Not only are commodities markets being changed by ETFs and emerging countries, now there is the combination of the two, which could potentially lead to some real trouble.

Diversification is one of the main tenets of safe investing. Since different asset classes are not supposed to correspond, diversifying your portfolio should allow you to hedge against losses in one category or profit from another. The work of two American finance professors, K Geert Rouwenhorst and Gary Gorton, has many investors focused on commodities as a good way to diversify away from equities markets.

The professors' thesis is simple. Commodities did well when stocks did not and commodities did poorly when stock markets were rising. Their analysis went from 1959 to 2004 and is very persuasive until you get to 2008. Then the idea goes bad. In the summer of 2009, the correlation between the S&P 500 and the benchmark S&P GSCI commodity index rose to almost 0.8. Both commodities and stock markets collapsed together. Of course, Prof. Gorton dismissed it as rogue.

I believe that Prof. Gorton's dismissive attitude is wrong. Something basic has changed in the commodities markets, but what? Two things: ETFs and emerging markets.

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