Are we in the middle of a bull market for commodities?

Perhaps instead of investing in stocks, bonds and real estate you should be looking at the only asset class which appears undervalued today: commodities.

Sure, the past few years have seen some big surges in commodity prices, most notably oil although the rise is spread among all types of commodity, from live cattle to gold.

Jim Rogers was one of the first major investors to spot this trend back in 1998 and he came up with his own commodities index of 35 commodities because none of the existing ones seemed up to the job. That proved to be the year that commodity prices hit an all-time low, and since then his index has been the best performing index fund in the world in any asset class.

Now he has written a book, 'Hot Commodities' and is on the global investment lunch circuit promoting his work. His thesis is that commodity markets are inversely correlated to equity markets, and that investing in commodities makes sense when equity markets are in a bear phase.

The parallel to the situation in the early years of this century is the 1970s. Rogers lived through this era - and made his fortune during it - and can point to so many matching factors it would be impossible to sum them up in this short article.

Suffice to say gold peaked at $800 in 1980 and oil reached over $80 a barrel. It was the same for all commodities in the 1970s, while equities slumped, commodities boomed.

Of course, there will be market corrections in any bull market, and Rogers' advice to investors is to wait until China has a recession and to then take advantage of temporarily depressed commodity prices to buy into this market, as none of the fundamentals will change.

This is pretty strong stuff. Are commodities the next NASDAQ? Rogers seems to think so, although his book explains how some unlikely candidates like lead might actually outperform the more obvious investment choices like gold. However, in a bull market the price of all commodities will rise.

Caveat emptor, why is he writing about this now? Why does he not want to keep his discovery secret any longer? Typically traders hype a market to sell off their holdings - but the commodities market is rather too big for one book to make much difference.

No more probably he wants to attract more money into his index fund, which presumably he earns a fee for managing. This is certainly a book any serious investor should read, and its implications for other asset classes should be considered.

Are we going to see simultaneous crashes in the bond, equity and housing markets? Well, that is what happened in the 1970s!