I read this article in The Edge about how commodities are an outlier when every other asset class is at or near record levels.
The bear case on commodities is as follows :-
A) The correlation of commodities with stocks has been high, weakening the case for investment
B) Commodity investment is like buying insurance and inflation comes due to higher raw material cost, which is nowhere in sight. Gold has fallen over the last three years, silver as well, energy etf is at half of 2008 prices, so in the recent past commodities are a failed investment story.
C) The world has too much supply and not enough demand, Europe is on the brink of recession, Japan is in one, China is slowing, USA oil production has surged. Hence, inflation is not a problem, the real risk is of deflation.
D) Institutions which invested in commodities are getting out, Harvard has cut its exposure to zero.
The bull case is that this is conventional wisdom and the Contrarian move would be to add commodities now to the portfolio.
First I have to identify a commodity etf which gives broad exposure.
As always, I will review this in a year. This might be the ideal way to recycle the China etf gains.
I am not an investment professional.
I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.
Nothing written here is an invitation to buy or sell any particular stock.
At most, I am handing out an educated guess as to what the markets may do.
The market will always find a new way to make a fool out of me (and maybe, even you!).
Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.
I am not immune to that, so please understand that any past success of mine will probably be followed by failures