Goldman Sachs GS Commodities Desk Dodged the Ax and Is Minting Billions Again

Notwithstanding the foregoing, a commodity trading advisor will be deemed in compliance with this § 4.35(a) concerning the performance of partially-funded accounts if the commodity trading advisor presents the performance of such accounts in a manner that is balanced and is not in violation of the antifraud provisions of the Commodity Exchange Act or the Commission’s regulations thereunder. (iii) The commodity trading advisor must discuss all material differences among the accounts included in a composite. (iv) The commodity trading advisor must make available to prospective and existing clients upon request a table showing at least quarterly the information required to be calculated pursuant to § 4.35(a)(6). (2) The trading advisor must include in the description of the business background of each person identified in § 4.34(f)(1) the name and main business of that person’s employers, business associations or business ventures and the nature of the duties performed by such person for such employers or in connection with such business associations or business ventures.

The index’s components qualify for inclusion in the index based on liquidity measures and are weighted in relation to their global production levels. That makes the GSCI valuable as both an economic indicator and a commodities market benchmark. Below is a table of the 2021 reference percentage dollar weights (RPDW) for the S&P GSCI. Taken together, combining these two higher quality forecast estimates commodities outperforming equities by 12.2% annually over the next decade, versus 2.6% in this simple analysis. The important aspect of the analysis is not the exact number, although that is also of interest, but the direction of the trend which is consistent under both approaches. The market peak in August 2000 was surely a terrible time to invest in the stock market, right?

Trading the S&P GSCI

Outside of a few specific resources (like coal), commodity prices in general are still quite depressed. I´ll address this point in a follow-up post where we´ll see that this changes the size of the benefit of stocks over commodities, but not the message. Along the way, we´ll also get a better feel for what it means to say that equities are overvalued relative to commodities. Sunrun — The residential solar energy company’s shares rose 4.2% after KeyBanc upgraded the stock to overweight from sector weight. The bank said Sunrun could rally more than 31% from Monday’s close as it gains market share in California. If a user or application submits more than 10 requests per second, further requests from the IP address(es) may be limited for a brief period.

(ii) The total value of the participant’s interest or share in the pool as of the end of each of the pool’s two preceding fiscal years. (iii) The Commission finds that the exemption is not contrary to the public interest and to the purposes of the provision from which the exemption is sought. If any provision of this part, or the application thereof to any person or circumstances, is held invalid, such invalidity shall not affect other provisions or application of such provision to other persons or circumstances which can be given effect without the invalid provision or application.

RISK DISCLOSURE STATEMENT

Of course with the benefit of hindsight, we know that 1985 was not anywhere near to a stock market top. It was not a top in absolute terms, since the market continued to climb uninterrupted for another decade-and-a-half. And not relative to commodities since it would not be until February 1999 before the S&P 500 peaked against the commodity index. I´ve truncated the excess return axis at 16% because, with the stock market having an extreme bull market over the last year, the short-term excess return is unusually high. Throughout its history, the S&P 500 has outperformed commodities by about 12% annually.

The pool operator or trading advisor must promptly file a notice advising the National Futures Association of such change. Each commodity trading advisor registered or required to be registered under the Act must make and keep the following books and records in an accurate, current and orderly manner at its main business office and in accordance with § 1.31. If the commodity trading advisor’s main business office is located outside the United States, its territories or possessions, then upon the request of a Commission representative the trading advisor must provide such books and records as requested at the place designated by the representative in the United States, its territories or possessions within 72 hours after receipt of the request. A statement that the commodity pool operator is required to provide all participants with monthly or quarterly (whichever applies) statements of account and with an annual report containing financial statements certified by an independent public accountant.

Viewing your signed in accounts

(h) Trading manager means, with respect to a pool, any person, other than the commodity pool operator of the pool, having sole or partial authority to allocate pool assets to commodity trading advisors or investee pools. (ii) Any exemption from the requirements of § 4.31, § 4.33, § 4.34, § 4.35 or § 4.36 claimed hereunder shall not affect the obligation of the commodity trading advisor to comply with commodities trading advisor all other applicable provisions of part 4, the Act and the Commission’s rules and regulations, with respect to any qualified eligible person and any other client to which the commodity trading advisor provides or intends to provide commodity interest trading advice. (4) All financial information shall be reported in accordance with generally accepted accounting principles consistently applied.

• For security purposes, and to ensure that the public service remains available to users, this government computer system employs programs to monitor network traffic to identify unauthorized attempts to upload or change information or to otherwise cause damage, including attempts to deny service to users.
• The statistical analysis tells us that there is a baseline excess return from equities over commodities when the market is fairly valued of 9.3% annually.
• In this post, I want to focus on the role of relative valuation in isolation of other variables so the reader can get a feel for how important this one variable is in determining future returns.
• (C) Agrees to keep such required books and records open to inspection by any representative of the Commission, the National Futures Association, or the United States Department of Justice in accordance with § 1.31 of this chapter.

The S&P GSCI is a composite index of commodities that measures the performance of the commodities market. Investing in a GSCI fund provides a broadly diversified, unleveraged long-only position in commodity futures. As with many other business segments, the Internet and technology have opened up this attractive marketplace to a new breed of individual investors and speculators working part-time.

GS Commodity Strategy Fund

The dotted line of best fit confirms our eyeballing of the data´s negative relationship. (This line is constructed so that the number of points above and below the line is about equal (and the line passes through as many points as possible). The R2 of this line of best fit is 0.42, meaning that relative valuation of the market at the beginning of the period explains 42% of the variance of the 10-year excess return. I emphasize the looong aspect of these periods because, at best, the investor has twenty to forty years to maximize his investment return. Over some shorter periods, stocks have been a worse investment than commodities.

For librarians and administrators, your personal account also provides access to institutional account management. Here you will find options to view and activate subscriptions, manage institutional settings and access options, access usage statistics, and more. Some societies use Oxford Academic personal accounts to provide access to their members. In theory, professional commodities traders can also use contango and backwardation to profit at the expense of simple automatic rolling strategies. It could also be more theoretical than real, like many early criticisms of stock market index funds.

If you bought the S&P 500 in August 2000 and held it until today you would be sitting on a respectable 7.4% return, annualized over these 21 years. If you instead bought commodities with that money, you´d be sitting on an annual loss of 2.8% until today. If you held cash, you would have lost 2.2% annually since that is the rate of inflation averaged over the period.

On the x-axis are the values of the excess return one would earn over a ten-year period by investing in the S&P 500 instead of the S&P GS Commodity Index. On the y-axis I plot the relative valuation at the start of all these ten-year periods, expressed as a standard deviation from the mean. Having a linear relationship between relative valuations is important because returns relate to each other linearly. Having an excess return of 4% on the stock market over the commodity market is half that of earning an excess return of 8%.