Betting Against the Resource Sector Betting Against the Resource Sector: A Public Service . . . or Disservice
by Eric J. Fry
The Rude Awakening
Wall Street, New York
Wednesday, March 29, 2006 Eric Fry discusses some mutual funds that bet against the resource sector. ------------------------- - Cancel your subscription and do away with brokerage
statements – time to ride the commodity bull,
- Are you one of these eleven million Americans?
- A golden opportunity to cash in on, additions to the
market data and still more...
------------------------- Eric Fry, reporting from Downtown Manhattan... Today's Rude Awakening provides two public service
announcements – one for individuals who suffer allergic
reactions to various types of foods, and one for
individuals who suffer allergic reactions to various types
of bull markets. First, the food allergy announcement: Any Rude reader who
is allergic to peanuts, eggs and/or milk will want to
acquaint themselves with a company named Divvies. Some very
good friends of mine founded Divvies, which is one reason
that I am mentioning the company...but not the main one. Caramel corn is the reason. Divvies makes the best I've
ever had (despite the fact that it contains none of the
usual dietary garbage that I expect great-tasting sweets to
contain). Divvies does not use any eggs, milk or nut products in the
production of its baked goods, which is exactly why I
expected the caramel corn to taste "just okay," or "not bad
for a non-allergenic food." But it was genuinely superb. So
even though I suffer no food allergies whatsoever, I am a
very satisfied customer of Divvies. In case you're wondering, neither my employer nor myself
have any business relationship with Divvies. My
relationship with the company is strictly personal: my 7-
year old son and the 7-year old boy, Benjamin, who inspired
the launch of Divvies, are very good friends. Because Benjamin has severe food allergies, his parents (my
friends) embarked on a fascinating odyssey of culinary
innovation that ultimately became Divvies. For Benjamin's first birthday, his mother Lori, made a
"cake" of shaved ice. Birthday's #2 and #3 featured
"special cakes" that none of the other party-goers really
cared to eat. Thus, Lori and her husband Mark, became
determined to find – or create – non-allergenic foods that
EVERYONE would want to eat. "For the more than 11 million Americans with food
allergies," a Divvies press release explains, "deciding
what to eat and where can be difficult, and for some, very
dangerous. The practical implications of food allergies are
challenging on their own, but add the social separation
that so often is an unfortunate side-effect of the safety
precautions those with food allergies must take, and you
have a recipe that needs some work. "Parties where baked goods are served was the biggest
divider for Benjamin, so step one for Mark and Lori was to
scour the marketplace for non-allergenic foods. Their
diligent search yielded disappointing results. What they
quickly discovered is that there are not many food
companies dedicated to omitting peanuts, tree nuts, eggs
and milk from their ingredient list—the four common baking
ingredients that Benjamin can not tolerate even in trace
amounts. "But Lori would not be dissuaded. She donned a chef's cap
and a baking apron and worked tirelessly to create
delicious recipes that contained no peanuts, tree nuts,
eggs or milk." Lori succeeded beyond her expectations. So she and Mark
decided to launch their trend-setting baked goods company. If you'd like to learn more about Divvies, or try one of
their products, visit the Website at www.divvies.com. If
any Rude reader happens to try one of the Divvies products,
please let us know what you thought of it.
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A Public Service...or Disservice
By Eric J. Fry
22-year highs in silver; 24-year highs in sugar; 25-year
highs in gold; 26-year highs in platinum; all-time highs in
copper, crude oil and natural gas...Welcome to the
commodity markets of 2005-06. Commodity prices have been soaring to such heights that
tremors of acrophobia have become difficult to suppress.
Rare is the commodity bull who does not occasionally ask
himself, "Is this rally almost over?" Here at the Rude Awakening, we remain ardent bulls on the
commodity sector. But we also remained perpetually
terrified by the fear that our beloved commodities will
suffer some wicked setbacks en route to much higher
prices. We suspect investors would do well to simply buy
whatever resource stocks they wish to buy, then cancel
their subscriptions to the Wall Street Journal and toss
their brokerage statements in the trash until sometime
around 2010. But some investors may wish to place occasional bets
against the resource sector. (As when, for example, Ben
Bernanke's FOMC kicks this sector in the teeth by raising
short-term interest rates to 4.75%, despite a recessionary
economy and a slowing housing market). Thus, for those
investors who might like to bet against resource stocks, we
bring two new securities to your attention: Betting Against the Resource Sector: The Short Profunds Short Oil & Gas ProFund (SNPIX), an open-end mutual fund
that endeavors to produce "daily investment results, before
fees and expenses, that correspond to the inverse
(opposite) of the daily performance of the Dow Jones U.S.
Oil & Gas Index." ProFund's also offers a fund that bets against precious
metals stocks. The Short Precious Metals ProFund (SPPIX)
seeks to produce the inverse of the daily performance of
the Dow Jones Precious Metals Index. Both funds have lived up to their mandate. As the nearby
chart illustrates, the Short Oil & Gas ProFund exhibits a
distinct inverse correlation with the Dow Jones U.S. Oil &
Gas Index. 
For good measure, the gang at ProFunds has also launched
the Short Real Estate ProFund (SRPIX), which – you guessed
it – bets against real estate stocks like Simon Property
Group, Equity Office Properties and the other names inside
the Dow Jones U.S. Real Estate Index. Happy short-selling!
[Joel's Note: If you feel the same way about the commodity
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