Friday's discouraging payroll report in the US - 85,000 non-farm jobs disappeared in December - took the wind out of copper's sails. So did the report from newswires that China's central bank is hiking interest rates on short-term debt. This sent the signal, or the perception, that China's monetary authorities are getting a bit worried about inflation.

--Of course one way of looking at the rise in metals is precisely as an inflationary hedge. Non industrial metals demand would come from traders, speculators, and stockpilers either front-running the recovery story or simply looking for a place to park excess liquidity. That makes the metals rise price less straight forward and probably a lot more vulnerable to a correction-starting today.

--Later today, we're headed over to the editorial shop to speak with the research team on what they're seeing, buying, and selling. We'll put the question to them of the metals price rise and see what they say and advise. Stay tuned!

--One question that we've been getting a lot lately is how to invest in these big ideas. How do you go short U.S. Treasury bonds, or long U.S. interest rates, or long precious metals like platinum and palladium without actually buying stocks or the metal (if that's the kind of trade you're after? The obvious place to look is the exchange traded funds market (ETFs).

--ETFs are starting to catch on here in Australia. In the States, the ETF universe has grown massively since we first started using it to trade options on sector funds in 2003. But even if you're not interested in owning or trading ETFs, or options on ETFs, you have to pay attention to the way they affect markets, especially for commodities.

--To back up a second, an ETF basically securitises a commodity or asset class. It makes it possible for you to speculate on the rise or fall in price of a whole class of securities (like money-centre banks for example) or a specific commodity (like gold or oil). It's a strange kind of security, and you don't do security analysis for ETFs the way you do for single stocks.

--In fact you could probably say ETFs are more for punters than investors. But they do allow you to make simple directional bets on asset prices. And more importantly, when new ETFs come online for certain commodities, it makes that commodity, as an investment idea, a lot more accessible to retail and institutional investors. The result is rising liquidity, which often leads to new demand for the underlying commodity.

--A current example would be platinum and palladium. Several new ETFs which track platinum and palladium prices

--For example the

--But nothing, in our opinion, beats getting the big trends right. It's the asset class that matters. From there, you can seek alpha (superior stock selection.) But if you really want superior leverage, junior mining stocks give you all that and a bag of chips. What's more, the precious metals miners are in the right big trend (long stuff, short paper money).

--Granted, not of that tells us if the mining stocks will be a good refuge in a double dip recession. Probably not. And if last week's thesis is right that Chinese resource demand has already reached its zenith, you'd certainly be wary of base metal prices and base metal stocks. But what should you do? We're off to ask the research cabal what they think. Until tomorrow...