My 5¢ worth......returns in all market conditions....where's Alpha now?

These are my thoughts: Money managers needing bull markets to make money are quite simply not not acceptable. Surely a managers true worth can only be guaged in the current volatile times? It's no longer a case of the markets being a 'win-win' situation and if a manager cannot make money in a falling or sideways market then I certainly would expect him to clear his desk . Where is Alpha now eh? The shocking results of many funds over the past few months are nothing short of a disgrace. I do hope that the coming months will offer an opportunity for a clean out of those who have been shown to be wanting. The problem is manyfold..but in particular the 'long' mentality that prevails in the equity markets and the inability for strucutred portfolio diversification. Everyone is a specialist. You learn your professional trade in either equities/futures (energy/agri/metals etc)/foriegn exchange/bonds/interest rates or credit swaps/STIRS and so the list goes on. It's hardly surprising that there is little understanding between each discipline even though any/most investement bank(s) will have a department for each. The true bull market dependence of any money manager is surely revealed during such times as we are seeing now and yet many funds are simply standing aside and telling their clients to wait out the current market conditions and then pile in when markets resume a gentle trend up again. Surely there are opportunities at the moment? If anything I see more since the S & P/Dow topped out in late summer than before. With the hedge funds it maybe emerging market equities, rare antique watches if a fund isn't likely to thrive during NEGATIVE return periods for the assets in which it trades then it is NOT a hedge fund. Hedged means you are able to manage or offset your risk and still generate performance with such insurance in place. What also irritates me is the absurd portfolio diversification away from equities that was becoming apparent in the summer. Diversification into gold being a classic examaple yet under volatile conditions it is not unusual for markets to move in the same direction..currently we have Gold/Euro/Energy/ some commodities that show a direct correlation to equity markets which has been tightening over the last weeks.

Here's another article of interest from Canon trading titled "5 commodities to watch".

Gold
There has long been a strong underlying cultural demand for the precious metal during the fall and winter in most developed and developing economies. Typically unencumbered by weather, the demand for gold's annual cycle begins in September with the Indian harvest as farmers and workers put some of their earnings in gold, the traditional medium of saving and investment in most of rural India. Until the recent emergence of China as a gold-hungry country, India was year after year the largest consumer of gold, often buying more than 500 tonnes annually. This seasonal pattern of demand is large enough to influence the monthly price pattern in the world market.

Indian buying then continues into October with Diwali, the Hindu festival of lights and the beginning of the Indian wedding season when parents often buy gold for dowries. In the developed countries, Jewelers begin buying gold to fabricate jewelry for the year-end Christmas season, which accounts for the lion's share of annual jewelry sales.

Live Cattle
U.S. beef prices will average 8-9% higher in 2011 compared to 2010 according to the latest Consumer Price Index (CPI) for Food, from United States Department of Agriculture's Economic Research Service. The October report projects the increase to continue into next year, but at a slower pace with the increase in the 2012 CPI for beef projected at 4.5-5.5%. Meat prices in general are climbing faster than those for other food categories this year.

The report lists the 2011 CPI for all food increasing by 3.5-4.5%, while meats, poultry and fish are up 5.5-6.5%. For the coming 2012, prices for meats, poultry and fish are projected to increase by 3.4-4.5%.

According to the same report, cost pressures on wholesale and retail food prices due to higher food commodity and energy prices, along with strengthening global food demand, have pushed inflation projections upward for 2011. They add, that retailers have so far been slow to pass their higher costs on to consumers. Food prices during 2012 ultimately will depend on factors such as weather conditions, fuel prices and the value of the U.S. dollar.

Corn
With shrinking harvest expectations, the outlook for tight corn supplies will likely keep corn prices historically high over the next year, raising feed costs for beef, dairy and pork producers. At the end of the 2011-12 marketing year next August, the nation's corn stockpiles are expected to fall to a 16-year low, based on a USDA forecast. The USDA has typically come in with rosier forecasts than reality ultimately supports. As of this writing, 67% of the corn crop has been harvested versus 51% this time last year. Despite this, yields are expected to be lower than the USDA October numbers would suggest. The October report projected 148.1 bushels per acre, but farmers are now expecting an average yield of 145.9 bushels per acre.

Sugar
The sugar crop in Brazil continues to come in under industry expectations. Poor weather, aging cane fields under rehabilitation and a national mandate that 50% of the domestic sugar cane crop be used in ethanol production for the country's growing biofuel industry have all left transport-ready supplies to a sugar hungry world tighter than net importers could have anticipated. Ninety-six percent of all cars sold in Brazil are now flex-fuel vehicles. China, the world's largest consumer of raw sugar is expected to import between 18 and 22% more in 2011-2012 as consumption outpaces production. Thailand, the world's second largest sugar exporting nation behind Brazil is currently experiencing the worst flooding in 50 years at a crucial time when the harvest is expected to be delayed by two to three weeks.

Crude Oil, Unleaded Gas and Heating Oil
The U.S. Department of Energy released data last week reflecting a 4.7 mmbbl increase from a week prior, but still 28.6 mmbbl lower from a year earlier, thus reinforcing fears of continued stockpile depletions that have left our inventories at 20-month lows. Speculatively, the trend points to higher crude, heating oil and unleaded gas prices.

Tighter supplies relative to demand are likely to apply upward pressure on prices. In addition, unleaded gas stockpiles dropped 1.35 million barrels and distillates fell 4.28 mmbbls, while refiners are running at 85% capacity with no reason to increase capacity.

The Bottom Line
Gold, cattle, sugar, corn and crude oil are in high-demand now due to a number of factors including seasonal patterns and shortages. Because of these circumstances, the commodities may prove worthwhile to the savvy trader.

Trading commodity futures and options involve substantial risk of loss. The recommendations contained in this article are of opinion and do not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

Seasonal tendencies are a composite of some of the more consistent commodity futures that have occurred over the past 15 years. No representation is being made that price patterns will recur in the future, and even if a seasonal tendency occurs in the future it may not result in a profitable transaction due to fees, the timing of the entry, and liquidation.

Original story - 5 Commodities To Watch

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/09/investopedia65142.DTL#ixzz1dJ56ECdu