How to clone commodity indices for the better

Posted on 01. Apr, 2014 by Jean Jacques Ohana in Weekly Focus

Commodities’ performance has been lackluster since 2006 (Figure 1). On table 1, we note that, even though the spot performance was very good, it was eaten up by the negative roll return. This is due to the steep contango of commodities’ forward curves from 2006 to 2012.

However, Figure 2 shows a revival of the commodities’ [...]

Oil crisis brewing: mind the right tail!

Posted on 09. Sep, 2013 by Jean Jacques Ohana in Weekly Focus

At last, the trend in oil reversed back to positive levels (figure 1). Contrary to the last incursions of oil on the positive side since 2012, this move in the 1st nearby contract comes with a strong inversion in the curve shape as reflected in figure 2. The inversion dynamic of the WTI and Brent [...]

What are the implications of the commodities’ debacle?

Posted on 15. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

Commodities have been the poorest performer of all assets classes since 2009 which marked the recovery from the Lehman crisis.

This lackluster performance was first attributed to the persistent steep curve (contango) which penalizes the so called “commodities’ passive investors” rolling over long positions in baskets of commodities futures contracts.

Now, the poor performance is due to [...]

The intriguing commodities decoupling

Posted on 18. Feb, 2013 by Jean Jacques Ohana in Weekly Focus

Commodities are undoubtedly related to equities of commodities’ producers and commodity currencies. From a fundamental point of view, commodities’ producers own exploitable deposits of commodities which will be extracted and sold should commodities prices exceed the extraction cost. Hence, equities of commodities’ producers should trade like a call option on commodities. In the same token, [...]

Why Quantitative Easing alone won’t make commodities rise

Posted on 10. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

The performance of risky assets since 2011 has been highly contrasted (figure 1). The Iboxx High Yield provided by far the highest risk-adjusted return. Whereas equities and precious metals have ended close to neutrality over the last two years, there has been a rift between the positive total return performance of Agriculture and Oil on [...]

Commodities are (again) the eye of the storm

Posted on 13. Jun, 2012 by Riskelia in Weekly Focus

Will the Spanish banks’ rescue package resolve the current market woes? This is not sure, as the Eurozone crisis is not any more the unique focus of investors’ attention and market indicators increasingly point to a gloomy outlook in the US and in emerging countries.

Riskelia has developed a synthetic indicator based on commodities’ forward curves [...]

Discerning the good long-term bets from the bad ones

Posted on 13. Jul, 2011 by Jean Jacques Ohana in Weekly Focus

Although the financial integration is historically high as far as short-term asset returns are concerned, the long term trends of cyclical assets have shown very different patterns from 2010 onwards.
Averaging the trends over the past 18 months provides an interesting perspective on long-term asset dynamics, as this selects assets that have proved the most resilient [...]

Using VIX futures contracts as a hedge against increased uncertainty

Posted on 15. Mar, 2011 by Jean Jacques Ohana in Weekly Focus

The dark clouds are accumulating over the horizon: not only do we have to worry about 1) the euro zone sovereign debt problem, which has known a recent aggravation and to which the European leaders have once again failed to bring a definitive answer at the last European summit, 2) the MENA unrest, 3) the [...]

When will the Commodities Indices myths collapse?

Posted on 09. Jun, 2010 by Jean Jacques Ohana in Weekly Focus

Two Commodities Indices have been designed to play a role in enhancing and diversifying global diversified portfolio returns: the GSCI and the DJ UBS (ex DJ AIG).
Both arguments are contradicted by the new financial reality.
Myth 1: diversification
Commodities are not any more a diversifier as the new zero rate paradigm makes them more similar to other [...]

Does oil respond to speculation or fundamentals?

Posted on 17. Mar, 2010 by Steve Ohana in Weekly Focus

The energy complex seems to go through a highly interesting new period accumulating several bullish signs. From the beginning of 2009 onwards, the oil curve has been flattening consistently, meaning that the harm inflicted by the contango to long investors has considerably decreased over time as exhibited in the chart below:

Sources : Bloomberg, Riskelia’s estimates, the [...]