Commodities Come in Three Packages

There is no question that these conclusions are true, but the argument for stocks instead of commodities is incomplete. Stocks aren't commodities, and commodities aren't stocks. The Market Vectors Agribusiness ETF, a stock fund, and the PowerShares Agriculture Portfolio(DBA), a commodity futures fund, are clearly similar in description as the companies in the stock fund make money one way or another from the things in the commodity futures fund, but the behavior of the two during the bear market was much different. The stocks went down much more than the commodity futures.

At times, the stocks will outperform the futures, at other times the futures will lead and other times still there will be very little difference between the two. Another way to think of it is that the stocks may benefit from commodities, but they aren't the same thing as the commodities. This is also true of industrial metals, precious metals and energy.

The original Thomson-Reuters Jefferies Commodity Equity Index Fund was a me-too fund, but has come out of the gate impressively with $55 million in assets after only one month. While likely not enough of an asset base for profitability, it's an impressive start. Whether the good start for that fund was a function of a successful sales effort by Jefferies Asset Management or not, I expect the two newer funds to gain traction, but to use them for what they are, which is commodity stocks, not commodities.

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