From the Financial Times (Feb. 6, 2007):
Two weeks ago, I unfairly profiled the Chicago speculator community. "Profiling", in the sense of accusing or convicting a suspect based on
race or general appearances, is wrong, even in the case of such a rich and privileged group as the "locals", or speculators in the commodities pits.
I was describing the practice known as index roll congestion, or "date rape". This involves profiting from the requirement that public investors' positions in commodities indices be "rolled over" from one contract month to another over a known five-day period. The price of the old month's contract is depressed and the price of the new month's contract is inflated. This can be a huge source of profit for those ready to take advantage of the naive public.
In the column, I was correct to point out that index roll congestion costs people who use indices such as the Goldman Sachs Commodity Index something in the order of 150 basis points of return a year. Given that formula-managed commodities index funds have $100bn in assets, of which GSCI-linked funds account for $60bn, a lot of money is being lost by the public to someone....MORE
HT: I'm not sure. I thought it was Market Movers but when I looked in the link-vault I couldn't find it. If it was yours, email and we'll link.