Goldman Sachs Commodity Index: Volume Explosion

And now for some midday Schrodinger wave function collapse:

"If a volume explosion hits the GSCI index, does it exist if nobody witnesses it?"

It is quite obvious that nobody at all was aware of any impact pieces out of Goldman that would herald summer of 2008 crude price targets... The chart below shows the insignificant volume pop in the GSCI.

A brief recap on GSCI from Seeking Alpha.

The GCSI is an index of 24 commodities weighted by world production. Goldman Sachs believes each commodity should be weighted in proportion to the amount of that commodity flowing through the economy.

Because commodities can be held in many different ways, it is impossible to directly measure the amount of capital dedicated to holding that asset. For a stock you can measure its market capitalization which represents the total amount of capital dedicated to holding that stock. But for commodities, you can't do that. The way to measure economic significance of commodity is to measure its production, which in turn is related to how much capital is dedicated to that commodity.

At this point, theoretical elegance clashes with investment prudence. The world's most widely produced and traded commodity is oil and related products. Reflecting that, the GSCI has a 73.5% weighting in energy commodities. Of the total index, 45% is weighted to Crude Oil. Of the remaining 27% of the index, 10% is allocated to each of agricultural commodities and industrial metals. The final 7% is split between precious metals and livestock. The GSCI is designed to reflect reality without concern for investability.

Comments

[tunaman4u2:]

Ive GS bailout funds so they can speculate in oil... BRILLIANT! How did that 200 price target work out last time jerks

Jun 04 04:09 PM

[Rollerball:]

Amazing. Sure got a nice fill. I guess it's good to be king.

Jun 04 04:22 PM

[dcb:]

your AIG money at work.

Jun 04 04:30 PM

[wheelbarrel...:]

Can you move the date up a little? June 10th would be great.

TIA


On Jun 06 08:03 AM CRASH BEGINS AUGUST 2009 wrote:

> x

Jun 06 09:42 AM