WisdomTree's Kiss of Death?

WisdomTree Registers New Inflation-Linked ETF

WisdomTree Trust has registered with the SEC a new exchange-traded fund that seeks to give investors long-term returns above the rate of inflation.

To do so, the WisdomTree Real Return Fund (NYSEArca: RRF) will invest in inflation-linked securities such as U.S. Treasury Inflation Protected Securities (TIPS), bonds and commodities instruments.

RRF will be the newest member in an expanding group of ETFs that seeks to capitalize on investors' rising fears of inflation.

For some strange reason, the contrarian in me is half tempted to start learning Japanese and take some profits in U.S. Treasury Inflation Protected Securities.

I wonder if it has something to do with WisdomTree launching their stock market ETFs shortly before the stock market imploded? And now they want to do the exact same thing with commodities? Call me skeptical of the wisdom.

Stock Market ‘Bubble’ to End, Morgan Stanley Says (Update2)

The commodity-producing nations will be the hardest hit when the current rally ends, Sharma said. The Latin American markets of Brazil and Chile are the most expensive, he said, and Morgan Stanley is also “underweight” on Taiwan, Malaysia, Israel and Russia. Commodity prices are rising even as economic fundamentals are deteriorating, he added, a sign that the rally may be fizzling.

“Commodities are at the centre of this echo bubble,” he said, adding that they are “in substantially overvalued territory, way above fundamentals.”

Inventories of oil, copper, aluminum have risen over the past few months even though demand hasn’t picked up, Sharma said, adding that the price of oil is inversely correlated to the U.S. dollar. Increasing buying of commodities as a hedge against the decline in the U.S. dollar has resulted in the commodity rally, he said.

I am sympathetic to his deflationary arguments. Let's just put it that way.