Commodities In The Spotlight

There has been no bigger or more controversial asset class lately than commodities. OK, I'll give you Financials. But commodities have been very big over the last couple of years, and it's only in part because of their outsized returns. Long a tool in the index wonks' low-correlation kit, of late commodities have emerged as a full-blown asset class in the way that Emerging Markets and Real Estate have in years past.

Add to that the fact that commodities (and particularly energy) are primary drivers and indicators of global economic activity, and it's been hard to take your eyes off of them lately, from the hoarders of gold in times of uncertainty to investors looking to use a broad basket of commodities to hedge their equity exposure. This issue, we've got all the commodities you could want.

Leading the issue is a very salient piece on the state of the commodities market in general. After the dizzying rise in price and the recent precipitous drops, the question that begs to be answered is whether the commodities boom is over. Nick Brooks provides an answer.

Rarely at the center of controversy, index investors recently became demonized, in large part because of the assertions of our next contributor. Hedge fund manager Michael Masters got in front of Congress twice and essentially said that conservative institutional index investors were juicing up commodities markets. Brad Zigler begs to differ and runs a withering rebuttal after the Masters piece.

The issue includes a lively roundtable discussion of commodities from some of the leading voices in the business including Peter Schiff, Jim Rogers and others.

Bringing some weight to the issue is a nice feature on commodities index construction from Paul Kaplan that looks at some of the tricky issues around how futures markets work. Larry Swedroe adds an excerpt from his new book on alternative assets giving guarded approval of the commodities asset class and looking at ways to access it.

Professor Israelsen submits one of his always-popular features, this one looking at one of the core selling points of commodities: correlation. And finally, Gary Gastineau, in a spirited back-page substitution for the Curmudgeon, tells you about an ugly surprise you might be in for when your broker lends out your ETF shares ... in an exposé of a little-known scandal in the ETF business.

Whether you're putting all your dollars into gold now, banking on Texas tea or hedging your bets with some correlation benefit, we've got you covered this issue.

Jim Wiandt
Editor