Shorting transports into a possible commodity bounce (USO, FAA, SEA, FRO)

With Quantitative Easing 3 on the way and uber-investor Jim Rogers shorting stocks and going long on commodities, short- and long-term exchange-traded fund plays are in order.

Gold (GLD), silver (SLV) and oil (USO) stand to gain. On the other hand, investors should look to short exchange-traded funds for airlines (FAA), shipping (SEA) and homebuilders (XHB).  Stocks have already been beaten down in these industries due to higher fuel and other raw materials costs but the ETFs offer the best options for establishing a short position for sizable gains. 

Short positions of 13.47% already exist for the XHB and 8.84% for SEA.  An article on about the policies of the Federal Reserve under Ben Bernanke details where to invest, “Ben Bernanke to emerging market investors: buy commodities!.”

Paradoxically, the combination of Ben Bernanke and the Chinese have been devastating to shipping stocks in SEA.  This was detailed on in the article, “China is sinking global shipping companies.” 

Naturally, shipping stocks would benefit from a real upturn in fundamental demand — and not just hedging or investor interest — in bulk commodities. But if this is only the contracts passing back and forth, the shipping companies will be left behind.

As it is, it looks like a choppy season for Frontline Ltd. (FRO), which was just downgraded — its fifth of the year — and has fallen over 50% the past week. 

FRO is now trading around $2.80 with FBR Capital calling for it to hit $1.50 over the year. 

General Maritime Corporation (GMR), another tanker company, just filed for bankruptcy. 

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