-- Posted Wednesday, 22 July 2009 | Digg This Article | | Source: GoldSeek.com

Three years ago when I visited North America it was the television commercials for flipping and re-mortgaging houses that caught my eye as a worrying sign. This year watching TV at night in Vancouver it is the advertising for commodity exchange traded funds that catch my attention.

Commodity ETFs are an attractive way to hold financial exposure to anything from oil to gold and agriculture. They are relatively cheap as a financial vehicle and very liquid. But you are still making a bet on the direction of these markets, and that is all that really matters.

Retail investors

So what does it mean when an investment appears in a TV advert? Well, it is not something you will see until an investment is pretty much agreed on by the consensus. TV ads are expensive and take time to make. Therefore, they tend to be top-of-the-market indicators.

Another similar media indicator are books about an investment class. My own book ‘Opportunity Dubai’ was the same. It takes a long time to write and even longer to get published, and so books often appear just as the fundamentals they describe are changing.

Yesterday I bought ‘The Goldwatcher’, an excellent new book by John Katz and Frank Holmes with a forward by Dr Marc Faber. Perhaps this is also a negative indicator, although I asked Dr Faber that last night and he said gold has a maximum downside of $850 an ounce in any correction.

Perhaps it is the rest of the commodities complex ex-gold that should be the main concern. It is surely illogical that in the worst recession since the Second World War – with trade and industrial output slumping faster than in 1930 – that commodity prices should stay up.

Agricultural investment

Agora Financial senior editor Chris Mayer made a powerful case for agriculture as an investment theme at the Decade of Reckoning conference here in Vancouver. Population growth and a desire to eat well are strong drivers, and the longer trend is clear. Companies like Potash Corporation and Lindsy are Mayer’s top picks to play this trend.

But in the short term you have to wonder if the rally in agricultural prices is not overdone and maybe even more obviously the industrial metals and materials complex. If this is really such a terrible recession why should commodity prices hold up?

There ought to be a short-term correction at the very least as recession is striking at the heart of demand for commodities. If global manufacturing is in crisis then commodities should be cheap not expensive, and if so then the TV commercials for commodity ETFs are indeed a warning to heed.

-- Posted Wednesday, 22 July 2009 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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