From my read of El-Erian (though there's a lot that I haven't grokked yet), I think he's saying that long-term investors should expect to HOLD commodities, not trade them. The dynamics of the situation are that world resources are getting squeezed, and having REAL STUFF rather than paper is a good hedge against all the economic repositioning going on.

IMHO, this is especially true in Agriculture. More and more people dependent upon crops which require (1) good weather, (2) water, delivered either by timely rain or irrigation systems--the latter being dependent either on (a) snowmelt or (b) pumped groundwater; (3) fertilizer, which in large part is manufactured from the same raw material as fuel, and (4) transport. Note that every one of these inputs is under threat from either global climate disruption or limited energy supplies. My conclusion is that we won't have to worry about agricultural commodities going down in value (except for short-term corrections) for a long time to come.

My own tactic for investing in this asset class is to buy the less-inflated assets of the iPath ETN offerings (http://www.ipathetn.com/product-information.jsp). Pick and choose: if grains are perhaps overbought at the moment, I bet cacao and coffee aren't.  (This also assuages my moral concern that I might be driving up the price for people whose survival depends on access to what I'm trading).

I posted earlier with certain concerns about these ETNs, though; liquidity, in the short term, and the counter-party risk, in the long term, might make these vehicles less than ideal. But given the popularity of this type of investment--can we call it a stampede, yet?--no doubt the market will provide something better in the near future.

--Aalan