reasons.

I was only willing to hold PCRIX in a tax def account. Because I can't get it in my 401(k) and I can't contribute to my Roth anymore this is a huge thing for me.

 

[Dawg52]

Thanks, you just described my situation perfectly.

 

[LOL!]

Thank a bunch for the update/news. I had not pulled the trigger on the pimco fund yet, so this is good timing for me.

 

[ats5g]

Q: What happens when the iPath notes mature in 2036?

Do investors just get all their money back and then have to pay the cap gains and re-invest in another note?

thanks,
Alec

 

[brewer12345]

Q: What happens when the iPath notes mature in 2036?

Do investors just get all their money back and then have to pay the cap gains and re-invest in another note?

thanks,
Alec

Yup.

Assuming that this issue does well, I would expect to see more series of these notes issued. Some of them may have longer maturities.

 

[ats5g]

Is there anyway for a company to structure an ETF [that doesn't mature] like one of the mutual funds that does the commodities thing? I suppose there would be capital gains distributions, etc, for these.

- Alec

 

[brewer12345]

Is there anyway for a company to structure an ETF [that doesn't mature] like one of the mutual funds that does the commodities thing? I suppose there would be capital gains distributions, etc, for these.

-  Alec

Checkout DBC. It is an ETF that uses commodity futures and collateral and never matures. But that way you won't get the favorable tax treatment.

 

[saluki9]

Q: What happens when the iPath notes mature in 2036?

Do investors just get all their money back and then have to pay the cap gains and re-invest in another note?

thanks,
Alec

Ask somebody who owns PCRIX or PCRDX in a taxable account. I will be happy to pay my taxes in 30 years as opposed to getting clobbered each year.

 

[Dawg52]

Ok you dirty market timers, DJP has dropped from $50/sh to around $47.50/sh since we discussed it a few days ago. Good time to buy or do you think commodites have a lot more downside from here? 

 

[brewer12345]

Looks attractive to me from here. We are one hurricane away from another huge spike in commodities prices.

 

[Dawg52]

Looks attractive to me from here.  We are one hurricane away from another huge spike in commodities prices.

Well while I'm stocking up on canned goods for the summer hurricanes I might as well stock up on some DJP. 

 

[wabmester]

Well while I'm stocking up on canned goods for the summer hurricanes I might as well stock up on some DJP. 

What's the difference? They are both commodities with no investment value.

 

[saluki9]

What's the difference? They are both commodities with no investment value.

Them are fightin words!

 

[Dawg52]

What's the difference?   They are both commodities with no investment value.

Not true. I strongly believe in investing in my stomachs growth. 

 

[brewer12345]

What's the difference?   They are both commodities with no investment value.

Eh, I 'm not interested in rehashing this again. Go read the articles or stay in the dark. I can't be bothered to care which.

 

[wabmester]

Them are fightin words!

I think Swedroe looked at commodities as a diversifier.   He found that if you took energy out of the basket, commodities were consistently a drag on returns.    And, of course, we've all seen recently how well historic covariance predicts future covariance.  

If you're looking for an inflation hedge and something with low covariance with other assets, I would just focus on energy.   Oil is the new gold.   Of course, that doesn't mean it won't be getting cheaper in the short-term.

 

[saluki9]

I have not seen the work that Swedroe did, but I fail to see how what you indicate is possible.

If you look at historical data the Gorton and Rouwenhorst put together 3 of the 4 highest returning components were in energy (Crude, refined gas, and propane) but they were far from the most valuable when it comes to correlation. (and don't discount the 24%+ return from butter!)

That being said, considering where I think we are in this cycle, I have become a flithy dirty market timer and sold all of my PCRIX a month ago.

 

[Beststash]

I have become a flithy dirty market timer and sold all of my PCRIX a month ago.

I wish I had.....I haven't been that impressed since last Dec.

 

[cute fuzzy bunny]

Is it worth pointing out that commodities have been good diversifiers/uncorrelated asset classes predominately when they were hard for the average retail investor to own? Is that still going to be true now that funds and etf's out the wazoo exist?

 

[haha]

Is it worth pointing out that commodities have been good diversifiers/uncorrelated asset classes predominately when they were hard for the average retail investor to own?  Is that still going to be true now that funds and etf's out the wazoo exist?

Also, IIRC, a lot of the return to passive commodities historically came from the gain that occurs when futures prices in backwardation rise to meet spot.

With a lot of new money passively invested on the long side, we may see less backwardation than before.

Ha