Roger Nusbaum submits: A reader forwarded me a link from Index Universe about a broad based commodity ETF from Deutsche Bank that was approved by the SEC (proposed ticker: DBC). Unless I missed it in the article I did not see an expectation of when it will price.
The reader wanted to know if it is a good idea to own something like this coming ETF given the run that commodities have had.
Jim Rogers says he expects this commodity bull market to last for at least 15 years (based on the duration of past commodity bull markets), which means there are at least ten years to go. There is no way to know if that will be right but I think the logic is sound; commodities could outperform for an extended period.
I think every diversified portfolio needs some commodity exposure and if this is better than what I am using now I would not hesitate to switch.
One thing to understand is that where it has been it not very important. That commodities zig when equities zag is important. Buying Google at $345 (the price I sold it) was a great trade. The move from $85 to $345 should not have mattered to the person on the other side of my trade.
To be candid I do expect the run in commodities, in general, to last. I don't know about doubling in price from here and I don't know about gold either but I think it makes sense to overweight the asset class for a while to come.
Overweight does not mean 30%. For the portfolios I manage it does not even mean 10%. The other thing to add on this topic is that we are talking about an asset class. Being diversified means exposure to all asset classes, even the ones you don't expect much from.
I had some good comments left about my most recent thoughts on gold. After a big drop in such a short time, yeah I think it might be better to buy right here. It has fallen fast and hard as opposed to rolling over. Maybe I am wrong and it will fall a lot more. I still do not think $800 gold is coming soon. A lot of the comments about this point out the some of the fundamental catalysts for why gold should go higher. I know all of the reasons and they may turn out to be right but I don't think the central bank buying, as an example, will mean what so many folks think it will mean.
$500 may be high but I do not think is is baseless. The story has evolved to be more favorable for gold. From the start of this dialogue I have been doubtful about $800 and higher. I have not doubted a move a little higher above current levels.