http://www.tradingmarkets.com/.site...arket-Volatility-and-its-Impact-on--79250.cfm EDITED EDITED Metals and Commodities: Like stocks, real estate and non-guaranteed debt securities - commodity prices including metals have taken it on the chin due to deleveraging by hedge funds, a stronger dollar and the prospect of slower global growth. Stocks in commodity related companies have performed worse still. Will commodities rise up once again? Will we see global food shortages? Will future coordinated currency devaluations cause gold to become a de facto number currency? Will Asia recover and continue consuming vast energy reserves? None of us know for certain. It's equally possible that a battery engine is soon invented and 10 years from now gasoline doesn't even exist. I consider inflation sensitive commodities to be a must have in a balanced portfolio but I'm well cognizant that commodity prices could succumb further to continued asset erosion. Buyers in this sector should start with reasonable size and with room to add on further weakness - particularly in food related groups. Treasury Securities: As we've witnessed the past year and half not all credit markets are the same. In fact not all segments of the yield curve are the same either. Non Treasury backed issuance remains soft with default risk spread out among an array of mortgage, municipal and corporate backed securities. In general be cautious of any high yielding paper. We haven't seen the last default and municipals are going to be the next wave of collapsing securities. While the front end (short dated paper) remains on all time low yields due to flight to quality and an ever easing Federal Reserve, the long end of the Treasury curve remains in flux. Bulls cite economic weakness and safety as the prime catalysts for lower yields, while the bear case is fear of increasing deficits, possible selling by over committed Asian central banks and the chance of severe inflationary pressure. I suggest that if you prudently seek some diversification in the Treasury market, try to stay at an average duration of around five years. The Five year will give you an additional 100 plus basis points in yield over the two year, with much less price risk than the ten or thirty year. Don't assume that a few years from now a chart of the 30 year T-Bond can't resemble today's beleaguered financials. Cash too is an asset: I've probably scared some of you away from any investment vehicle other than good old cash. Think again. Cash too has a risk factor we've rarely before seen. Clearly most of us sat through the pain this decade of seeing our cash reserves lose parity with a host of foreign currencies, but in the past few months many of those exchange rates have corrected in stunning fashion. In many currencies, 5 years of dollar weakness was negated by virtually 5 weeks of dollar strength. The Australian dollar for example rose from 60 cents U.S. in early 2003 to 96 cents this past July before breaking all the way back to 62 cents late last month! As Americans we hear incessantly about our high national debt and entitlement liabilities but the rest of the world is in the same boat. Right now cash is king but the cheap assets cash can buy may someday dethrone the king. Stay agile, proactive and ready to overweight sectors only as conditions become clearer.