Earlier in the year or late last year Dalio introduced the idea of the great rotation from Bonds to stocks, this idea is currently well underway and anyone looking to jump on the train is way, way too late.

Bonds initially soaked up the QE money and liquidity that the Federal Reserve pumped into the markets and the re-building of bank balance sheets. The excess money soon flowed into equities and their earnings.

Today the stock market is at nominal highs and money is leaving the bond market. This should be good for equities and it probably will be for a period of time going forward.

But money and liquidity rotate, and at some point the hot money follows the smart money. The smart money looks for value. Value is not without risk and smart money usually also means early money. Early money can have to endure some rough moments.

Commodities are now appearing all over blogoland. Some are positive, some are negative.



This is just one example. It doesn’t even talk about whether investing in commodities is a good/bad idea, simply the effect of commodity prices on earnings, which are currently good, and a % of these good earnings are due to low commodity prices which have been falling due to a contraction in demand.

Eventually, when the rotation from Bonds to stocks starts to slow, the leak from stocks to commodities will create higher commodity prices and commodities become hot again. Should economies improve, this effect will be magnified [not that I expect that] and commodities will really catch fire.