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Contrary to popular opinion the inflation trade came back with a vengeance in 2010. Year to date, the ultra silver ETF (NYSEARCA:AGQ) ranks as the highest performing ETF up 88 percent. Second place? Cotton, up 65 percent. The silver mining ETF (NYSEARCA:SIL) went public in the summer, so it is at a disadvantage when comparing year-to-date returns. Using its holdings to project year to date returns it would have been the second best performing ETF up about 81 percent year to date.

Not surprisingly, precious metals were the best performing sector, as quantitive easing acts as rocket fuel for hard assets. A dubious runner up was real estate which benefited from an increase in farmland, forestry and raw land values as well as higher rental rates with lower purchasing costs. In line with themes which TradePlacer has focused, the other top sectors were agriculture and Latin America led by Colombia as a top performer. Latin America will become a leading exporter of agricultural products and other natural resources in the coming decade.

ETF
AGQ ProShares Ultra Silver 88.05%
BAL iPath DJ-UBS Cotton TR Sub-Idx ETN 65.28%
BHH B2B Internet HOLDRs 64.53%
GXG Global X/InterBolsa FTSE Colombia 20 ETF 62.26%
DRN Direxion Daily Real Estate Bull 3X Shrs 55.04%
IIH Internet Infrastructure HOLDRs 53.64%
THD Diversified Emerging Mkts 52.38%
JJT iPath DJ-UBS Tin TR Sub-Idx ETN 51.70%
DGP PowerShares DB Gold Double Long ETN 48.64%
UGL ProShares Ultra Gold 46.21%
SIVR ETFS Physical Silver Shares 46.00%
Sector
Commodities Precious Metals 33.44%
Real Estate 26.50%
Latin America Stock 24.54%
Commodities Agriculture 20.40%

Mainstream money managers and analysts continue to ignore the inflationary trend at their own embarrassment. Investors may review these performance numbers and ask their financial advisers whether they have investments in gold, silver, and agriculture and if not, why? Most don't have any. Investors should consider working with money managers that actually anticipated these trends rather than acted as bystanders.

The Federal Reserve has two buttons on the money printing machine. The off button - which will lead to immediate economic meltdown, and the on button - which will push capital into the inflation trade led by precious metals, agriculture, land, other commodities and emerging markets. There is no third button and using either button ensures that a currency breakdown is inevitable.

The power of the bull market in precious metals has steadily increased over the last decade. Gold has appreciated every single year for ten years and silver has begun a powerful move with intent on visiting its all time highs. The final phase in this raging bull market is approaching as the greed of making returns in dollars turns to absolute fear of holding any fiat currency in any amount.

Disclosure: Long SIL

Source: Top Performing ETFs and Sectors in 2010