Monday, January 08, 2007

Retooling the GSCI

We heard today some more about rejiggering in the Goldman Sachs Commodity Index.

Some component weightings have been changed, and though the changes seem to be far more slight than the energy weighting changes that occurred last summer, they still may have played a great role in last week's commodities drop, according to Joe Duarte and the Bear Mountain Bull.

The NY Post reports:

Goldman cut the energy portion by as much as 50 percent in some of the sub-indexes that comprise the widely followed Goldman Sachs Commodity Index, tamping down moves to buy them by large investment funds who mimic Goldman's index.

The changes took effect this month and apply for all of 2007, a Goldman spokesman said.

Crude oil futures plunged 9 percent Wednesday and Thursday to $55 a barrel, before settling Friday at $56.31. The two-day decline was the sharpest since December 2004.

I took a look at the component tables earlier today, and like Joe Duarte, I'm unable to see the large percentage cuts in energy components cited by the NY Post article. Anyone know more about this?

Update: Regarding cuts in energy weighting, see the Bear Mountain Bull's post (linked above). He points out that the old (New York Harbor) unleaded gasoline contract has been dropped in favor of the RBOB gas contract. Both contracts traded side by side on NYMEX until January 2007. Total index weighting in gasoline is now 2.35%, down from 4.67% last year.

Hope we got that right.