True diversification requires looking for independent return streams. You normally cannot rely on the weather, but in investments that lack of reliability is an interesting feature.
Recently on CNBC, I discussed technological disruption in the auto industry from car sharing, autonomy and electric vehicles. I argued that batteries were likely to be similar to microchips – falling 20% in price every year – and could therefore disrupt the internal combustion engine.
The rise of Chelsea and Man City shows that it takes a lot of money to break into the Champions League elite, but once you're there, it creates a virtuous circle. The same is true for inflation. There is a self-reinforcing loop of high inflation expectations, wages and prices. But the 2014 oil shock looks to have knocked the US and Japan out. Consumers' inflation expectations remain stubbornly low.
We have become more constructive on commodities this summer, in particular on the energy complex. After many years of supply outstripping demand in oil markets leading to rising inventories, we now see the oil market moving towards balance in 2017. But is buying commodities directly the best way to express our view?