"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, November 5, 2013

Dow Jones - UBS Commodity Index Rebalancing

Each year the sponsors/originators of the various commodity sector indices announce a reweighting or rebalancing of their respective commodity index. This is done for assorted reasons but for whatever the reason, those index funds that benchmark to these things, must adjust their portfolio at the onset of the New Year in order to bring them into line with the new weightings.

The Dow Jones/UBS Commodity Index has announced that the target weighting of both gold and silver will be increased in the 2014 index. Silver's new weighting will be 4.1% compared to its current 3.9%. WTI Crude will be lowered to 8.5% from the current 9.2%.

Gold, surprisingly enough, will be raised to 11.5% (the largest weighting) from this year's 10.8%.

I am still looking for the Goldman Sachs Commodity Index reweighting and will try to note the changes in the precious metals, if any.

This will bring in some buying after the first of the year of both gold and silver futures contracts. While this is purely a technical development, it will tend to have a very short term impact on the metals.

I might add that this is not at all friendly towards crude oil which is already seeing large selling pressure.

A lot can happen between now and then, but I did want to note this.

As of today, the commodity complex as a whole is experiencing another strong bout of selling as the Dollar is moving a bit higher and traders continue to have their doubts about the longevity of the "no tapering" policy.

As has been the case, the equity markets could seemingly care less about much of anything. Dips continue to be bought as that bubble grows larger and larger. It really is mind-boggling to me to see this drug-induced march higher and higher in the US equity markets. The disconnect between the US stock market and what is occurring all across Main Street is something to behold. There still does not seem to be any sign that the mania is about to end anytime soon.