Over the past 3 years, we have warned about mean reversion risk due to extreme over-valuations built into resource, mining and materials companies. After 50-70% declines, price risk is now lower in those sectors. But it remains dangerously high in many of the commodity prices themselves as well as interest-sensitive sectors like REITS, financials, utilities, long and lower quality bonds, all of which have recently been correcting on the realization that unlimited QE is simply not possible. The trouble is that many people and funds today are heavily concentrated in precisely these most vulnerable areas, as zero interest rate policies have herded capital into leaking dinghies on the naive belief they were sea-steady yachts.
Fund Manager Anuraag Shah says that another commodity crash is coming- and mis-allocation of capital due to QE is to blame. Here is a direct video link.
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