By Anne-Sophie Corbeau, Research Fellow, KAPSARC (Saudi Arabia)

The Liquefied Natural Gas (LNG) industry is going through the largest increase in LNG capacity ever, equivalent to twice the LNG export capacity of Qatar. These new supplies are arriving in a market environment significantly different in terms of supply, demand and prices from what the industry anticipated when investment decisions were taken. Slower than expected LNG demand growth is forcing sellers to look for new, more riskier markets. But a potential market squeeze beyond 2020 is currently the greatest worry of investors and buyers alike, as very few projects have been sanctioned since mid-2015. Buyers have become more demanding about what they are ready to accept in terms of contractual conditions. Their demands focus on three different aspects: pricing mechanisms, flexibility and final destination clauses. Sellers have become increasingly worried on how far negotiations could be pushed and that the sanctity of long-term contacts could become under threat.

This digest article examines whether gold can hedge an investor’s inflation risk over the long term. Though many studies do find that a long-run equilibrium relationship exists between gold and inflation in various countries, these results may not be relevant for the outcomes that real investors would have experienced. This article examines the results of saving an ounce of gold a year for a U.S. dollar-based investor over 25 to 40 years, as someone saving for a pension would, over a 200-year period. Perhaps somewhat surprisingly, in the majority of cases, saving in gold would not have compensated these investors for inflation when they came to draw down their funds at retirement. The paper concludes that there may be good reasons for an investor to hold gold, including portfolio diversification benefits and acting as a safe haven during major market crashes, but reliable inflation hedging properties does not appear to be one of them.

One typically finds that institutionally-scaled futures programs employ trend-following algorithms. Here, the key is employing such algorithms across numerous and diverse markets such that the overall portfolio volatility is dampened. On the other end of the spectrum are calendar-spread strategies. These strategies typically have limited scalability but individually can potentially have quite consistent returns.

By Nikos Nomikos, Ph.D., Professor of Shipping Risk Management, Faculty of Finance, Cass Business School, City, University of London, U.K. and Member of the JPMCC’s Research Council

As discussed at the JPMCC’s September 2016 Research Council meeting, the shipping industry plays an important role in the world economy since about 90% of the world trade is carried by sea. One of its sectors is the dry bulk market that involves the transportation of homogeneous bulk commodities, typically raw materials such as iron ore, grains, coking and thermal coal, bauxite and alumina, on non-scheduled routes, mainly on a ‘one ship-one cargo’ basis. The dry bulk sector is important in its own right, as it represents by far the largest shipping segment in terms of both cargo carrying capacity and quantity transported. This digest article describes the statistical properties of both dry-bulk shipping demand and supply and does so as well for shipping earnings and vessel prices.