Sunday, June 15, 2008

Sell Short!

I guess some Wall Street investors have been reading my blog.

Investors are getting worried that the commodities party may be drawing to a close, and Wall Street is introducing funds designed to capitalize on the choppy market.

Over the past seven years, commodity prices have soared with the S&P GSCI Total Return Index rising nearly 300%. But starting this spring, with the huge exception of oil, many key prices have eased.

Several new funds and securities take short positions on commodities, allowing investors to benefit from any drop in prices. But investors should exercise caution. These funds often pursue complicated strategies, some going long on certain commodities and short on others. And, if their particular bets go sour, they could pile up big losses. Many funds are leveraged, which will magnify gains or losses on the investments.