Here Comes the Commodity Index Rebalancing

I consider these contra-indicated: In a time of massive Fed credit creation and Treasury money printing, they oddly want less exposure to Gold. And with the worldwide recession getting worse, they want more exposure to Oil. Both of these are poorly timed macro-trades.

There are two things I can tell you about the index rebalancing: First, the last such contra-indicated changes were steamrolled over by the market, and cost investors in these indices to miss out on a huge move in Oil via the lower weightings.

Second, it won’t take long before people start to consider the political ramifications of goosing energy prices 2 weeks before the Obama administration is sworn in.

I have no clue what the motivation is for these moves, nor do I knows what what they were in 2006. But they are looking increasingly curious and ill timed. Once is a coincidence. Twice makes you pay close attention. After the third such move, expect to see the index managers dragged before a Congressional panel ...