The Swensification of Commodities, etc.
There is little question one of the driving forces behind the rise in commodities prices has been the Swensification of the stuff. After the dot-com crash investors began looking everywhere for uncorrelated asset classes -- stuff that didn't go down when everything else went down -- and they didn't have to go much further than Yale's David Swensen and his standout performance embracing commodities, hedge funds, real estate, etc. (Read Swensen's classic Pioneering Portfolio Management for full details.)
As a piece in today's Washington Post makes clear, a host of endowment and pension funds have now followed Swensen into commodities -- uncorrelated asset classes! -- most of them a) late, and b) less nuanced than Mr S. in their embrace of the previously heretical asset class.
While Swensen can't be blamed for the sins of his followers, some of their comment are striking, like this one from a pension director from Fairfax County, Virginia whose returns from commodities investing essentially drove his whole $5-billion fund's returns:
Our job is to minimize our risks on the taxpayer. If you can do that, why wouldn't you?
Indeed. Why didn't I think of that sooner?