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David Stafford
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Student of markets, enjoys following their course.
My book:
Around the World in Several Pieces
  • CFD, Resilient Or Overlooked? 0 comments
    Feb 7, 2013 6:52 PM | about stocks: CFD

    With news of Calpers generalized tarring of commodity indexes, one could expect commodity funds to kind of suffer. Seeing as how pension funds own much of the stock market in general( hence lending stability etc) through indexing etc, I was personally preparing for the worst for ye old CFD upon hearing of Calpers anti commodity announcement. Especially since, with its various academic-esque publications etc, Calpers is kind of a very respectable if not the most respectable pension fund that one might think of off hand, thus it might sort of lead the heard per se.

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    Needless, to say CFD's price was undaunted by this pronouncement and its price actually increased.

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    Why CFD? CFD is a fun way to invest in commodities. When I say fun I in essence mean, that its not too highly priced to have a really high "entry cost" as I like to think of it, and not only that, but it has a great yield of 8.24%, that's right my friends 8.24%. Now if one were to apply some sage portfolio construction planning to one's pile-o-gold, one might want to include some commodity funds. Even though there is debate as to weather or not managed commodity investments are better than pure commodity investments per se, managing a pure options based commodity investment portfolio could needless to say require much more effort than say, simply buying some CFD. Its nice to also have access albeit indirectly to all of the access, and execution related technologies etc, that investing through a managed fund brings.

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    So, CFD is a perhaps good addition to a high yielder portfolio, because it provides the commodity per se, and hence serves as somewhat of a hedge to various systematic, and perhaps unsystematic risk, while all the whilst providing a very un-defensive payoff rate, that may rival one's purely offensive per se, investment picks.

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    So back to Pension funds....When looking at ye old CFD, I was perplexed why it wasn't tarred and feathered over the Calpers announcement. Of course, I was happy to see a sort of interesting investment profile element in and of its self, namely the % of investment into the investment, that comprised the funds of institutional investors(see pension funds etc).

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    CFD's figure concerning this element of its profile, is in this case, a delightful 11%, hence, if there was much pension fund dumping it perhaps occurred unnoticed due to the relatively small % of shares in the investment that were currently held by institutional investors etc.

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    Hence, perhaps CFD is an even more favourable portfolio element than it was previously. For, ironic as it may seem, it actually has been leant stability by not being held so widely by institutional investors.

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    Thank you for your readership,

    sincerely,

    Dave

    Stocks: CFD
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