In case you missed last week’s confirmation hearing for incoming Federal Reserve Chief, Janet Yellen, I can sum it up for you in one word … Clueless!
“It’s important for the Fed, hard as it is, to attempt to detect asset bubbles when they’re forming,” said Yellen. “[But] by and large, I would say that I don’t see evidence at this point in major sectors of asset price misalignments.”
No bubbles anywhere, huh? Maybe Yellen has already donned the pair of rose-colored glasses worn by her predecessors, Greenspan and Bernanke – who completely missed the epic bubbles in tech stocks and real estate. Or maybe it’s just that the asset bubbles I see forming don’t qualify as “major” enough to warrant a Fed response.
As an investor, though, any asset bubble spells trouble. So we need to be on the lookout for them at all times. Because once they
Some analysts are predicting that the commodity price boom of the new millennium is something that has played itself out.  Except for shale gas and its downward pressure on U.S. natural gas prices, however, natural resource-based commodity prices have remained high by historical records in the last few years, despite the feebleness of the recent global economic recovery. The great spike in commodity prices starting at the end of the 1990s has not been significantly reversed along the global downturn, remaining on average not far from their 2008 levels (Chart 1). And in fact, they have occasionally exhibited signs of revival quicker than the global economic output (Chart 2). So the question now is: have we entered a phase of descending commodity prices in general?
(Click to enlarge)
Source: World Bank, Commodity Markets Outlook, October 2013
First Trust, the money manager known for its specialized sector index exchange traded funds, is adding an actively managed commodity strategy later this week.
According to a press release, the First Trust Global Tactical Commodity Strategy Fund (FTGC) is expected began trading on Wednesday, October 23.
Commodities provide a historically low correlation to traditional asset classes, like stocks and bonds. With an uncorrelated asset, such as commodities, investors can increase diversification and potentially diminish portfolio volatility.
Additionally, commodities provide investors with an inflation hedge as commodity prices typically rise during periods of high inflation.
FTGC tries to generate attractive risk adjusted returns through commodity futures contracts and commodity-linked exchange traded instruments, according to an updated SEC filing.
Specifically, 25% of the holdings will be in futures contracts and exchange traded instruments. The remainder of the fund's assets will be invested in short-term investment grade fixed-income securities, money