Commodities

The most important thing for your investments isn't gold or the dollar, or the consumer price index or Treasuries or even the stock market.

It's energy. More specifically, it's crude oil. Oil absolutely dwarfs everything else.

As I wrote back on June 3:

"...in April of this year, a new daily volume record was set on the Intercontinental Exchange (ICE) for West Texas Intermediate Crude (WTIC) contracts - with an astounding mark of 464,381 contracts traded in just that one day. Each contract trades 1,000 barrels of oil.

With oil prices around $84 that day, each contract was worth about $84,000. So, it means that over $38 billion worth of oil contracts traded hands in that one day alone.

We might quietly scoff at the Toyota (NYSE: TM) Prius drivers - after all, the car only gets slightly better mileage than the average car in its class, so it's not all that special as far as environmentalism goes.

But don't scoff too hard, because it just might be that we'll all be driving hybrid cars in the not-so distant future.

You might be thinking that we simply don't have a model of fuel-source change for automobiles - so we really don't know what the future will hold - and whether our cars will be powered by natural gas, lithium-ion, or even solar power - or perhaps some combination.

And you're right - there's basically no model for automobile fuel conversion.

But there is a very robust model for home heating conversion.

Today there are at least as many heating technologies as there are fuel types, but 100 years ago, most people used coal and wood.

I'm back in Vermont after a week in Sea Isle City, New Jersey. And there's nothing like a vacation to make you appreciate the comforts of home. Even though Vermont isn't very far from New Jersey, geographically, the weather difference is pretty dramatic. Vermont does get hot (we broke 100 degrees a few weeks back) but I've never felt the urge to apply and reapply sunscreen here, like I did in New Jersey last week. I still managed to get a sunburn.

The headline reads "Oil falls to near $82 on weak US crude demand." As if that's some kind of revelation. The better question is "why is crude oil $82 a barrel when U.S. crude demand is weak?"

The latest round of economic data for the U.S. is pretty much the same as it has been: not disastrous, but not strong by any means. June consumer spending was flat and household purchases rose just 1.6% in the second quarter.

Many analysts still seem to think that oil prices are driven solely by demand in the U.S. But a report from Sander Capital sums up the reality: "The underlying fact is the emerging markets are still growing and so is their consumption of energy…"

In yesterday's issue of Resource Prospector I talked about the idea of shorting new commodity ETFs. There's lots of evidence that new ETFs, especially commodity ETFs, are launched at the height of their popularity. They can only fall from those heights.

There are a few exceptions. I will be publishing a special report about my three favorite ETFs - funds that are actually designed to make money, not lose money - in sectors that I think have plenty of upside.

If you haven't read my commentary on ETFs before, and you're wondering why firms would launch funds that tend to underperform, all you have to do is look at this simple chart...

On paper, I love socialism, the United Nations and ETFs. On paper, socialism is paradise where we all take equal advantage of each other and enjoy the fruits of the world's labor for free! The UN is the friendly world-policeman making sure that no one shoplifts or performs acts of mass-genocide, and ETFs are easy, convenient baskets of investments that every day investors can choose from to match their needs.

But in practice, all three are about as bad as it gets. Socialism is responsible for more death and destruction than any other form of government. The UN is an ineffectual collection of world improvers who can't manage to do the simplest of things right. And ETFs are baskets of investments typically launched at the peak of their popularity, which as we know, is the worst time to buy any investment.

So whenever I see a new commodity ETF coming over the horizon, my first instinct is to short it, if not completely ignore it.

Of course there are exceptions, and for the morbidly curious, I'm putting together a report about the ONLY three commodity ETFs that I like. It will be available sometime in the next week or so. Watch your inboxes.

In the meantime, let's look at one group of ETFs launched by one firm - most of these are based on commodities.

Below, I've posted a table of ETFs launched by Global X Funds.

Do you own the world's biggest oil company? Of course I'm talking about Exxon (NYSE: XOM) - and odds are if you've invested in a mutual fund or broad index, you do own Exxon.

But what if you could go back in time and buy Exxon in 1996, at under $20 a share?

Nearly 15 years ago, Exxon had yet to merge with Mobil, the largest industrial merger ever.

But they were still a huge company with a long track record of profits.

Buying Exxon Mobil at $20 a share would let you lock in a near-triple at the company's current share price of nearly $60. Okay, so a triple over 15 years isn't going to sail any ships.

I've flirted with the idea of dedicating each Friday's edition of the Resource Prospector to more humorous topics. But it's tough to be appropriately reverent about something as serious as our money while at the same time being humorous.

And to be honest, not many of the current topics in the resource sector are especially hilarious.

For instance: there's currently some degree of argument over whether we're currently experiencing inflation or deflation. I can't think of a more non-funny topic. If they say that comedy = tragedy + time, or that comedy is tragedy that happens to someone else, then it doesn't seem like there's much opportunity for jokes. After all, deflation or inflation is happening to all of us all of the time, so no matter how tragic it is now, it's likely to be at least as tragic later.

With the market bouncing all over the place - down 2 percent one day then up 3 percent the next, you're probably wondering where the best place to put your money is. In yesterday's issue of Small Cap Investor Daily- Alternative Energy Stocks Picking Up Steam, I recommended the alternative energy sector. Stocks in this sector continue to gain momentum as oil prices increase.

First off, I think energy is a good place to be, but you should not limit yourself to only alternative energies. The old standbys, including coal, are proven, abundant, and cheap. They will continue to be used - don't forget that for one minute.

A man once said "The 19^th century belonged to England, the 20^th century belonged to the US and the 21^st century belongs to China. Invest accordingly". That man was Warren Buffett, one of the most well-known, well respected, and most successful investors in the world.