Simple is Good (EM and Commodities)

There is a lot of talk about what the fundamental inferences from the decline in commodity prices should be. FWIW, I tend to think the underperformance of commodities and emerging markets is mostly the unwind of a lot of strategic investor enthusiasm that got build up over the past twelve years, and not so much about global demand—which, with the exception of the steadily improving US, has been weak for years.

But set that all aside for a sec and just have a look at the following two charts, of copper and the ETF EEM. Whatever you think is behind their underperformance, the charts will tell you a lot about how investors think about the two assets classes; in other words, what their revealed preferences have been. It’s striking (and usefully simplifying). It may also help you develop a trading/invest view as to where you think these assets are going. Oh, and for the record: I don’t see a Ph. D. anywhere in there, either.

Copper, from 2003:

EEM, Emerging Markets ETF, from 2003: