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With global growth anaemic and likely to get worse, commodities are dead money according to the conventional wisdom.

Bonds are according to Bernanke et al, going to remain low at least into 2015 and maybe beyond. Whether a ‘taper’ arrives or not, yields will remain low.

Stocks are therefore by default going higher and you should be on the train.

Commodities respond to falling prices through the restriction of supply, whether voluntary, or forced by the market. The prices then stabilise and in many cases rise. Inflation, of which we have plenty despite protestations to the contrary, add a further price rise [nominal] into that mix.

Therefore I will be a buyer of commodities over time. The assets must always be purchased cheap [low] and sold high. You can only ever get low prices when things look horrible and the end is nigh. Currently commodities are hated by pretty much everyone, therefore, you must buy. Not in one giant hit, nibble, build the positions over time. Use time as your ally.

Bonds in the face of money creation/expansion by the Fed can indeed stay low. While they do, money, must and will flow elsewhere for a return. Pension funds require a return to fund their obligations. Insurance premiums [earned] that form the basis of reserves need to earn a return to offset future claims. The list can go on.

Buying bonds therefore is a total waste of time. There is no return commensurate to the risk that you are assuming. No-one knows how high the yield would rise in a market free from Central bank intervention. Bonds are a death trap and should be avoided by the non-specialist. I will be interested to see how the ‘specialists’ make out…the Gundlach’s and Gross’ of the investing world.

Buffett is selling debt to fund purchases, the very opposite of what these chap’s are doing. Love him or hate him, he has made money through all market cycles over what, 60yrs!

Stocks, do then, provide seemingly the only game in town. With stocks I will likely be a seller into a rising market. I bought [near] the lows and will be gradually selling into any continuing move higher. The problem will occur if I sell out of all my holdings due to the market rising so high.

The solution for me will likely be to break the SPY ETF into sector ETF’s which allows the low P/E sectors to be bought, or relatively low sectors.

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