“You’re trading the commodities markets all wrong. It’s not about you making money; it’s about us making money.”

So go the words of the old guard of the commodities markets.

Trading commodities used to be a sucker’s market. You’d get the pitch for opening a futures account with either the concept that your broker or investment guru knew what he or she was doing and would manage your account.

Then, after many months of that broker swinging back and forth, resulting in a blizzard of trades, you’d get your usual report with the accompanying letter starting: “So sorry.” And then you’d get the margin calls notice for even more cash on top of what you lost.

Or how about the pitch that it’s more solid to invest in real goods via the commodities market than paper assets such as stocks and bonds? You’d open an account and put down thousands of dollars. And after a few days—or, if you’re lucky, a week or two—that cash would be gone, and you’d be scrounging for more cash to meet margin calls.

Futures have always been a great deal for brokers and traders and the firms for which they work. But I’ve never come across an individual investor who somehow managed to overcome the system to eke out a gain or just break even.

When it comes to the commodity markets, it’s all about the trading action. And most traders go for broke, with mega-leverage of hefty margin rates.

Individuals who stray into the traffic of the trading pits get run over and stomped upon until they’re broke and finished learning their lesson on how not to profit from commodities.

So rather than continue to have investors repeatedly beat their heads against the wall, the markets moved beyond the trading pits of Chicago and the electronic floors of London. They ditched the whole whipsaw trading concept and decided to simply invest in commodities.

Let supply and demand rule the prices rather than some guys in funny-colored jackets screaming, resulting in neck-jarring volatility. And thanks to the efforts of the US Securities and Exchange Commission, the market saw a new way to buy and hold commodities—either singularly or collectively—through index-linked securities and funds.

We get to own commodities—from agricultural grains to petrol and more—via funds such as Deutsche Bank Agricultural Index Trust (AMEX: DBA), Deutsche Bank Oil Fund (AMEX: DBO) and Deutsche Bank Commodities Index Fund (AMEX: DBC).

And while individual investors now get to buy and own rather than trade and lose, institutional investors are also getting on board with funds as well as structured index investments.

The result: From pension and retirement funds to individual investors, we all get to profit from rising commodity prices rather than be victimized by rising prices.

But here’s the rub: Too Many market traders don’t like the fact that we buy and hold. And with rising prices around the commodities markets, some are getting hot and bothered and trying to place blame for the higher prices and resulting inflation.

But rather than deal with the economics of the market and tighten down government spending and fiscal policy, politicos are going after us as commodities investors. They’re telling us the commodities markets aren’t meant for us; they’re meant for farmers and companies to hedge themselves and the traditional futures traders making a living screaming at each other in trading pits.

We’re now getting all sorts of threats by the Commodities and Futures Trading Commision (CFTC) that it may restrict who can buy and own commodities and how much. And some, such as Sen. Joe Lieberman (ID-CT), are working to propose legislation to restrict investment in commodities.

Sure—that will work to control prices.

If such policies do manage to make it through and aren’t struck down by the Supreme Court, they’ll just send investors out of the US markets. And with those restrictions, there will be a rush to back up the truck on commodities, which should send prices even higher.

Meanwhile, hedge fund and private equity guys aren’t waiting around to see what plays out. Some are buying grain elevators and even agricultural land around the US and elsewhere. They’ll either get around the rules by being directly involved in the commodities markets or circumvent the rules by investing in raw goods by other means.

Remember the days before my friend Jim Blanchard successfully led the fight to end US laws forbidding us to buy and own gold? Back then, the US and other governments thought they could control prices by limiting who could participate in the market.

That didn’t work for the big guys. They just went outside the US and UK and invested in gold through other means. And when President Richard Nixon liberated the market, gold prices soared from their artificially contrived pricing to real levels.

Here’s what we’re doing. Inside Personal Finance, I continue to buy commodity index funds, such as the Deutsche Bank investments noted above. And I continue to buy companies in Personal Finance, The Partnership and Inner Circle that profit from supplying and servicing commodities markets while avoiding many of the companies that consume raw goods.

And although the CFTC and the folks on Capitol Hill may not be pleased, the results speak for themselves—for the better.
 
So now that we’ve invested successfully in the commodities market, rather than losing money trading, how about spending some of the spoils? Here’s a thought: How about a great getaway trip with me and my Personal Finance colleagues Roger Conrad and Elliott Gue?  

Never taken a cruise? I didn’t, until my first, and all I thought it would be was wrong. But not all cruises are the same. You need to be on the right boats, with the right chefs, going to the right locales.

Join a select group of subscribers on a cruise commencing at the Port of Miami, proceeding through the Caribbean (including one of my favorite islands, St. Barthelemy), continuing on through the Panama Canal to Costa Rica.

This is a great opportunity to come to know firsthand what many subscribers have learned by going along with me on previous cruises: We enjoy ourselves enough to let go of at least some of the market-driven agita, and we’ll get some tax benefits to boot.
 
Click here for more information.

Dead Guys of the Week

Dead guys sometimes come in clumps. They can be from the same industry, government project or a host of related sectors in life. It may make you wonder sometimes if there’s somebody up there orchestrating the whole thing. Or is it just the idea that folks who work or live in related environments tend to be of similar age and, therefore, destined to die around similar dates?

The past week, two fellows integral to modern science-fiction productions on the small screen, and later on the big, died. Before there was Star Wars there was Star Trek. And the man who cued the actors from the director’s chair during the 1966-69 series died at 96 years.

Joe Pevney not only directed many Star Trek programs, in which he worked to make sure Jim, Bones, Spock and Scotty all got along, but other classic TV favorites as well, including The Munsters and Bonanza.

Within a day or so, Alex Courage—the man who wrote the compositions Jim cued—died at 88 years. As the composer of the iconic theme for the NBC series, he worked on themes for other period programs, including Lost In Space and the antithesis of science-fiction programs, The Waltons.

Speaking Engagements

“The coldest winter I ever spent was a summer in San Francisco,” a saying that’s almost a San Francisco cliche, turns out to be an invention of unknown origin, the coolest thing Mark Twain never said.

The natural setting is, however, among the most exciting in the US. Venture west for the San Francisco Money Show Aug. 7-10, 2008, and conduct your own field study.

Roger Conrad, Elliott Gue and I will discuss infrastructure, partnerships, utilities, resources and energy, and tell you what to buy and what to sell in 2008.

Click here or call 800-970-4355 and refer to priority code 011363 to attend as our guest.

I’ll also be appearing at the following events:

.    The Personal Finance Investment Resource Cruise, Dec. 1-12, 2008

If you’re interested in having me or one of my cohorts address any investment or professional groups, please e-mail me at paymeweekly@kci-com.com with ideas or suggestions.

Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by e-mail at paymeweekly@kci-com.com.