In this corner is Goldman Sachs, which praises the virtues of commodities. At a conference in South Carolina, Selen Unsal, v.p. of commodity sales at Goldman, said, “Commodities in a portfolio make equities better-behaved.” They perform best, says Unsal, “when the financial portfolio performs worst.” Just take a look over the past three decades, he says, when the Goldman Sachs Commodity Index Total Returns gained an average of nearly 17% when cash and bonds could muster only 5%, and the S&P 500 was between -16% to -20%. In the opposite corner is UBS Global Asset Management, with a spanking new report on commodities. Prepared by the firm’s Global Investment Solutions team, headed by Brian Singer, the report cites “a history of underperformance and volatility” in the class. “Commodities are a very inexact and unstable inflation hedge,” said Singer, a UBS Global Asset Management executive.” It is precisely the lack of correlation between commodities and any other asset class that suggest that they should not return anything in excess of cash,” he said. “While spot prices have risen since 1970, they have underperformed relative both to the [Consumer Price Index], by a cumulative 21%, and relative to cash, by a cumulative 46%, over the last 36 years.”
