Animal Spirits Podcast - Talk Your Book: How to Invest in Commodities

Episode Date: September 1, 2025

On this episode of Animal Spirits: Talk Your Book, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Don Casturo, CIO at Quantix Commodities LP and Kristof Gleich, President & CIO at Harbor Capital to discuss: how to invest more thoughtfully in a broad basket of commodities, how investors typically allocate to commodities as an asset class, why the index doesn't make sense anymore and how commodities can hedge more traditional portfolios. Find complete show notes on our blogs... Ben Carlson’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠A Wealth of Common Sense⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Michael Batnick’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Irrelevant Investor⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Feel free to shoot us an email at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ with any feedback, questions, recommendations, or ideas for future topics of conversation. Check out the latest in financial blogger fashion at The Compound shop: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://idontshop.com⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by Harbor Capital. Go to harborcapital.com to learn more about HGERR, their Harbor Commodity All Weather Strategy ETF. That's HarborCapital.com to learn more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only

and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Is the dollar bull market over, Ben? Sure seems like it.

It's definitely taken a punch on the chin, correct? A punch on the chin. That doesn't sound right. That doesn't sound right. Taking it on the chin. Well, one of the things that benefits with a weakening dollar are commodities. And don't look now, Ben, or you can if you want. Gold has been one of the best performing assets over the last year.

Over the last couple of years, it's doing well. And the technician in me says it looks like it's going higher. It is going higher. What I'm talking about? Not a prediction. It's going higher. It's up today. Commodity does move higher.

I guess people are luring about inflation again. No, it's interesting, though. I was talking with Jan Van Eck about this yesterday. Investors are still apathetic about commodities. They're not seeing a whole lot of investor demand, if you look across the industry, which tells me that it's early. And these things tend to run for years out of the time. So you think it's because that we've been in this essentially sideways market for commodities prices for the big ones, right?

Like oil and such. that probably that, yeah, investors are right or wrongly just assuming that this is going to continue. Well, one of the things about commodity products, which we speak about on today's show is the waiting, like the Bloomberg Commodity Index, how much of it is energy? Right. And that's a lot of people think that the benchmark, it's kind of like bonds. Like the S&P 500 is hard to beat, but the bond index, if you just take on some more credit

or duration, right, it's not that hard to beat, but the people have problems with the commodity index as well, just because of the way, like, how do you choose the importance of these commodities? And they did it, what, 35 years ago, wherever when it started. And a lot of people think that there's a better way to do it. It was because it was for suppliers and hedgers. Right. Like, it wasn't meant as an investable index. Right. So on today's show, we talked to Don Castorra, who is a CIO at Quantix Commodities. And they work with Harbor Capital. So we have Christoph Glechon again. We've had him on a number times to talk about their index, and then the ETF they created off that index, which they think has a better

waiting scheme for more of a long-term buy and hold. Commodities play. So their ETF is called HGERR is the ticker, harbor commodity all weather strategy. We talk all about how they put it together, how they change the different weights and such. So here's our talk with Don and Christoph. All right, guys, welcome to the show. Great to be here. So how is it, let's start here, how is it that the Bloomberg commodity index is still well below its all-time highs and you guys are beating the pants off it? What is the story with the index that we're going to be talking about today? It really comes down to a difference in waiting methodology.

There's a fairly finite collection of commodities that are liquid enough to be considered for indices. So basically any commodity index will have pretty much the same component. to it. But by putting those components together in different weights and arguably a better construction that is more suited to the investor, you can have dramatically different returns. Okay. So what is the way that these indices, I'm still having trouble, indices or indexes, how have they been done in the past and what did you guys do to sort of change the way that they are done? Well, the two most common benchmark for commodity indices originally was the SMP, GSEI, now more commonly, I think the Bloomberg Commodity Index has become the more common

benchmark for commodities. Both of those sort of share a similar history in terms of their construction. They were created primarily to generate offsetting flows for banks' commodity desks in their producer book hedging. It was pretty much one-sided risk at the desk at those times, which is basically hedging the exposure of commodity producers with no offsetting buyers. So they created these indices to try to get that offsetting flow, to try to cater them to the individuals of the world that actually had the commodity exposure on the other side. And as such, their weights were basically just world production waiting because they were trying to offset the producer hedging that they had. They weren't specifically, they didn't specifically have in mind the investor that may actually,

actually want to buy the other side. And that's the biggest difference that we consider in our construction. It's like, well, what if we approach it from the other side? What have we said, what does the investor want to get out of an allocation to commodities? In most cases, that's some diversification from a 60-40 portfolio in a way that is going to be effective in hedging inflation. And approaching it from that perspective results in a slightly different commodity wading to your basket. Is that because back then it wasn't really an investable asset class or it wasn't thought about the same way? Because that has to be part of it too, right? You know, the creation of the BECOM and the GSCI was designed to make it an investable asset class. I mean, obviously,

you've got to get your exposure. Most investors are going to want to get their exposure from derivatives, not from actually owning cattle in their backyard. So in order to do that, they needed to buy futures. And then with futures, you have to have a rolling mechanism so that you don't go into delivery. So a lot of that early work was done to create something that could be investable for people who didn't want physical exposure to commodities, but have price exposure to the asset class. But the weightings, like I said, they were mostly driven to say, well, what gives us the offsetting flow to what these producers are selling? And we'll just create that because that's good for our books may not be as good for the investor.

And that got our, you know, if I can just sort of jump in, that's what really got my attention and our attention. So just to back up quickly at Harbor Capital, we work with specialized boutique managers that we think can deliver strong returns. In this case, we're talking about commodities. And it was that insight that these well-known commodity indices, or it's BCOM, GSC that we kind of take for granted, were designed for commodities. producers rather than commodities investors. And if you look at the returns that commodities

are put up for investors, they're pretty awful over the long run. And they have fits and starts where they work and then they don't. But if you look over the long term case, the long term, sorry, to try and make a strategic case for commodities based on the existing options that existed, it's pretty hard to, you have to torture any kind of optimization or mathematical model. And what was interesting here is actually commodities haven't been the problem. It's been the solutions that have been designed to capture the available returns. And so just kind of like rethinking the asset class from first principles, you know, as Don sort of started to explain, we thought we could create a really sort of neat, innovative idea that would allow

investors to have a strategic allocation to the asset class. So, Don, when did you have this insight and what did you do to make sure that investors had a better outcome than with the options that are available before you launched? Well, the key thing in terms of an insight was finding an investor that was willing and basically told us that they were willing to deviate from the existing benchmarks. Sam, part of the other challenge that we face with commodity investing is a lot of investors are in their investment committees are pretty conservative and aren't willing to deviate from an existing benchmark, even if its performance is pretty bad, and as to instruction

potentially even worse, when we first started Quintex, there was an investor out there that said, hey, we recognize the shortcoming of the existing benchmarks. We think commodities can be an effective tool in hedging, convince inflation. Coming out of the pandemic, we really think we are going to be in that environment. We believe in your skill set to develop something that can be very effective in that. We're not going to be constrained by tracking air to a benchmark. Can you come up with a framework for something that exists to us? And that's really where this was born, this idea of like, okay, we're being mandated to create an index that's built for an investor, for an investor objective.

And that's really what was basically the genesis of where the Quantix Commodity Index came from. So that was late 2021, and then we launched the ETF, the tickets, Hedger, HG, E.R, and we launched that on February 9th of 2022, when, you know, inflation was getting really, really ugly. And so the ETF is about three and a half years old now and about 600 million of assets. Pretty good timing on the launch, huh? Yeah. I wish we could have been around a little earlier so that people could have bought it when they're. they needed it. So what is the, I mean, to my mind, oil seems to you like the biggest one, but like what are the biggest differences here? What are, what are you over underweighting

versus some of these other benchmarks? So, yeah, we're basically picking from the same commodity universe. I mean, BECOM has 23, 24 now commodities in it. And our basket contains basically the same commodities. It's just a different weighting. And the construction mechanism, the key differences in construction mechanism come down to a couple key points. One, we, we, as I keep emphasizing, we consider what the investment objective is in terms of what the buyers want to get out of this. So we do a quality score waiting across these different commodity components. And a key feature of that quality score is inflation passed through sensitivity. The commodities that are in the BECOM basket represent a wide range of refinement. You get.

They have something like cotton, which is basically pure cotton just comes off the bail, a long way from anything that you would actually use in terms of how that cotton is, even the price of a T-shirt, which is the most basic implementation of cotton. It's only 5% of the price of that shirt is the cotton, where another commodity that's in the B-com index, R. Bob Gasoline, is what we trade on, what is primarily traded into the component of the B-com index in gasoline, is the same stuff. that you put in your tank. So if that goes up in price, the consumer is going to feel it right away. And we consider those type of things in terms of inflation sensitivity in terms of waiting

the basket. We also consider roll yield because, as I mentioned, you're not owning the physical commodity as an investor. You're owning a derivative, which are these futures contracts that need to be rolled from one contract to the next. And the process of doing that, if there's a contango in the curve, i.e. the futures curve is predicting it to get more expensive. The investor doesn't get those gains. They pay that on a roll away in a cost of carry. So if we wanted to create an index that is a strategic long-term allocation, we need to be sensitive to role yield and that cost of carry. And different commodities have different characteristics in that regard. And that factors very heavily into the weighting analysis as well. What it tends to result in is being more

overweight refined products, the things that are, that you actually use more than crude oil, so we own more heating oil, distillate in R. Bob gasoline, relatively lower crude oil, because again, that's further away from the actual cost in the investor uses. And more overweight gold relative to the rest of the basket. And reasons for that are a little bit different in that we want, we envision this in being something that's durable and appropriate for a long term, strategic investing. And there's not every environment where commodities are so tight that inflation is likely to be caused by scarcity, like we're running out of commodities. There are periods where there's ample supply and holding and rolling those futures contracts when there's out

ample supply. It could become costly over the long term. In those environments, you're more likely to get inflation from debasement where there may be a flood of dollars trying to stimulate demand to try to correct this oversupply situation, which would likely weaken dollars, a rising tide raises all ships. You want real assets in that environment. Gold is really the only commodity that makes a lot of sense as a store of assets. So another key element of our design is dynamically reweighting between consumable commodities and storable commodities, basically gold in terms of a safe asset.

So for a commodities like novice like me, right? I'm not a commodities expert like Don is. If I'm holding commodities in a portfolio, presumably I want to hold commodities and I want them to work if there's inflation to protect my 60, 40. So they have a filter and they overweight commodities that do well in inflationary environments. Number two is sometimes holding commodities can be really, really expensive or sometimes it can be really, really cheap depending on whether they're in backwardation or contango. And so to skew your commodities exposure towards things that you're getting paid to own rather than paying to hold makes a lot of sense. And then the last thing is commodity, the inflationary environments that we face can be different. And so different commodities

behave in different ways depending on the type of inflation or environment that you're in. And The big differentiator with Hedger is the gold trigger and how it flexes gold up or down depending on the inflationary environment that we're in. It's when you package those three things together, you can really deliver something very different from sort of these broader-based commodity indices. You know, I think the irony here is these original indices, as Don said, were to provide sort of production-weighted exposure. think about gold.

Not much new gold is produced every year because it's scarce. And because it's scarce gives its value. So if you're only going to invest in stuff as it's being produced every single year, you're naturally going to be underway a really valuable asset like gold. And so it's kind of fixing that shortfall as well. Who decides what's in the index at these levels? Like, for example, and what's a commodity? water or commodity? What about eggs or eggs a commodity? Bitcoin is classified as a commodity,

but none of these things are in the index. Yeah. So the first step in our index construction is very similar to how Bigcom and GSI do it, is evaluating liquidity by looking at open interest and volume that trade across various commodity contracts. By that methodology, there's only 24 commodities that are eligible to be included. Those are the same that are in BECOM. So So water is not eligible or even some of the other examples. But most things you would think of, it's across a variety of sectors are included. And it seems I said I think that's remarkable, given how much outperformance we're able to generate by a different methodology, it's done with the same 24 components.

It's just a different way of waiting the same 24 things. How much should investors expect there to be movement? Like, do these relationships, the inflation relationships change? or do you think they're relatively static over time and you just kind of let things free flow? Like, how does the rebalancing work? Yeah, so I meant to answer that as part of the last question. There's not discretionary choices being made in this freewaying. This is all a prescriptive methodology that we came up with, you know, four or five years ago.

And one of the key things that I always tell my marketer about that in terms of, well, if you've done something prescriptive, then you've got to discount it how performed in the back test relative how it's going to perform in real life. I didn't think that was going to be the case because we never looked at the back, we never looked at the back data when we developed it. We came up with this process about what should be in it, what rules should govern how it should reweight between scarcity into basement and gold and the other things without looking at the data, just knowing what a well-constructed thing should look like.

And then when we came up with the rules, we ran it back and it had 8% over BECOM outperformance over the previous 20 years. And since it's been live, as Christoph knows, it's outper. perform by 8.5% even better than it did in the back test because we didn't, there's probably some rules you could have come up with. Have you looked at the data that would have been even better? But that's not how we created the thing. So how did you create the thing? What is the waiting methodology? I was hinted at some of these things earlier. The first step, obviously, to generate what could be included. That's that volume and OI analysis. It seals the same 24 list of possible

components that the BECOM has. The next step is to create a quality score for each. commodity and the components of that quality score have a couple of different inputs to them. One is this inflation past through sensitivity like how related is a change in the price of that commodity to a change in an end user good because that's what the people probably want to protect against. Two is just looking at a correlation of that commodity to CPI over different windows because again, if it's going to be an inflation hedging tool, there should be some consideration and how the price of that commodity changing relates to the change in CPI. And then the last component of that quality score is looking at the cost of carry.

Like, how expensive is it to maintain an investment in that commodity relative to other commodities? And that's basically the shape of the curve. And then the last thing in terms of the weight process that's important is this dynamic rewading between what type of environment we're in, whether we overweight the consumable commodities or overweight gold. And that, the calculus that goes into that is a function of three different indicators. One is roughly how gold is performing relative to copper, using copper as a measure of how much genuine economic growth activity there is and how it's performing, relative to

gold, which is more of a, are people concerned about a preservation of wealth. And looking at the price of those two things is one indicator. Second indicator is simply just the shape of the yield curve. As simple as that sounds, we have found that there's, there's some predictive power in terms of what the commodity demand environment is going to look like that's indicated by the shape of the yield curve. And that is another one of the scarcity debasement indicators. And the The third one is basically just looking at the shape of the consumable commodity curves themselves. If they are in general backwardation, the price of the commodity on a spot basis is higher than is predicted to be in the future, that's a pretty obvious indication of some scarcity.

Like there's higher demand right now than there's expected to be going forward. All three of those factor into the general gold, overweight, or underweight decision. How does the direction of the dollar impact these strategies? The dollar itself isn't an explicit consideration in terms of the weighting. I would say in general that a weaker dollar is bullish commodities regardless of what the basket is. And that's primarily a function of that all 24 commodities that I'm talking about that are part of BECOM are considered to be possible parts of our index are denominated in the U.S. dollar. And if consumers from non-domestic consumers are buying in another currency that is getting stronger relative to the dollar, they can afford to pay more in a dollar price without really actually paying more. So in general, commodity demand tends to go up as dollar as the dollar weakens.

And we have definitely certainly seen that this year. that's most obvious in commodities that have a higher non-U.S. consumption and basically industrial metals probably have not even probably correlation-wise have the strongest effect from that. I'm curious kind of from like a 10,000 foot view, how you think about the relationship between technology and commodities. Because I guess the hope with technology is that we just become more efficient at all of these things. And technology should be a deflationary for us. Obviously, the 2020s has put that idea to the test. How do you think about that from a big picture perspective, having this as a strategic allocation? So I wrote a newsletter

a way back about the effective AI on commodities. And I was coming at it from a bullish perspective that basically you were replacing human resources with mechanical resources. And the mechanical resources going to need all this commodity supply to run itself. And I believe that's definitely the case. I mean, AI is just going to get better and better the more resources it has to get better. And what resource does it need to get better? It needs power. So it's just logical to me that the demand for power is going to go way up, way more so than agriculture, because humans aren't going to need food as much as the machines are going to need power. But the funniest thing was when I, When I ended the newsletter, I actually asked chat GPT what the effect of AI growth is going

to be on commodities. And it was actually, it actually came back with all these answers about how it's going to make the discovery of these things so much more efficient that commodity prices should go down, which I thought was interesting, and not really the conclusion I would have come to. And even if technology ultimately is deflationary, like it always has been and it always will be, but there are a lot of reasons, I think, why one should at least have a hedge against a worsening inflationary environment with what we're faced today, whether that's, you know, de-globalization, decarbonization, de-dollarization, you know, increased deficit spending, dollar weakening. There's, I would say, at a moment, a very mixed and confusing picture in terms of inflation. And so that's why we think it's prudent to at least hold it. hedge against a more, a worse inflationary backdrop.

Why isn't electricity a commodity? It is. Power is actually traded. It's very difficult to put power into a long-term index so because it's not storable. I mean, that's part of the biggest challenge with some of these alternative electricity sources in terms of storing wind and solar for when you need it. Same thing exists for investing in it. the relationship between the spot price and what it might be two weeks from now

varies dramatically. So it's very hard to buy and hold on an investable basis because of that. Got it. Christoph, you at Harbor see a lot of different areas of investable markets. How are you seeing investors behave when it comes to taking a position of commodities? Do they tend to? I don't know this probably depends on the investor, but whatever. Too late. I'll ask it anyway.

Are there people that are training or are people that are buying holding or are the people that are trend following it? How are people investing, getting exposure to commodities? I'd say it's obviously a few different ways. I'd say there's one camp, which I would say has more of a strategic asset allocation at the moment, just with what's happened in the 2020s, you know, the shifting environment that we've kind of talked about. And for those folks, you know, obviously talking about commodities or talking about the merits to the asset class or maybe a better approach to the asset class, those conversations tend to flow more naturally. I would say the biggest cohort and the numbers play this out is people

that don't own any commodities and frankly have been burnt by it and don't want to touch it again. So there's a lot of education with those investors. If you look at what commodities did in the 2000s, you know, it was a very, very strong asset class. I think a lot of people went in at the wrong time and then saw commodities do nothing but underperform in the 2010s and kind of swore never again. And so we just, you know, we spend a lot of time trying to educate those investors on the merits today of the approach that hedger takes, the merits of the assets classes as it is today. And really, I think the 2020s is a very different investment environment from the post-financial crisis, you know, 2010 period, where you had a disinflationary,

very low interest rate, very kind of benign and stable macro backdrop, where you didn't really need to own anything except equities and maybe some bonds just to provide a bit of protection, whereas I think today the environment's very different. What sense do you get is a typical allocation of someone who has a strategic? Because you mentioned this as an offset to like a 60, 40 or a hedge. Are we looking at five to 10% allocations? Like what are investors putting in something like this in terms of the overall portfolio?

I'd say a little bit less than that is what I'd see. Like, it's funny, we do portfolio reviews. Like we work with financial advisors, RAAs, and we get that whole portfolio when we look at it and we do a bunch of analytics on it and run it through our different systems and see how we can help them. I've never seen, you know,

we do hundreds of these. and I've never seen an allocation to commodities where I've gone, oh, that looks, you know, too much. And so always single digits and always, I would say, low single digits. So if I see a portfolio and someone's got like four or maybe five percent in commodities, I'm like, oh, they like this asset class. But often what you'll see is like a one or two percent, you know, hold in the asset class. If you see it at all, I would say still to this. the vast majority of allocators have zero to commodities.

And I can explain why that's the case. I mean, to put some numbers on what Christoph was saying earlier, from the end of 2000 to today, the BECOM index, the excess return, is down 13% over 25 years. Now, the same commodities and the same weights, if you look at their spot prices, like what it actually costs you to buy the 24 things that are in there, it's up five times, you know, like, and that's probably consistent with what you guys kind of feel and know, like gasoline is definitely more expensive than it was then. Copper is more expensive than it was then. Yet the index that's supposed to have been providing you protection against that is down 13% over 25 years. Like, why would you allocate to something like that? Don, Don, what would, because I think over, I think since if you use 2000 as a start date, which is like the peak of the dot com bubble, but whatever. I think gold is either right in line of the S&P, it's all. I think gold is either right in line of the S&P, it's all. outperformed. What would you say to someone who says, you know what, I'm just going to put, my commodity allocation is going to be gold as opposed to a diversified portfolio of these

different commodities? What would you say to that? Like, what's the benefit of adding these other commodities? Great question. And the answer to that, there's great examples of that, even in the last four years since we've been live with the index that hedger tracks. There are examples of the idiosyncratic risk geopolitical shocks that can occur that are unpredictable in terms of their timing. So you need to have that exposure at all times to really capture those things. The Russian invasion of Ukraine, I think, caught everyone by surprise. And basically, you looked at the cost of distillate, heating oil, jet fuel type things, doubled in two months. And that's an inflationary shock that you would be missing in not.

have been protected against if you were only allocated to gold. Even this year, gold captures a lot of headlines. It's not even the top performing commodity of 2025. It's not even the top performing precious metal. Silver is outperformed gold. But bean oil has also outperformed gold. Even live cattle, doesn't get a lot of airtime. It's a small commodity, but it's in BCOM, is up 25% outperforming gold this year. I think, just let me add on this. So I've got the numbers in front of me. In 2021, when BECOM so broad, you know, commodities basket was up 27%. Gold, precious metals were down negative six. And in 2022, when commodities were up 18%, precious metals were flat, they were basically

zero. So those are two back-to-back years. If you've, if, and those are the years that you really want commodities to be in your portfolio, if you've just got a very, you know, concentrated view and, you know, only owning precious metals, you may be opening your investors up to some nasty surprises. And that's why I just think having this diversified but highly convicted expertise in driving your commodities allocation makes a ton of sense. One of the things that used to happen that doesn't seem to happen anymore are oil spikes

after geopolitical instances, which was one of the key. reasons, at least historically, to be exposed to these areas, certainly BECOM where it's, you know, a huge component of it is energy. Talk about that dynamic. I think the biggest reason it stopped spiking is because in every geopolitical potential supply scenario, there was never actual a loss of supply. And I think it's like the boy who cried wolf. Eventually, the market just got numb to the threat. Like, we've heard this before, but we never actually lose supply. I think that's a lot. Conclusion, one, I believe in myself, but at some point, that's not going to be the case. There's going to be an event where we actually do lose supply and what people were fearing when they were buying it to begin with will actually be reality.

That's, you know, the MIDI supply shock is way down on the list of things you could be potentially bullish about for commodities, though. So, you know, even though that one is unlikely to play out, that does, that's not a reason. not to buy. Guys, is there anything else that we did cover that you wanted to hit on today? No, I'd just, I'd say for me, from an asset management perspective, I think what's interesting is like this approach that we've talked about, if we were doing this 10 years ago, this would have been available in an actively managed mutual fund. But just how the industry has shifted, how investor preferences are shifting, there's a really interesting kind of merging of active and passive or active in index investing.

And I think this is a great example of where we're trying to meet investors where they are today, which is clearly they have a preference over index investing. Index doesn't mean passive because you can see in this index approach, you know, I describe it's very, very active. It's high tracking error to BCOM and it's been designed to generate meaningful outperformance versus BCOM. Perfect. Where do we send people who want to learn more?

They can go to our website, harbourcapital.com. Perfect. Thanks so much, guys. Thank you. Thanks. Okay, thanks to Don. Thanks to Christoph, remember check out harbordcapital.com to learn more. Email us, Animal Spirits at CompoundNews.com.