Platinum Is Only as Good as Gold

Gold's recent strength hasn't done much to help commodities, most of which are still sharply off their midsummer peaks. Among the hardest hit has been platinum, which at a recent $857 per ounce is trading down from over $2,200 per ounce in March. More surprising is that platinum, which is approximately 30 times rarer than gold, is now fetching approximately the same price as gold.

If you think platinum is bound to go up from here, one trading idea is simply to purchase it, either through coins or the iPath DJ AIG Platinum ETN (PGM), an exchange-traded note that tracks platinum prices. To wager on the gold/platinum ratio widening again, consider selling short a position in SPDR Gold Shares (GLD) against an equal-sized long position in PGM.

Earlier this summer I profiled iPath Global Carbon ETN (GRN), the first carbon fund offered in the U.S. Since then it's averaged about 2,000 shares a day, or a little more than $50,000 worth of carbon traded daily. Your local supermarket likely does more business.

Now a second carbon offering is available with the launch of AirShares EU Carbon Allowances (ASO), a commodity pool that holds futures contracts for European Union Allowances, or EUAs. Under Europe's Greenhouse Gas Trading scheme, these credits allow the holder to emit carbon dioxide based on a "cap-and-trade" method. Because the U.S. hasn't signed the Kyoto Protocol, which established international standards for lowering greenhouse gas emissions, Americans are thankfully not held to these arbitrary and productivity-sapping rules.

iPath Carbon ETN (GRN) vs. United States Oil Fund (USO), 6 months

Since GRN launched, it has fallen some 40%. While I applaud the continued innovation of new financial products, I stand by my belief that "carbon finance" is a rigged and ultimately doomed game. Unlike an investment in a bond or a stock, a carbon credit serves no economic purpose whatsoever. It's simply a tax, a worthless slip of paper valued solely by power-hungry politicians and the environmentalists who egg them on.

Of course, should President-elect Barack Obama fulfill his campaign promise to subject our country to the menace of cap-and-trade, the value of these credits could soar. But with no commercial or speculative need or interest, they remain an oddity in search of a purpose. The green crowd would be better served buying a Prius.

It's more than a little apparent that the SEC completely dropped the ball in investigating Bernard Madoff. Chairman Christopher Cox admitted that "credible and specific allegations" about illicit financial activity at Madoff's firm were reported as far back as 1999, yet SEC staffers took no definitive action.

The proper role of government is that of policeman and referee. And upon being alerted to potential criminality, it's perfectly appropriate for government to investigate. But instead of actually investigating the rare miscreant, the entire hedge-fund industry will now likely be subject to a new raft of onerous regulations and rules, just as was the case with Sarbanes-Oxley.

That's the rub: Regulation doesn't target the guilty, but punishes the innocent. The thousands of law-abiding funds that dutifully serve customers every day will now be subject to the additional costs and burden of greater government oversight, even having done nothing wrong. As I pointed out earlier this week, Madoff himself was registered with the SEC for over two years. Even then regulators missed the alleged $50 billion fraud completely.

The problem isn't hedge funds but a single bad apple and the law-enforcement officials who failed to act even when compelling evidence of wrongdoing was delivered to their front door.