The Decline in Crude Oil Prices and Implications for the ... · The Decline in Crude Oil Prices and...

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The Decline in Crude Oil Prices and Implications for the Year Ahead

January, 2015

Commodities and Energy Discussion Webinar

141 West Jackson Blvd. | Suite 1320A | Chicago IL 60604 | +1 888.430.0043 Past performance is not a guarantee of future results.

Disclaimer

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An investment in commodities or other alternative investments, is speculative, involves a high degree of risk and is suitable only for persons who are able to understand and assume such risk. Those who are not generally familiar with such risks are not suitable investors and should not consider investing in commodities or other alternative investments. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any interest in such a product.


Price Holdings, Inc. andPrice Asset Management Overview

Price Holdings, Inc. is a 100% employee owned company consisting of Price Asset Management, Uhlmann Price Securities and the Price Futures Group

Price Asset Management (“PAM”) was founded in 1998 by Tom Price, Co-Chairman of Price Holdings, Inc. and original member of the Rogers International Commodity Index® committee

The Firm’s wholly owned FINRA broker dealer, Uhlmann Price, was founded by Fred Uhlmann, former Chairman of the Chicago Board of Trade

Price Asset Management is a SEC Registered Investment Advisor, CFTC Registered Commodity Trading Advisor, and a NFA member

Headquartered in the Chicago Board of Trade building

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141 West Jackson Blvd. | Suite 1320A | Chicago IL 60604 | +1 888.430.0043 Past performance is not a guarantee of future results. 4

OIL: WHAT HAPPENED?

Saudi price war with US energy producers

Increased US oil production

Slowing growth in parts of the world (Europe and China)

Decline in Oil Prices


Mean Results Following 6-month Declines for Crude Oil:

January 1980-December 2014

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Energy Declines

# Data Points

+1 month

+3 month

+6 month

+12 month

+1 month

+3month

+6 month

+12 month

Over 10% 85 1.1% 6.5% 13.7% 28.6% 1.0% 4.3% 8.1% 15.7%

Over 20% 45 0.7% 5.5% 16.9% 41.0% 0.7% 3.4% 9.4% 21.4%

Over 30% 20 -0.1% 3.9% 17.5% 45.5% 0.3% 2.9% 10.5% 24.9%

Over 40% 12 -1.1% 9.0% 27.5% 52.8% 0.2% 6.1% 17.3% 30.5%

• ≥ 30% declines: there were 20 observable data points that occurred during 1986, 1991, 1998, 2001 and 2008-09. 18 of the 20 were positive one year out for both oil and commodities overall.

• ≥ 40% declines: there were 12 observable data points that occurred during 1986, 1998 and 2008. 11 of the 12 were positive for oil one year out. 12 of 12 were positive for commodities overall.

Energy*(oil) Commodities** (diversified)

*Energy is represented by Crude Oil (nearest futures contract; Heating Oil prior to 11/1983). Energy prices as dictated from futures closing prices on The Chicago Mercantile Exchange.

** Commodities are represented by the RICI® (actual since inception in 1998; back tested RICI® back to 1/1/1984; GSCI prior to 1984).


Possible Reasons for Price Increase

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Production destruction

Potential quantitative easing in Europe

Overall world GDP is positive

Previous collapses have set the stage for future price increases


Years of Simultaneously Strong Dollar and Commodities

Year DXY* Commodities**

1980 5.33% 11.10%

1982 12.10% 11.55%

1983 12.30% 16.26%

1984 14.93% 1.06%

1988 8.35% 27.93%

1989 0.68% 38.29%

1992 10.57% 4.44%

1996 3.96% 33.91%

1999 8.18% 24.34%

2000 7.55% 31.84%

2005 12.76% 21.35%

2010 1.5% 16.82%

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*DXY is a weighted geometric mean of the dollar's value compared only with a "basket" of 6 other major currencies which are: Euro (EUR) 57.6%, Japanese Yen (JPY) 13.6%, Pound Sterling (GBP) 11.9%, Canadian Dollar (CAD) 9.1%, Swedish Krona (SEK) 4.2%, Swiss Franc (CHF) 3.6%

**Commodities are represented by the S&P GSCI TR from January 1970 to July 1998 and the Bloomberg Commodity Index TR from August 1998 through September 2014.


Inflation Protection QuarterlyCorrelations to CPI, December 2014

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Index CPI

S&P 500 (1/70-9/14) -0.10%

Bonds (USGATR) (1/92-9/14) -0.33%

Commodities-RICI® (8/98-9/14) 0.603%

TIPS (DJCSTP10) (1/97-9/14) 0.067%

Commodities and the CPI:

Commodities have a much higher correlation to the CPI than equities, fixed income or tips.

Commodities historically benefit during inflationary times and tend to react particularly well to unanticipated inflation.

Source: Bloomberg LP


The Importance of a Broad Based Index

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WTI Crude Oil 16.00%

Brent Oil 13.00%

Natural Gas 5.00%RBOB Gasoline 3.00%

Heating Oil 1.80%Gas Oil 1.20%

Copper 4.00%Aluminum 4.00%

Gold 5.00%Zinc 2.00%

Lead 2.00%Silver 4.00%

Platinum 1.80%Tin 1.00%

Nickel 1.00%Palladium 0.30%

Corn 4.75%Wheat (CME) 4.75%

Cotton 4.20%

Soybeans 3.50%

Coffee 2.00%Live Cattle 2.00%

Soybean Oil 2.00%Cocoa 1.00%Lean Hogs 1.00%

Lumber 1.00%Rapeseed 1.00%

Rubber 1.00%Sugar 1.00%

Wheat (KCBT) 1.00%Milling Wheat 1.00%

White Sugar 1.00%Rice 0.75%

Soybean Meal 0.75%Orange Juice 0.60%Oats 0.50%

Milk 0.10%

Energy 40%

Metals (Precious & Industrial) 25.1% Agriculture 34.9%

www.pcscommodityfunds.com


The RICI®, S&P GSCITM & BCOM are long only, passively managed commodity indices. It is not possible to invest in them and their returns do not reflect the fees and expensesinherent in investing a vehicle designed to replicate a particular commodity index. Detailed information on all of the indices is available upon request.

Source: Barclay’s Trading Group Ltd.

Index Methodology PerformanceAugust 1998 through December 2014

IndexCompound

Annual Return

Total ReturnAnnualized Standard Deviation

Sharpe Ratio

RICI® 6.35% 174.8% 18.95% 0.22

BCOM (benchmark) 3.04% 63.5% 16.94% 0.06

S&P-GSCI 2.09% 40.30% 23.42% 0.01

S&P 500 5.67% 147.1% 15.66% 0.23

Barclays L.T. Treasury 7.40% 223.0% 10.39% 0.51

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141 West Jackson Blvd. | Suite 1320A | Chicago IL 60604 | +1 888.430.0043 Past performance is not a guarantee of future results. 11

Institutional Client Contact Information

Uhlmann Price Securities, LLCMember FINRA/SIPC

Chicago Board of Trade141 West Jackson Boulevard, Suite 1340A

Chicago, Illinois 60604

Uhlmann Price Institutional Group: 888.430.0043

Alan KonnManaging Director

[email protected]

Denise PolingAssistant to Managing Director

[email protected]

Jerry McEnteeSenior Director, Institutional Sales

[email protected]

Ruth MignereyDirector, Institutional Sales

[email protected]

David FennConsultant, Institutional Sales

[email protected]

Lydia BrownAssociate Institutional Sales

[email protected]

mailto:[email protected]


Risk Disclaimer

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An investment in commodities, managed futures or other alternative investments including any fund or separate account advised or managed by Price AssetManagement, Inc. (“PAM”), is speculative, involves a high degree of risk and is suitable only for persons who are able to assume the risk of losing their entireinvestment. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any interest in such a product. Prospective investorsare expected to be aware of the substantial risks of investing in the highly speculative field of commodities and futures trading. Those who are notgenerally familiar with such risks are not suitable investors and should not consider investing in commodities, managed futures or other alternativeinvestments. No one should consider or recommend an investment in any investment vehicle prior to a complete and thorough review of the applicabledocumentation required, including the sections on risk and expenses associated with such an investment. PAM cannot provide any assurance that investorswill not lose all or substantially all of their investment. The past performance of any product managed by PAM is not necessarily indicative of future results.No representation is made that any returns indicated herein will actually be achieved.

PAM is registered with the Commodity Futures Trading Commission (CFTC) as a commodity pool operator and commodity trading advisor and is a member ofthe National Futures Association (“NFA”). PAM is registered as an investment adviser with the U.S. Securities And Exchange Commission (SEC). Neither theCFTC nor the SEC have passed upon the merits of participating in any trading programs or funds promoted by PAM. Consequently, neither the CFTC nor theSEC have reviewed or approved this report.

The Index returns shown in this presentation do not represent the results of actual trading of investible products, assets or securities. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index and there can be no assurance that investment products based on the index will accurately track index performance or provide positive investment returns. All the indices referred to in this presentation above are not investable products and their returns do not reflect the fees and charges inherent in investing in a vehicle designed to replicate a particular index.

No fund nor any separate account managed by Price Asset Management, Inc. that tracks the RICI® is sponsored, endorsed, sold or promoted by BeelandInterests, Inc. (“Beeland Interests”) or James Beeland Rogers, Jr. Neither Beeland Interests nor James Beeland Rogers, Jr. makes any representation orwarranty, express or implied, nor accepts any responsibility, regarding the accuracy or completeness of this presentation, or the advisability of investing insecurities or commodities generally, or in any private fund. or in futures particularly.

BEELAND INTERESTS DOES NOT, NOR DOES ANY OF ITS AFFILIATES OR AGENTS, GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE ROGERSINTERNATIONAL COMMODITY INDEX® (“RICI®”), ANY SUB-INDEX THEREOF OR ANY DATA INCLUDED THEREIN. SUCH PERSON SHALL NOT HAVE ANY LIABILITYFOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN AND MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY OWNERS OFAN INTEREST IN ANY PRIVATE FUND OR ANY SEPARATE ACCOUNT MANAGED BY PRICE ASSET MANAGEMENT, INC., OR ANY OTHER PERSON OR ENTITY FROM THEUSE OF THE RICI®, ANY SUB-INDEX THEREOF, ANY DATA INCLUDED THEREIN OR ANY PRIVATE FUND OR ANY SEPARATE ACCOUNT MANAGED BY PRICE ASSETMANAGEMENT, INC. BEELAND INTERESTS DOES NOT, NOR DOES ANY OF ITS AFFILIATES OR AGENTS, MAKE ANY EXPRESS OR IMPLIED WARRANTIES, AND EACHEXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RICI®, ANY SUB-INDEXTHEREOF, AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL BEELAND INTERESTS OR ANY OF ITSAFFILIATES OR AGENTS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IFNOTIFIED OF THE POSSIBILITY THEREOF.

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