Volatile but fundamentally floored?
First Published in Automated Trader Magazine Issue 10 Q3 2008
We continue our coverage of commodities with one man’s analysis of the long-term case for investment. David Nahmanovici delivered his analysis at IDX in London, back in June. We were in the audience.
Commodities, with their unique properties and reputation for high volatility, were once eschewed by many investors as too risky for serious consideration.” So began David Nahmanovi’s solo presentation in the Queen’s Vault at The Brewery on the second day of IDX. Nahmanovici, manager for commodity investment solutions at Barclays Capital, had earlier asked his not-quite-capacity audience whether they were, or were intending to become, investors in commodities. The answer – a near-unanimous no to both questions – gave him perhaps more of an opportunity than he had expected.
Current enthusiasm for commodities, Nahmanovici explained, was prompted by their strong price performance, the lack of correlation between this and other mainstream asset classes such as stocks and bonds, and commodities’ potential as a hedge against inflation. But the boom was having the counter-intuitive effect of obscuring the more compelling long-term case for commodity investment based on fundamentals. This, said Nahmanovici, was being “pushed aside” by increasingly strident claims that price performance was the product of speculation in commodity futures, with commodity index investment as “the main culprit”.
Nahmanovici said: “We at Barclays Capital continue to believe that this is a fundam...
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