If Congress thinks that their constituents are upset about $4 per gallon gasoline, what will happen when they find out a year from now that Congress restricted then from diversifying their portfolio and it cost their pension plans or 401Ks 10% or more, possibly thousands of dollars.

It could happen.

Futures did a quick calculation in our upcoming August issue on what would be the difference for the first six months of 2008 in a portfolio that had a 50/50 allocation to stocks and bonds and a similar portfolio but with a 20% allocation to the S&P Goldman Sachs Commodity Index(GSCI). The addition of the commodity allocation added approximately 10% and was the difference of having a significant loss to having a decent return. Numerous studies have indicated that an allocation to commodities improves a portfolio’s risk adjusted returns.

That is one argument being made by the Coalition to Protect Competitive Markets, an organization made up of industry lobbying groups and exchanges “to educate lawmakers about the negative consequences of imposing unnecessary regulations on investors’ participation in the commodity markets.”

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