The paper's view was embraced en masse by institutional investors and helped to transform commodities from a niche investment into a proper standalone asset class.

But the diversification benefits of commodities have become increasingly tenuous as prices in the years following the report's publication moved in tandem with other major asset classes, including shares and bonds.

As stock markets plummeted worldwide in 2008, commodities fared just as badly. And last year both bottomed in March, challenging the notion that they respond to different phases of the cycle.

These correlations have proven nasty for investors, such as pension funds, that piled into commodities as a way to broaden portfolios and spread risk.

"There have been some questions raised about whether commodities provide that diversification," says Michael Lewis, head of commodities research at Deutsche Bank in London.

Last summer the correlation between the S&P 500 and the benchmark S&P GSCI commodity index rose to almost 0.8.
In spite of this recent close correlation between commodities and other asset classes, Profs Gorton and Rouwenhorst are standing by the paper's conclusion.

Sitting in Prof Gorton's paper-choked office on a day when both the S&P 500 and GSCI were each falling more than 3 per cent, the finance experts at Yale University say the volatility of the past two years fails to undermine their findings that, over a long period, commodity futures returns match equities but with a negative correlation, indicating commodities usually go up when equities fall.

"You can argue whatever you want about the last three years, two years, one year, six months," says Prof Gorton, 58. "That's not how we do research," he says in an interview with the Financial Times.

David Fuller's view Fullermoney was an early advocate of a commodity supercycle approximately eight years ago, citing the end of a 21-year bear market and historical evidence that bullish cycles for resources were also lengthy in duration. We mentioned that recessions would interrupt rather than derail a generally bullish environment for commodities.

Regarding non correlation with financial assets, I would be more cautious than the two professors quoted in the article above because the background circumstances can easily change. For instance, in the 1970s, we had rampant inflation, which was obviously bullish for commodities and other tangibles, but less so for equities and outright bearish for bonds.

Also, to the extent that the professors and Jim Rogers have encouraged people to invest in commodities, the involvement of those who are not among the traditional producers and industrial consumers of commodities can only increase the correlation with equities.

Lastly, commodities were never intended to be an asset class, gold and perhaps silver aside, so there are issues, to put it mildly. In 1H 2008, I pointed out that if funds became buy-and-hold investors in petroleum futures, as they did for a while, they would tip the world economy into recession, undermining many of their other assets in the process. Similarly, heavy investor / speculative demand for agricultural commodities would quickly become a serious social issue due to the hardship it caused, particularly among the world's poorer people. I last summarised these points on 27th July 2009.