John Dizard wrote two columns in the FT.com about the cost of rolling futures forward for commodity funds, and how the commodity speculators are able to game this to extract a profit at the expense of the commodity funds.
His columns are usually in the Tuesday Financial Times, along with James Altucher.
Dizard tends to tell the unpleasant truth in a memorable and occasionally funny way, which is why we won't see him on CNBC.
Worth reading if you are going to buy one of these funds.
First article -
ft.com
The minor corrections -
ft.com
******************* Excerpt **********
Speculators profit from commodity investors
By John Dizard
Published: January 22 2007 21:10 | Last updated: January 22 2007 21:10
Speculators on the floors of commodities exchanges have been called many things, but sensitive, or solicitous of the interests of public investors, are not among them.
So it shouldn’t be surprising that one of the ways they have of profiting from the passively investing public is called “date rape”. In the pits, physical or electronic, that means betting against the certainty that commodity index investors’ positions are rolled in a mechanistic manner every month, in known patterns on particular days. The phenomenon could be called index roll congestion, or some other euphemism, but as we noted, these are not people who worry about your feelings.
Commodities indices were devised to provide a transparent, systematic means for the public to obtain exposure to an asset class that gives a diversified return on capital.
Well, actually, they were devised as a way for investment dealers to make money from investors who wanted that diversification. They’ve worked extremely well for the latter purpose, and reasonably well for the former purpose. |
