About that 2014 Commodity Breakout…
Amidst all of the talk of the death of volatility, we’ll excuse you if you didn’t notice some rather bizarre behavior in farmed commodity markets in May. The poster child was Wheat, which had a trend reversal on May 6th, and didn’t look back. But it wasn’t just Wheat – similar patterns were seen in Corn, Soybean Oil, Rice, Coffee, and Cotton:
Complacency Everywhere
But here’s the thing that’s driving those who do more than just stocks (read: global macro, fixed income traders, currency traders, managed futures, etc.) — CRAZY. You see, it isn’t just the stock market that’s seeing record low volatility. Complacency is everywhere
An Alternative State of Mind
Here’s what caught our eye in the world of alternatives this week.
Low Volatility is Not so Smart?
Risk is bad, right? Volatility is the enemy of the efficient portfolio? All else being equal, the intelligent investor would prefer less ups and downs in their investments… right? Our friends over at Covenant Capital are out with a deceivingly short piece bringing these long-held beliefs into question. We say deceivingly short, because this one pager touches on all sorts of interesting ideas and questions in the asset management space, while at the same time keeping those questions just below the surface. Read on:
Disclaimers
Managed futures, commodity trading, forex trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.
The entries on this blog are intended to further subscribers understanding, education, and – at times – enjoyment of the world of alternative investments. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.
The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
The performance data for various Commodity Trading Advisor (“CTA”) and Commodity Pools are compiled from various sources, including Barclay Hedge, RCM’s own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor’s disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor’s track record.
The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on RCM’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by RCM, and averaging of various indices designed to track said asset classes.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.
The owner of this blog, RCM Alternatives, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
See the full terms of use and risk disclaimer here.
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