Stocks are out. Bonds are out. Real estate is out.
Commodities? That’s where the money has been made lately. Commodities have just had their best 6 months in 35 years. But our guess is that many are in bubble mode and will continue to rise as the U.S. Fed pumps more liquidity into the system. But betting on commodities is not a one-way wager. Tony Jackson tells us that in the 1970s, commodity prices, adjusted for inflation, were flat in the United States and down in the United Kingdom. Besides, remember that high prices cure high prices. As commodity inflation bubbles over to retail price inflation, consumers cut back. Demand falls. The economy slows. Commodity prices drop.
It may be true that commodity prices will continue to rise for a few years more. It may even be true that real commodity prices will be higher 10 years from now than they are today. But at today’s prices, looking for safety in the commodities market is like protecting your son from bicycle mishaps by buying him a motorcycle. You’re simply trading a slow risk for a fast one.
How about emerging markets? Same problem. They’re risky anyway. Inflation doesn’t make them safer. It just makes alternatives to them less safe too.
So, what does that leave? Nowhere? Nah… the FT is wrong. There’s no such place as “nowhere.”
More about where your money should be…tomorrow…
Markets and Money