Investors Plan to Go Overweight Commodities, Credit Suisse Says
Posted by WARREN MOSLER on October 7th, 2009
Turning into a stampede?
People want it.
They are scared of the fed ‘printing money’ even in the face of obvious excess capacity?
Watch for storage costs to go up/contangos where there is not a monopolist setting price?
Good market for producers who sell forward, getting paid by investors paying up for forwards/storage?
Investors Plan to Go Overweight Commodities, Credit Suisse Says
By Chanyaporn Chanjaroen
Oct. 7 (Bloomberg) — More than half of investors surveyed
by Credit Suisse Group AG said they plan to hold an overweight
position in commodities in the next 12 months, double the
proportion with such a weighting now.
Of the 180 investors surveyed last month, 51 percent said
they expected to hold an overweight position in the next year,
34 percent a neutral weighting and 13 percent underweight. That
compares with 25 percent overweight now, 38 percent neutral and
30 percent underweight.
The most popular route for commodity investment will likely
be active indexes or funds, followed by exchange-traded funds,
according to the survey, e-mailed by the bank yesterday. Of
those surveyed, 44 percent were from hedge funds and 22 percent
from institutional funds.
The Reuters/Jefferies CRB Index of 19 commodities posted a
record 36 percent decline last year and rebounded 13 percent
this year. Assets under management at commodity hedge funds
increased 6 percent this year to $60.61 billion as of the end of
August, according to Hedgefund.net.
Expectations that inflation will accelerate and the dollar
weaken contributed to investor demand for commodities this year,
Kamal Naqvi, head of global commodity investor sales at Credit
Suisse in London, said by phone today.
Thirty-nine percent said natural gas would be the best
performer among energy products over the following 12 months,
with 32 percent picking crude oil.
Among industrial metals, 59 percent expected aluminum to be
the worst performer over the period, while 51 percent thought
copper would advance the most.
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October 7th, 2009 at 8:36 am
If I had any spare capital lying around (which I don’t), I’d be shorting gold like a sumbitch…
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Curious Reply:
October 7th, 2009 at 2:01 pm
Jim,
I don’t think you need spare capital to short. You can use your existing investments as collateral for margin, no?
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October 7th, 2009 at 2:06 pm
Curious –
You misunderstand – when I say “no capital” I mean, “no money”, as in no investments, as in “no pot to piss in”, in the parlance of our time.
Ok, I do have SOME assets, but I have a wife who’s laid off and a baby on the way and job that pays me just enough to keep my head above water if I swim really hard. So speculative investments, no matter how slam dunk I think they are, are a no-no at this point. Besides, I remain haunted by Keynes’s immortal advice that “The market can remain irrational longer than you can remain solvent.”
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Matt Franko Reply:
October 7th, 2009 at 3:20 pm
Jim I think that is good advice you give yourself.
With gold, Ive been thinking if the regulators ever really get speculator limits back in the critical commodity markets, gold may become the last refuge of these doomsday types and with how much spec $$ is out there and how small the gold market really is they could send it up $1,000s of dollars perhaps…no one will stop them as it is gold and not food or energy. Matt
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knapp Reply:
October 7th, 2009 at 5:35 pm
and the GLD gold etf (where a lot of hedge funds are hiding)is not regulated by the CFTC like the futures market, so speculators are under even less scrutiny.
One of the major premises driving gold is that it will do well under either inflation or deflation. And here is where an understanding of Chartalism can help. The “gold is money” crowd confuses a speculative demand for a real “store of value” with a true demand for money as the ultimate means of payment (to settle tax obligations). The bulls site the 1930s as an example of gold doing well under deflation yet – besides the fact that this is a rather small sample size – the situation couldn’t be more different as gold was actually money back then, so it had an additional liquidity premium lacking when gold is just a commodity as it is today.
The other risk of gold is what I call the “inflation basis risk” – the difference between what the price of gold has done over a given time period relative to measured inflation, such as the (imperfect) CPI. For example, gold could utterly collapse, say 50-60%, and wipe out all specs yet still have provided an “inflation hedge” for investors that got in at the bottom in 2002. But it won’t feel like a hedge! If gold bulls really wanted a low risk inflation hedge they would just buy indexed-linked bonds.
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Matt Franko Reply:
October 7th, 2009 at 9:44 pm
Knapp,thanks for the info. I often relate gold (as money) with distrust between the counterparties. For the 1930s I suspect relations were deteriorating rapidly between central banks leading up to the world war and gold became more popular (I call gold “The C.O.D. of the monetary world”).
Contrast that to today where Warren chronicled the USD swaplines set up last fall between global central banks via conference call and probably some faxes and $600B was wired out in a day ultimately non-recourse…that event to me is an exhibit of ultimate trust between the CB counterparties that exists today, exact opposite of the 30s and 40s. resp, matt
October 16th, 2009 at 3:58 am
Aren’t the countries with historically high inflation also those with a high output gap, high unemployment?
Is their inflation different from that forecast for us by the inflationistas?
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