Checkout The Chart: Where's The Beef?

Earlier this year, we nominated the iPath DJ-UBS Livestock TR Sub-Index ETN COW as the most disappointing ETF or ETN of 2011. What led to such a bold proclamation so early in the year was the simple fact that while lean hogs and cattle prices were surging, COW was doing a whole lot of nothing. Not to toot our own horn, but this was the first outlet to highlight that COW was not a good way to participate in livestock's upside and we opined that if COW wasn't participating in said upside, would it not be vulnerable to a decline? Well, checkout the chart to see that the answer is a definitive “yes.” COW is down more than 10% in the past month and as if that performance wasn't bad enough, more pain could be on the way. optionsXpress sums it up best by saying “the historic rise in cattle futures is seemingly at an end.” Bad news for an ETN that is comprised of roughly two-thirds cattle futures. optionsXpress notes that cattle supplies are on the rise (not a good thing for almost any commodity) and August futures have given back $20 from their April highs. Making matters worse for COW, the most recent Commitment of Traders Report shows traders are reducing their long exposure to cattle futures. In terms of cattle futures, the above factors are near- to medium-term headwinds. Harsh weather and higher corn prices later this year, among other factors, could boost cattle futures as we get closer to 2012, optionsXpress notes. That's all fine and dandy for futures traders, but as we have already learned, that scenario won't make much difference to COW. Checkout the chart if you dare, just don't go running into this ETN without proper preparation for disappointment.