8. What Is So Super About Chinese Demand? We have heard for many years now about the Chinese super-cycle that supported commodity prices since 1999 and we have also heard many debates about whether it has ended. So if it has ended what now? How huge is the impact on commodity prices? That all depends on the level of inventories that result from the combination of supply and demand. Theoretically if there were no inventories or supply, it wouldn’t matter how much Chinese demand fell. They could demand all they wanted but there would Read more […] – See more at: http://www.indexologyblog.com/?s=what+is+so+super#sthash.3FOiyvTf.dpuf
9. WARNING: Hot Coffee May Burn There are too many funny coffee jokes to single one out but this one I found seriously relevant: Though I take my coffee black, I also take it seriously since it is one of the commodities in the S&P GSCI and DJ-UBS. Coffee has been the best performing commodity this year, up 23.9%. As I mentioned in a prior post, Coffee is up since the consumption of coffee in China is expected to grow by an annual rate of 9% for the next five years. This is not only from China’s large population Read more […] – See more at: http://www.indexologyblog.com/?s=warning#sthash.09jSV3Ax.dpuf
10. Don’t Put All Your Eggs In One Basket It’s a little late for an Easter post but this saying is about one of the key investment principles, diversification. Simply put, diversification happens when assets inside your portfolio move in opposite directions. The investment measure of diversification is correlation and it can range from -1.0 to +1.0. If correlation is -1.0 between two assets, then they have moved exactly opposite each other; conversely, if the correlation is +1.0, then they move exactly together. Correlation of -1.0 is Read more […] – See more at: http://www.indexologyblog.com/?s=don%27t+put+all#sthash.MSAgzzAI.dpuf
Top Post From Seeking Alpha: The Scary Thing About Falling Oil Prices I don’t believe what the gas experts say, “that there is nowhere for gas prices to go but down.” After another bloodshed month for crude oil as evidenced by the S&P GSCI Crude Oil return of -10.9% in Oct, bringing it down 24.6% off its high on June 20, one might get excited about further savings at the pump. Save that excitement. The gas retailers are not looking to save any money for anyone but themselves. At least this is the story using data going back to 1991 from the EIA (U.S. Energy Read more […] – See more at: http://www.indexologyblog.com/?s=the+scary+thing#sthash.Kf5lMsTQ.dpuf
Top Post From LinkedIn: The Disparity Of Risk Parity The simple concept of risk parity is that within a portfolio, each investment contributes equally to the overall portfolio risk. For example, a portfolio with a capital allocation of 50% equities and 50% t-bills, has a risk profile where over 99% of risk comes from the equities. In a risk parity portfolio, if 50% risk (contribution to variance) were allocated each to equities and t-bills, the capital allocation looks more like 5% in equities and 95% in t-bills. As Blackrock published in a Read more […] – See more at: http://www.indexologyblog.com/?s=disparity+of+risk#sthash.80AqUmVW.dpuf
Top Media Pickup: Is Climate Change Impacting Your Grocery Bill? It doesn’t take a weatherman to point out the crazy weather we have experienced in the recent past. There are more severe droughts, storms, freezes and heat that many blame on climate change. The National Climate Assessment, that will drive Barack Obama’s environmental agenda, notes that average temperature in the US has increased by about 1.5F (0.8C) since 1895, with more than 80% of that rise since 1980. The last decade was the hottest on record in the US. What impact does this spike Read more […] – See more at: http://www.indexologyblog.com/?s=climate+change#sthash.HgFHRYhh.dpuf
Contributor’s Choice: Picking Factors Beats Picking Winners If you were to ask a few commodity experts what is going on with precious metals (like an attendee did at our 8th annual commodities conference), the answer is long-winded since the story is different for each commodity. A few years back, the answer was far more simple where it depended on the RORO environment that overpowered supply and demand models of individual commodities and spiked correlations. The quantitative easing caused all the commodities to move together, and the excess inventories Read more […] – See more at: http://www.indexologyblog.com/?s=picking+factors#sthash.OdgWbuMR.dpuf
This article was written by Jodie Gunzberg, global head of commodities, S&P Down Jones Indices.
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