Andy Pfaff argues that asset allocators should consider exposure to physical commodities and not just resource stocks. For an economy built on commodities, South African investment portfolios hold surprisingly few commodities. You may see a lonely gold ETF, but the rest of the commodity allocation is generally made up of resource equities. As much as...Continue reading
Commodity futures have been easily tradeable since the 1970’s. These futures were designed for commercial use on a wholesale scale. Since 2000, listed commodity derivatives such as Exchange Traded Funds, Exchange Traded Notes & Exchange Traded Commodities have made the purchase & sale of individual commodities more easily accessible to all investors. However, these have...Continue reading
“While the current combination of fiscal & monetary stimuli might not necessarily result in rising inflation, the addition of fiscal stimulus to the monetary stimulus does provide a powerful additional tailwind for rising commodity prices.” Andy Pfaff (Coherent Capital Management, 2020) Cost-push or demand-pull? The rebound in commodity prices from the pandemic-induced lows of 2020...
“Fully-collateralized commodity futures have historically offered the same return and Sharpe ratio as equities. While the risk premium on commodity futures is essentially the same as equities, commodity futures returns are negatively correlated with equity returns and bond returns. The negative correlation between commodity futures and the other asset classes is due, in significant part,...Continue reading
Coherent (adj.) Every part is carefully considered, clear and logically connected” Any analysis worthy of the name requires an objective & robust approach, which is then consistently applied in a disciplined fashion. Without the discipline of consistent application, a variety of subjective behavioural biases will influence interpretation and reduce the probability of consistent results....Continue reading
For the best part of a decade, commodities have been deeply out of fashion. Now, as investors scour the market for the great reflation play, they’re hot again. Investing luminaries from Point72 to Pimco are calling for commodity prices to move higher. Goldman Sachs Group Inc., the bellwether of Wall Street, is predicting a new...Continue reading
Systematic investing is a term that can (and does) mean many different things to different people. Concepts like ‘quant investing’, ‘algos’ or ‘high frequency trading’ (HFT) often come to mind when people hear this term. We follow a systematic investment process at Coherent Capital Management (“CCM”), and that we believe it is a fundamentally important...Continue reading
“Those who fail to learn from history are condemned to repeat it.” (Winston Churchill, 1948) ‘Bear Markets are Real’ – a brief summary Over the last 60 years, the JSE has had a technical bear market roughly every 5 years, with a more significant bear market roughly every 10 years. This is very similar to the...
Approaching the end of 2020, it is perhaps appropriate to put the investment year into perspective. Because this is an investment note, because Coherent is an investment business and because, at Coherent, our emphasis is on the analysis of price behaviour, I am going to confine my comments to observations on price behaviour. There are...Continue reading