Commodities lose their luster

On March 2, I talked a little about what I felt was an unsustainable rise in the stock prices of natural-resources companies and then picked a mini-basket of especially overvalued stocks to track against the market. Here, I want to provide a little update on how our mini-basket of commodities shorts is doing.

Since the opening bell on March 3, the S&P index has traded sideways (-0.07%); however, the Divagators' basket of commodities shorts would have netted you a nice 17% gain at Thursday's close. I am not surprised at the deflation of the commodities bubble, but I am mildly taken back at the speed of it, and Thusday's trading session was most revelatory. During a session that saw broad gains across nearly every industrial sector, basic materials and energy were in the red. So, at least for Thursday, commodities weren't moving downward in sympathy with the market as a whole. Quite the opposite -- they were moving against the larger market. Clearly, I am not alone in thinking that commodities prices and the stock prices of natural-resources companies are far too high, but we'll have to wait and see whether the downward trend will be sustained or not. I think it will be, but not consistently and certainly not at the clip we've seen in the last few weeks.