Did Barron's Really Pan All Commodity Investing?

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The cornerstone of the (Barron's) author's argument was the current record net long position of speculators and the corresponding record net short position of the commercials who are considered the "smart money."

The cover story of this week's Barron's was Guess who's behind commodities boom ($), with this quote on the cover:

More than half of all bullish bets on commodities have been made by speculators, both big and small. When these markets fall, they'll fall hard, perhaps by 30%.

That quote summarizes the article pretty well. The cornerstone of the author's argument was the current record net long position of speculators and the corresponding record net short position of the commercials who are considered the "smart money." Commitment of traders [COT] data is indeed a valuable tool in analyzing markets, but to ascribe the price run-up to speculative demand alone glosses over the very real bullish supply/demand fundamentals...

If the main thesis of the Barron's article was that the commodities will correct further, I would have titled this post "Barron's pans commodities." Hell, I probably would not have written this post since I see some short term technical difficulties myself. However, rather than voicing an opinion on the future price trajectory, the article was really an indictment on investing in commodities, or to be exact, investing in commodities in long-only index funds. One particular quote belies the author's disdain: In other words, they [the commodity index funds] trade the naive and potentially fatal assumption that commodities have the same tendency as stocks to rise over the long run.

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