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Commodities Radar 20130430
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Transcript of Commodities Radar 20130430
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 1
Commodities without clear direction
Commodities continue to offer unappealing prospects, in spite of favorable liquidity conditions.
A ray of light comes this week from grains, on the back of unfavorable weather and bad harvest
prospects in the US. Soybeans benefit from the best score, followed by corn and Kansas Wheat, which
bounce back to life.
Regarding other softs, cotton, cocoa and meat products remain robust, while a bear bubble grows on
sugar and coffee.
The picture remains gloomy otherwise, apart from the bullish prospects conveyed by the dynamics of the Crude Oil WTI forward curve as well as the buoyant Henry Hub natural gas.The sectors conveying
the most bearish signals remain base and precious metals, as well as basic resources European
equities sectors and gold miners.
As far as commodities-related currencies are concerned, a rift continues to divide the bearish CAD and
ZAR and the bullish AUD and BRL.
Hedge funds and index investors stay in the wait-and-see mode in this mute environment.
Commodities Radar
30 April 2013
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 2
Contents
Trends & Bubbles .......................................................................................................................................... 3 Rankings ........................................................................................................................................................ 4 Risk Aversion ................................................................................................................................................. 5 Commodity Related Assets: Currencies and Equities .................................................................................. 6 Commodity Index Traders ............................................................................................................................ 8 Hedge Funds .................................................................................................................................................. 9 Model Portfolio ............................................................................................................................................ 10 IMPORTANT DISCLAIMER
The information herein is not intended to be an offer to buy or sell, or a solicitation of an offer to buy
or sell any securities or financial instruments. This document is based upon sources believed to be
reliable but is not guaranteed as to accuracy or completeness although Riskelia believes it to be clear,
fair and not misleading. The view of Riskelia reflected in this document may change without notice. To
the maximum extent possible at law, Riskelia does not accept liability whatsoever arising from the use
of the material or information contained herein. This research document is not intended for use by or
targeted at retail customers. Should a retail customer obtain a copy of this report they should not base
their investment decisions solely on the basis of this document but must seek independent financial
advice.
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 3
Trends & Bubbles
The Trend Indicator represents the net proportion of trending systems going long or short. 50 trend following
systems with a horizon of 3 to 24 months watch every asset.
The Bubble Indicator reflects bullish or bearish herding behavior. Exclusively resting on market prices, it scores
the regularity of the price moves on various time frames.
The Equity Tail Dependence measures the sensitivity of an asset class to a major equity deleveraging. It is the
mean daily price return conditional on a 10%-probability equities drop. It is measured over a 100 day rolling
window and expressed in number of standard deviations.
The Curve stands for the relative spread between the one year forward price and the prompt month price. When
the curve of a commodity is positive (resp. negative), the commodity is in contango (resp. backwardation) and
inventories are abundant (resp. low).
The Z score represents the deviation of the curve to a moving average (measured in numbers of standard
deviations). It reflects the curve evolution, hence gives insight on the inventories dynamics.
The Score is a weighted average of Z-score and trend. It decreases with the Z-score and increases with the trend,
adjusting the trend downward when the bubble score expands.
Market -12W -4W -1W Today Trend Bubble Curve Z Score 1 Year Curve %
Crude Oil WTI 50% 72% 36% 53% -10% 13% -2.3 -4%
Crude Oil Brent 80% 41% -2% 0% -17% 2% 0.3 -4%
Heating Oil 5 2% 3 4% -27 % -22% -53% 19% 0.0 -1%
Gas Oil ICE 9 0% -5 % -31 % -31% -48% 18% 1.8 1%
Gasoline 66% 36% 12% 11% 9% 15% 1.4 -4%
Natural Gas 15% 71% 98% 100% 62% 22% -2.0 -3%
Gold 34% -59% -58% -52% -83% 44% Not Applicable
Silver 20% -56% -63% -56% -78% 38% Not Applicable
Platinum 8 2% 4 6% -14 % -19% -32% 13% Not Applicable
Palladium 1 00 % 8 5% 4 2% 41% 8% 13% Not Applicable
Copper 16% -27% -41% -39% -71% 31% 1.7 1%
Aluminium 75% -14% -27% -33% -62% 25% 1.1 6%
Nickel 4 2% -9 % -39 % -38% -61% 23% 1.8 2%
Zinc 5 3% -1 % -28 % -33% -56% 20% 1.2 5%
Corn 52% 2% -5% 12% -22% 7% -0.6 -16%
Wheat -3% -31% -26% -24% -69% 39% 0.1 7%
Kansas Wheat 3 % -3 3% -3 0% -9% -56% 29% -0.5 3%
Soybean 30% 18% 42% 53% 13% 5% -1.1 -15%
Sugar Nb 11 -31% -31% -23% -24% -60% 46% 1.3 9%
Cotton 27% 64% 58% 46% 38% 9% -0.1 2%
Coffee C -29% -26% -11% -12% -69% 57% -0.1 9%
Cocoa 8% -1 8% 2 2% 31% 1% 2% -0.6 1%
Live Cattle 24% 22% 26% 21% -53% 13% -1.9 2%
Lean Hogs 62% 17% 23% 34% 13% 26% -0.6 -2%
Curves
Grains
8%↑
Softs
11%↓
Meats
28%↑
PricesCommodities Score
Energy
18%↑
Precious Metals
-22%↑
Base Metals
-36%↓
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 4
Rankings
Market Trend
Natural Gas 62%Cotton 38%
Lean Hogs 13%
Soybean 13%
Gasoline 9%
Palladium 8%
Cocoa 1%
Crude Oil WTI -10%
Crude Oil Brent -17%
Corn -22%
Platinum -32%
Gas Oil ICE -48%Live Cattle -53%
Heating Oi l -53%
Kansas Wheat -56%
Zinc -56%
Sugar Nb 11 -60%
Nickel -61%
Aluminium -62%
Coffee C -69%
Wheat -69%
Copper -71%
Silver -78%
Gold -83%
Market Bubble
Coffee C 57%Sugar Nb 11 46%
Gold 44%
Wheat 39%
Silver 38%
Copper 31%
Kansas Wheat 29%
Lean Hogs 26%
Aluminium 25%
Nickel 23%
Natural Gas 22%
Zinc 20%Heating Oil 19%
Gas Oil ICE 18%
Gasoline 15%
Crude Oil WTI 13%
Live Cattle 13%
Palladium 13%
Platinum 13%
Cotton 9%
Corn 7%
Soybean 5%
Crude Oil Brent 2%
Cocoa 2%
Market Eqty Tail Dependence
Copper -1.1Gas Oil ICE -0.9
Silver -0.9
Heating Oil -0.8
Nickel -0.8
Gold -0.7
Crude Oil Brent -0.7
Palladium -0.7
Crude Oil WTI -0.6
Gasoline -0.6
Aluminium -0.6
Zinc -0.5Platinum -0.5
Sugar Nb 11 -0.5
Corn -0.4
Wheat -0.3
Kansas Wheat -0.3
Cotton -0.2
Lean Hogs -0.2
Cocoa -0.2
Coffee C -0.2
Live Cattle -0.1
Soybean 0.0
Natural Gas 0.1
Market Z Score 1 Year Curve % Curve Shape
Crude Oil WTI -2.3 -4.1% Backwardation
Natural Gas -2.0 -3.1% Backwardation
Live Cattle -1.9 2.1% Contango
Soybean -1.1 -15.3% Backwardation
Corn -0.6 -15.6% Backwardation
Lean Hogs -0.6 -2.4% Backwardation
Cocoa -0.6 1.0% Contango
Kansas Wheat -0.5 3.0% Contango
Cotton -0.1 1.9% ContangoCoffee C -0.1 8.7% Contango
Heating Oil 0.0 -1.0% Backwardation
Wheat 0.1 6.7% Contango
Crude Oi l Brent 0.3 -4.2% Backwardation
Aluminium 1.1 6.0% Contango
Zinc 1.2 4.9% Contango
Sugar Nb 11 1.3 9.2% Contango
Gasoline 1.4 -4.2% Backwardation
Copper 1.7 1.4% Contango
Gas Oil ICE 1.8 1.0% Contango
Nickel 1.8 1.7% Contango
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 5
Risk Aversion
Risk Aversion Index
1 month ago 1 week ago Today4/1/2013 4/22/2013 4/29/2013
Global Risk Aversion -0.4 -0.6 -0.8
Equities -0.6 -0.6 -0.7
Cash Liquidity 0.4 -1.2 -1.1
OECD Sovereign Debt -0.4 -0.7 -0.8
Emerging Debt 0.2 -0.2 -0.2
Banks Euro 0.0 -0.5 -0.8
Banks UK 0.0 -0.6 -0.8
Banks US -1.0 -1.0 -1.2
Insurance -0.9 -1.0 -1.1
Carry Trades -0.4 0.2 -0.2Corporate Debt 0.0 -0.7 -0.9
Oil -1.9 -0.8 -1.0
-0.8
3 2 1 0 -0.5 -1
Very high risk avers ion Risk seeking behaviour
-1.5
-1
-0.5
0
0.5
1
1.5
22.5
3
3.5
-2
0
2
4
6
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 6
Commodity Related Assets: Currencies and Equities
Oil Products: Crude Oil WTI, Crude Oil Brent, Heating Oil, Gasoil ICE, Gasoline
Base metals: Copper, Nickel, Aluminum, Zinc.
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 7
Precious Metals: Silver, Gold, Platinium
The average rank correlations (over the last two years) between the assets in the theme and the target
assets are indicated on the edges. Edges are drawn only when this correlation exceeds 0.40. Riskelia's
recommendations are provided under the vertices.
Currencies
Equities
-12W -4W -1W Today Trend Bubble Equity Tail Dependence
ZARUSD -43% -39% -30% -30% -61% 38% -0.3
CADUSD 26% -25% -28% -19% -36% 18% -0.8
NOKUSD 59% 17% 15% -2% -20% 5% -0.6
RUBUSD 71% 32% 1% 1% -18% 4% -0.8
EURUSD 72% 19% 32% 30% 21% 6% -0.7
AUDUSD 81% 58% 65% 75% 40% 13% -0.7
BRLUSD 7 7% 80 % 1 00 % 100% 63% 14% -0.3
Score
-12W -4W -1W Today Trend Bubble Equity Tail Dependence
STXE 600 Basic Resources 90% -23% -46% -45% -73% 33% -1.0
S&P/TSX CAPPED ENERGY IX 4 4% 49 % -3 3% -37% -51% 18% -0.9
NYSE Arca Steel Index 8 0% 14 % -3 6% -36% -53% 22% -0.9
S&P/TSX CAPPED MATRLS IX -23% -61% -34% -30% -84% 50% -1.0
NYSE Arca Gold Miners Ix -36% -55% -27% -23% -89% 55% -1.0
S&P Materials Se lect Sector 60% 53% 43% 45% 40% 20% -0.9
S&P Energy Select Sector 63% 50% 49% 53% 51% 23% -0.7
Score
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Commodity Index Traders
CIT – Commodities Index
Traders – gain passiveand predominantly longexposure tocommodities by tradingfixed-weights baskets of futures contracts androlling over them with arigid schedule beforeexpiry. The maincommodity indices arethe S&P-Goldman SachsCommodity Index andthe Dow Jones-UBSCommodity Index.
Riskelia extrapolatesglobal CIT’s AssetsUnder Management(AUM) from the CIT’spositions on USagricultural futuresmarkets. The latter aredisclosed in the weekly“Supplement Report” of the US CommoditiesFutures TradingCommission (CFTC). Wethen extract the CIT’snet inflows by
disentangling thecomponents due to priceevolution and to netinflows in the dynamicsof the AUM.
CIT – Total Asset Under Management, in Bln USD
CIT - Total Net Cumulative Flows, in Bln USD
Sector FlowsRolling windows of 1, 4 and 12 weeks
0
50
100
150
200
250
300
350
0
20
40
60
80
100
120
140
160
Date 4/23/2013
in Bln USD 1 Week 4 Weeks 12 Weeks
Energy 0.4 2.7 -1.1
Agriculture 0.2 1.6 -0.6
Base Metals 0.1 0.7 -0.3
Precious Metals 0.1 0.5 -0.2
Total Flows 0.8 5.5 -2.2
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 9
Hedge Funds
Speculators (i.e. hedge
funds or traders) takelong or short positions oncommodities to makedirectional bets or takeadvantage of arbitrageopportunities. Hedgefunds are characterizedas “Non Commercial NonCIT" in US agriculturalfutures markets (coveredby the CFTC “SupplementReport”) and “ManagedMoney” in US metal andenergy futures markets
(covered by the CFTC“Disaggregated Report”).Riskelia’s trend indicator(reported below for allcommodities) provides anefficient replication of hedge funds positioninghence the evolution of speculative positions(including in non-USfutures markets) can bemonitored in real timethrough the trenddynamics.
Speculators – Total Exposure, in Bln USD
Global Net Cumulative Flows, in Bln USD
Sector FlowsRolling windows of 1, 4 and 12 weeks
-20
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012 2013
-60
-40
-20
0
20
40
60
80
2006 2007 2008 2009 2010 2011 2012 2013
Date 4/29/2013
in Bln USD 1 Week 4 Weeks 12 Weeks
Energy 0.8 -1.3 1.8
Agriculture 1.3 -1.0 -5.7
Base Metals -0.8 -9.0 -23.4
Precious Metals 0.0 -2.1 -8.7
Total Flows 1.3 -13.3 -36.1
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Confidential Riskelia | 30 April 2013 | CommoditiesRadar 10
Model Portfolio
Allocations Characteristics
Performance Contribution
Performance
Today Last Week Last Month Last Quarter 1st of year
4/29/2013 4/22/2013 4/1/2013 2/4/2013 1/1/2013
Weights 1% -10% 18% 108% 81%
Energy 5% 4% 27% 36% 15%
Crude Oil WTI 5% 4% 11% 6% 1%
Crude Oil Brent 0% 1% 7% 11% 6%
Heating Oil -3% -2% 5% 7% 3%
Natural Gas 6% 6% 5% 1% 2%
Gas Oil ICE -4% -4% -1% 12% 4%
Precious Metals -6% -7% -4% 27% 24%
Gold -4% -6% -12% 6% 8%
Platinum -2% 0% 6% 10% 5%
Palladium 3% 3% 8% 10% 8%
Silver -3% -4% -6% 2% 3%
Base Metals -15% -15% -8% 19% 8%
Aluminium -4% -4% -2% 8% 4%
Copper -4% -5% -5% 2% 0%
Nickel -4% -3% -1% 4% 1%
Zinc -4% -3% 0% 6% 3%
Grains 5% -2% -4% 12% 7%
Wheat -2% -2% -3% -1% 1%
Corn 1% 0% 0% 8% 3%
Soybean 6% 3% 2% 4% 2%
Kansas Wheat -1% -3% -3% 1% 2%
Softs 4% 2% -1% -1% -4%
Cocoa 3% 0% -2% 1% 2%
Coffee C -1% -2% -3% -2% -2%
Cotton 5% 6% 7% 3% -2%
Sugar Nb 11 -3% -3% -4% -3% -3%Meats 9% 8% 7% 15% 32%
Lean Hogs 5% 3% 3% 11% 9%
Live Cattle 4% 5% 5% 5% 23%
Year to date perf -3.99%Month to date perf -0.76%
Annual ex ante Vol 4.41%
Daily 90% ex ante CVaR -0.55%
Sharpe 1.0
Annual Return 8.0%
Skew -0.3
Peak to Valley 22%
Yearly Turnover 8.5
Last Week Last Month Last Year
Energy 0.17% -0.80% -6.38%
Crude Oil WTI 0.23% -0.55% -1.50%
Crude Oil Brent 0.00% -0.44% -1.43%
Heating Oil -0.09% -0.30% -1.82%
Natural Gas 0.12% 0.45% 0.08%
Gas Oil ICE -0.10% 0.03% -1.70%
Pre cious Metal s -0.33% 0.53% -2.24%
Gold -0.16% 1.27% 0.00%
Platinum -0.07% -0.44% -1.51%
Palladium 0.08% -1.00% -0.21%
Silver -0.17% 0.71% -0.52%
Base Metals -0.22% 0.33% -2.10%
Aluminium 0.01% 0.01% -0.18%
Copper -0.14% 0.28% -0.36%
Nickel -0.05% 0.10% -0.18%
Zinc -0.03% -0.06% -1.39%
Grains -0.05% -0.34% -0.73%
Wheat -0.02% -0.17% 0.02%
Corn -0.04% -0.06% -0.58%Soybean 0.13% 0.15% 0.05%
Kansas Whe at -0.12% -0.26% -0.21%
Softs 0.02% -0.38% -0.18%
Cocoa 0.02% -0.07% -0.42%
Coffee C 0.07% 0.03% 0.48%
Cotton -0.11% -0.35% -0.17%
Sugar Nb 11 0.05% 0.01% -0.07%
Meats 0.13% 0.01% -1.95%
Lean Hogs 0.07% 0.05% -0.55%
Live Cattle 0.06% -0.03% -1.40%
Year Total Performance
2001 2.8%
2002 10.7%
2003 20.8%
2004 11.3%
2005 13.5%
2006 7.2%
2007 10.3%
2008 19.5%
2009 5.1%
2010 17.7%
2011 -0.9%
2012 -11.5%
2013 -4.0%
1
1.5
2
2.5
3
3.5
2005 2006 2007 2008 2009 2010 2011 2012 2013