Commodity Prices and Fund Failures

[chinaco]

It looks like the drop in commodity prices is causing some problems for a hedge fund.

Is a small bubble popping or just deflating a bit.

Big commodities hedge fund shuts down - Daily Briefing


Are there more problems to follow?

[FUEGO]

Interesting, especially this:

"But Philip Gotthelf of New Jersey trading firm Equidex says the commodities selloff could just be beginning, given how many investors rushed headlong into the sector during the past year or two. He tells Bloomberg television the price of crude oil could be on its way to $50 a barrel from a recent $108."

Where was he 3 months ago to tell us about this impinging drop to $50 per barrel? It would have been nice about $40 per barrel ago! Darn those analysts.

[explanade]

Not going to shed one tear for those who made money on the run up of oil and other commodities prices.

They made money while the high prices sapped the economy for everyone else.

[cute fuzzy bunny]

Oil, gold and other commodities still have a way to go. Six more months of gut wrenching drops.

Really unfortunate for the folks who just piled into commodity funds thinking they were as safe as CD's, only with better returns.

[youbet]

Quote:

Originally Posted by chinaco Are there more problems to follow?

For the folks who invested in commodity funds..... we can only hope so!

[chinaco]

Diversification! Most of the model portfolios (for small investors) that I studied that had some allocation to commodities in some way (through some sort of fund) only allocated 5%-10%.

If people stuck with that approach, they should not be hurt too much. But people who gambled big... are going to feel it.

[teejayevans]

Quote:

Originally Posted by explanade Not going to shed one tear for those who made money on the run up of oil and other commodities prices. They made money while the high prices sapped the economy for everyone else.

The government needs to step and help them, like bear sterns, like the
homeowners with bad loans, like fannies!!
TJ

[HFWR]

In my portfolio, only bonds and small-caps are up ytd, with PCRIX just barely negative. Everything else is dramatically lower...

So diversification works; some things are less worse than others.

[ziggy29]

Quote:

Originally Posted by HFWR In my portfolio, only bonds and small-caps are up ytd, with PCRIX just barely negative. Everything else is dramatically lower... So diversification works; some things are less worse than others.

Your small caps are up? Are these individual stocks, ETFs or mutual funds?

Right now, nothing works except cash. That is a major difference between this bear market and the one in 2000-2002. In the previous bear market, several asset classes still did very well even as domestic large caps tanked. And I think that's why this one feels worse to asset allocators even though in terms of U.S. large cap it's not nearly as bad as the previous bear.

[HFWR]

I have an institutional small-cap fund in my 401k, based on the Russell 2000. It's actually down 6.5%, though rebalancing had me slightly positive until today...

[FUEGO]

My small caps (Vanguard tax managed small cap) are up about 10% last I checked. I did, however, rebalance in to them at a very opportune time. But that's the beauty of rebalancing - I picked an asset class that had dropped to a low and that I needed to bring back up a few percent.

(edited to add - small caps I rebalanced into are up more like 8.5% as of 9/3/08 close of business)

[haha]

Quote:

Originally Posted by FUEGO My small caps (Vanguard tax managed small cap) are up about 10% last I checked. I did, however, rebalance in to them at a very opportune time. But that's the beauty of rebalancing - I picked an asset class that had dropped to a low and that I needed to bring back up a few percent.

Did you mean to say, "That is the beauty of market timing?" Is not that what rebalancing at a very opportune time is?

Ha

[Culture]

I have actually stayed slightly positive. OTOH, that is only because I keep dumping new cash into my account .

I also moved 5% of my portfolio last week from bonds to equities, and plan to move 15% more over the next three months (5% a month), with the plan to go from 50-50 to 70-30 right before the elections. While my rational mind tells me this will pay off in the long run, the irrational part of me is on edge.

[FUEGO]

Quote:

Originally Posted by haha Did you mean to say, "That is the beauty of market timing?" Is not that what rebalancing at a very opportune time is?

Nah, it is called rebalancing when I do it. I don't care what you call it when you do it! The time proved to be opportune only in hindsight, by the way.

I also "rebalanced" into international investments. That hasn't turned out so well. But it is about time to rebalance some more into international pretty soon.

Edited to add: I did "market time" into a financials ETF within a day of the low point. I will call that market timing since it does not fit into my asset allocation policy. Maybe 20% market timing and 80% dumb luck...

[Gardnr]

Quote:

Originally Posted by chinaco Diversification! Most of the model portfolios (for small investors) that I studied that had some allocation to commodities in some way (through some sort of fund) only allocated 5%-10%. If people stuck with that approach, they should not be hurt too much. But people who gambled big... are going to feel it.

Quite true, but even that's a bit of a problem when that allocation is added at the top, as is surely the case for most. How many really had commodities as an asset class in their portfolio before the recent extreme run up?

Of course they're still much better off than those who run with all their eggs to the latest hot thing!

[Gardnr]

Quote:

Originally Posted by Culture I have actually stayed slightly positive. OTOH, that is only because I keep dumping new cash into my account .

Hey that works! Just ask the Beardstown Ladies

[headingout]

I've had a relatively big position in commodities funds (10-20% of portfolio depending on how you slice them), mostly accumulated starting 2003-2005. Probably could have sold some this year, but I'm an adamant buy-and-holder, plus don't need to be paying any extra taxes now while I'm still w*rking. I don't know much about the current speculation/bubble, but my long-term view FWIW is that commodities can only go up. Given the US public debt situation, plus growth across the globe, I see inflation+scarcity as facts of future life.

[HFWR]

Ah, but the market can stay irrational longer than we can stay solvent. Or something like that..

[tightasadrum]

With somewhere around 10% in PCRIX, I'm holding on for the diversification. I'm still heavily into cash (35%?) and still looking for a bottom. It may be timing at it's worst, but it helps me sleep at night.

[explanade]

Yeah I just came into a bunch of cash and I'm not thinking this is the time to put it into the market.

Not even into something like Wellesley Admiral. I notice 23% of its holdings are in financials, which are still leading the market down to triple-digit declines.