Money Magazine: Clueless on Commodities

Anyone wondering whether we are closer to the middle or closer to the end of the current commodities boom need look no further than this story in the current issue of Money Magazine to be reassured that it is the former and not the latter.

The nation's most popular personal finance magazine is still largely clueless about commodities as an investment class, the most recent evidence provided in the current issue that recommends commodity stocks instead of commodities themselves as a second rate alternative to TIPS (Treasury Inflation Protected Securities) for those looking to "protect" themselves from inflation.

While acknowledging the hefty price increases in energy, agricultural goods, and metals, all of which are readily available to retail investors through a myriad of ETF offerings, the magazine maintains its aversion to anything black and gooey or yellow and shiny by recommending related stocks instead of the commodities.

Specifically, the T. Rowe Price New Era fund [PRNEX] and the iShares S&P North American Natural Resources ETF (IGE) are both cited as good choices.

So, how have these stocks done against the commodity ETFs this year? Specifically, the iPath Crude Oil ETN (OIL), the iShares Silver Trust (SLV), the PowerShares DB Agriculture ETF (DBA), and the SPDRS Gold Trust (GLD)?

Not very good.

Of course they've done better than most other broad equity markets, so the Money Magzine staff is probably crowing about "beating the market".

And how is their number one inflation "protection" pick doing against mother nature's inflation protection?

As discussed here a few weeks ago, not very good either.

It seems that Money Magazine is no better than the government in helping to "protect" investors from inflation.

Full Disclosure: Long SLV, DBA, GLD, no position in OIL, PRNEX, IGE.

Comments

[TonyDaltorio]

I agree with you. I think that the move up in commodities in still in the 2nd or 3rd inning. The general public is still clueless about investing in commodities and the financial media absolutely loathes commodities.

[CLH]

Over the long term commodities go up very little. (housing is a commodity). They form a bubble and crash again and again. Never put commodities in long term investments but stick to growth stocks.

[bearfund]

Gold is money. If you hold stocks when the economy is healthy and gold when it has developed bizarre imbalances and disease, you will profit. But not because gold is an alternative investment. Rather, you will simply be holding the right form of cash at a time when cash is the right thing to hold.

[Kunst]

Money Magazine is clueless, period.

[GMiki]

Money Magazine isn't the only one. Some woman on CNBC named Carmen was last week giving advice on 401ks. Yikers--very 20th century, to say the least. But that's what's out there right now--yeah, buy TIPs and diversify. A little hemlock with that hamburger (replacing the sirloin on the BLS inflation index, of course), my dears?

[Humblemaster]

Watch your technicals in this market. ALL commodities are wildly overbought. Add legislation that threatens to close the enron loophole, and you're going to see a real downturn on oil and all commodities.

HM

[bluesmoke]

Judging by the range of responses, no one knows anything for sure. What I think we all can agree on is the world population is increasing. This in itself adds to the demand for natural resources of all kinds, whether it be hard commodities, or a companies' stock that trades relative to that market. So sure, the markets will swing, but it seems to me the trend will be up over a 5-10 year period.

[Kunst]

Human population is the ultimate bubble.

[mkreisel]

So you can do the rest of us a favor by committing ritual suicide, kunst.

[Steve K]

I'm not a fan of Money Magazine, but T. Rowe Price New Era fund [PRNEX] is a good pick. I've owned some for about 3 years, and it's returned about 30% a year each of the last 3 years. It's hard to be unhappy with that.