FSU Editorial: "Commodities Make Record Returns in 2007" by Mary Rivas 12/28/2007

COMMODITIES MAKE RECORD RETURNS IN 2007
Beating Stocks By Huge Margins
by Mary Rivas
powerpathtomoney.com
December 28, 2007

Commodities indices in 2007 are expected to have their best annual returns in the past five years, according to an article entitled �Strong Returns for Commodities in 2007� published by the Financial Times on December 21, 2007. This is amazing news---especially when you contrast how commodities have performed compared to stocks.

The major U.S. stock indices are set to post modest returns compared to commodity indices. For example, the S&P 500 index, a major benchmark for U.S. stocks, is up close to 4% for the year. In contrast, the total return for the S&P GSCI index, a popular commodity index, is up approximately 29% for the year, for example.

Indices and Why They�re Important

In the investment industry, investment products� performance is compared to an index---a benchmark. An index serves as a performance indicator providing a representation of the value of the securities (e. g., stocks, commodities, bonds) which constitute it. Indices tell you about the financial performance of a given market. If you invest in a fund that buys primarily U. S. technology companies, for example, you could compare your fund�s performance to that of the NASDAQ index (a benchmark of U. S. technology companies� performance) to determine how your fund is performing relative to the market.

Just as there are indices for stocks, there are indices for commodities. There are commodity indices that are diversified across the five major commodity sectors: energy, grains, metals, food and fiber and livestock. These indices give you an idea of how commodities in general are doing. And, there are commodity indices that are concentrated in just a single category such as agricultural commodities. This type of an index will mimic the specific performance of agricultural commodity futures contracts.

If you're wondering why indices are important, it’s because commodity funds and other innovative investment vehicles invest in commodities by tracking indices. If you decide to invest in commodities using a fund (versus actively trading an account), it’s to your advantage to learn a little about the underlying index that the fund is designed to mimic. Do you want to invest in a concentrated investment fund that is structured to track the performance of just agricultural commodities futures, for example, or in a diversified fund that tracks an index that represents a wide spectrum of commodities?

Top Performing Commodities in 2007

Agricultural commodities have surged this year, pulled higher by strong demand from emerging countries and low supplies. Global inventories for cereals are expected to fall to a multi-decade low. Wheat and rice prices have hit record highs as a result of low inventories. Soyabean prices have soared to a 34-year high while corn prices have jumped to an 11-year high.

Metals have also performed strongly due to robust demand from Asian economies. Platinum prices have risen 34.2% so far this year. Platinum hit a record high of $1,516 a troy ounce and rose 2.6% during the last week of December to $1,514 an ounce. Lead surged 7.2% to $2,647 a tonne. Zinc moved 3.1% higher to $2,413 a tonne.

Oil markets appear to be tight enough to trigger further price increases in oil prices. WTI crude oil has averaged just over $70 so far in 2007, and it’s expected that prices will move to well above $100 at points in 2008.

Mary Rivas has over 16 years of experience working in the investment management industry, and is the author of Power Path To Money, which is available at www.powerpathtomoney.com. She wrote this book to teach people 1) how to use low cost ways to easily invest in commodities and 2) how to invest in themselves to achieve maximum success. Her book reflects her philosophy that successful investing is achieved by being knowledgeable about investment opportunities and by developing one�s inner power.

Mary Rivas is passionate about teaching. She has over 16 years of experience working in the investment management industry, and is the author of Power Path To Money, which is available at www.powerpathtomoney.com. She wrote this book to teach people 1) how to use low cost ways to easily invest in commodities and 2) how to invest in themselves to achieve maximum success. Her book reflects her philosophy that successful investing is achieved by being knowledgeable about investment opportunities and by developing one�s inner power.

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Mary Rivas
PowerPathtoMoney.com
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