IB Net Payout Yields Model

CRB Index Components

As the CRB Index grabs more and more headlines attention, an investor needs to understand the commodities that make up the index. For more then 50 years, the CRB Index as served as the most widely recognized measure of the commodities markets. The index is comprised of 19 commodities with agriculture comprising 41% of the index followed by energy at 39%. Crude oil is by far the largest individual component at 23% followed by numerous commodities at 6% such as Copper, Corn, and Live Cattle. Yes, that's correct. Live Cattle ties for the 2nd biggest component in the index.

The index likely does an exceptional job of capturing the cost changes to the market. Crude oil is by far the largest commodity used and hence the largest expense to the US economy. For investors though, this index doesn't exactly capture the investment environment. Precious metals such as Gold make up only 7% of the index. From an investment standpoint, most of the commodities offer equal opportunities for investment. An investor can either invest in oil, nat gas, copper, corn, or gold. An equal weighting would be more useful from that standpoint. Do I really care whether Live Cattle go up or down?

Knowing the size of crude oil in the index, its little wonder now that the index is at a 52 week high but no where near the 2008 highs. Oil remains significantly lower while gold has hit new highs and copper nears that high. The picture is clearly skewed towards inflation and not investment results from the sector. Just something to consider when reviewing the index chart or results.

Also, interesting is that the index use to include lard, oats, and potatoes of all items. Lard! Really?

List of the 19 items in the index:

Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, Silver, Soybeans, Sugar, Unleaded Gas and Wheat


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