Features and Interviews
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Written by Julian Murdoch
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December 18, 2008 10:53 am EST |
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Page 1 of 2 No one denies it's been one heck of a ride, and it is easy to feel like the best place for your money might be your mattress. But as the ETF Securities Commodities Review 2008 points out, commodities may still be the best diversifier over the long term. Despite the recent market downturn, the report reminds us, commodities still look pretty great over the long term. The DJ-AIG All Commodities Index is up 14% over the last five years and 107% over the last 10 years. The S&P 500 is down during the same time periods - 7% and 11%, respectively. (And, if you're keeping score, the big winner is by far the DJ-AIG Petroleum Sub-Index, with 536% returns over 10 years.) DJ-AIG Indices | 5-year ret. | 10-year ret. | Correlation vs. S&P 500 | Volatility | All Commodities Index | 14% | 107% | 0.10 | 16% | Ex-Energy Sub-Index | 23% | 30% | 0.13 | 13% | Energy Sub-Index | -13% | 265% | 0.05 | 32% | Petroleum Sub-Index | 46% | 536% | 0.07 | 33% | Industrial Metals Sub-Index | 70% | 125% | 0.17 | 21% | Precious Metals Sub-Index | 95% | 149% | -0.04 | 19% | Livestock Sub-Index | -30% | -20% | 0.06 | 14% | Agriculture Sub-Index | -8% | -27% | 0.09 | 17% | Grains Sub-Index | -12% | -25% | 0.07 | 21% | Softs Sub-Index | -28% | -49% | 0.08 | 19% | | | | | | S&P 500 | -7% | -11% | 1.00 | 20% | Lehman Brothers Bond | 24% | 67% | -0.01 | 3% |
Ending Nov. 30, 2008 Correlation/Volatility based on 10-yr daily returns It's nice to see someone else running the numbers and supporting the conclusions we draw on our own: Commodities - despite recent market activity - remain an incredibly powerful source of uncorrelated returns. Digging through the entire report is valuable, as it's full of important and interesting numbers like this. For those of you interested, the full report is available from ETF Securities. In the meantime, however, here are the most interesting tidbits. Gold Only the DJ-AIGCI Precious Metals Sub-Index had a negative correlation of -0.04 with the S&P 500 over the past 10 years; it is also the DJ-AIGCI Index with the best YTD cumulative return, losing "only" 12%. Within precious metals, gold is the strong performer, in this case losing the least. In this market, that may be the best you can ask for. Gold YTD returns sit between -2% for ETFS Physical Gold and -4% for ETFS Gold. Gold traditionally has been a strong performer in times of trouble, given its "safe-haven" role in the market. The report also presents the following interesting chart, highlighting gold's role as the go-to investment when times are tough (like, say, 2008). ETFS points out that even during times when the price of gold was falling this year, there was still a net inflow into their ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS), suggesting that gold's "safe haven" status is alive and well.
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