Risk Management

Risk is commonly defined as the likelihood of permanent loss of invested capital. It is not a measure of volatility. Modern Portfolio Theory has popularized the notion that risk can be measured in terms of price fluctuations - by that standard, a commodity that suffers a price decline to a historically low level would be considered "highly risky". We view such logic as inherently flawed. Rather, whenever a commodity trades close to its extreme historical price, we see that as an investment opportunity rather than a risk. The risk, in our view, is that a commodity position, once taken, might remain "offside" for some time.