Animal Spirits Podcast — Episode Summary
Episode: Talk Your Book: Why Commodities Are Working
Hosts: Michael Batnick & Ben Carlson
Guest: Greg Sharen, Managing Director and Portfolio Manager, PIMCO
Date: February 16, 2026
Overview
This episode dives into the resurgence of commodities as an asset class, exploring why they’ve been “working” and how they fit into diversified investment portfolios. Ben and Michael speak with PIMCO’s Greg Sharen about the PIMCO Commodity Strategy Active ETF (CMDT), commodities cycles, and the influence of macroeconomic and geopolitical factors — including gold’s central-bank-fueled rally and the roles of energy, agriculture, and AI in commodity demand.
Key Discussion Points & Insights
Commodities: “Perfect for Trend Following”
- Ben’s framing: Commodities aren't for buy-and-hold investing due to their boom-bust cycles but are ideal for trend following and momentum strategies.
- “Commodities are not for investing. Commodities are for trend following ... When they work, they really work.”
(Ben Carlson, 00:43)
- “Commodities are not for investing. Commodities are for trend following ... When they work, they really work.”
- Recent volatility has benefited trend-followers but also “chopped up” some market participants.
- “They are really working now.”
(Michael Batnick, 01:12)
- “They are really working now.”
Inside PIMCO CMDT’s Strategy
- Greg Sharen: CMDT is an actively managed ETF not married to any one index. It invests broadly across commodities (energy, metals, ags, etc.), seeking to provide both diversification and hedging against inflation/geopolitics.
- “It can invest in any commodity ... with the goal of giving investors exposure to an asset class that is differentiated from most other things in their portfolio, but also provides inflation and geopolitical hedging.”
(Greg Share, 02:41)
- “It can invest in any commodity ... with the goal of giving investors exposure to an asset class that is differentiated from most other things in their portfolio, but also provides inflation and geopolitical hedging.”
- No rigid benchmark but uses Bloomberg Commodity Index for reference, with flexible investment weights (as low as 80% or up to 120%) based on market signals.
- “We are a go-anywhere fund ... When we assemble our own investments, we don’t start off with saying let’s tilt versus the index.”
(Greg Share, 04:04) - “We could be as little as 80% invested and up to 120% invested.”
(Greg Share, 04:19)
- “We are a go-anywhere fund ... When we assemble our own investments, we don’t start off with saying let’s tilt versus the index.”
Composition & Collateral Use
- Discussion of portfolio holdings (cash, bonds, derivatives) highlighted PIMCO’s bond expertise and collateral management.
- “For each hundred dollars you invest ... you get $100 of collateral. And what we do is we actively manage that collateral to try to improve upon basically earning SOFR.”
(Greg Share, 05:39)
- “For each hundred dollars you invest ... you get $100 of collateral. And what we do is we actively manage that collateral to try to improve upon basically earning SOFR.”
- Optimization not just on “front” futures contracts but across the curve for better carry and roll yield, especially for momentum strategies.
Gold: The Central-Bank & Geopolitical Story
- Gold has rallied sharply; recent surges are driven by both retail and central bank demand in a new, financialized era of gold investing.
- “Now we’re in a world where ... political and geopolitical considerations, in addition to inflation considerations, have driven an interest”
(Greg Share, 08:42) - The freezing of Russian assets in 2022 marked a “watershed moment” for gold as a hedge against asset confiscation.
- “I think the event after 2022, when the US and Europe froze and seized Russian assets. I think was like a pretty big watershed moment.”
(Greg Share, 09:38)
- “I think the event after 2022, when the US and Europe froze and seized Russian assets. I think was like a pretty big watershed moment.”
- “Now we’re in a world where ... political and geopolitical considerations, in addition to inflation considerations, have driven an interest”
- Gold’s supply-demand cycles continue; current environment is different due to both macro and geopolitical drivers.
- Central bank buying is a major force, but retail is stepping in after price runs. There could be a “pullback” if prices correct, but long-term motives (diversification, security) remain.
- “Central banks have been a major impetus for why gold buying has been resilient.”
(Greg Share, 26:15)
- “Central banks have been a major impetus for why gold buying has been resilient.”
Differentiation from Index ETFs
- CMDT seeks to outperform static indices like the Bloomberg Commodity Index by taking more “active risk,” leveraging momentum, carry, and other factors.
- Long history and experience managing real assets and commodities at PIMCO provide an “edge,” with strategy roots reaching back to 2000.
- “That’s part of what I think really gives us an edge over time is that we have a very long history of doing this.”
(Greg Share, 11:17)
- “That’s part of what I think really gives us an edge over time is that we have a very long history of doing this.”
Factor Tilt & Macro vs. Momentum
- CMDT’s deviations: ~20-25% from momentum/trend; remaining variation driven by factors like carry, skew, and behavioral indicators.
- “So momentum strategies amount to about 20-25% of our deviation from the benchmark. The rest of it actually has a lot of other versions of it, like carry ... and other behavioral strategies.”
(Greg Share, 13:00)
- “So momentum strategies amount to about 20-25% of our deviation from the benchmark. The rest of it actually has a lot of other versions of it, like carry ... and other behavioral strategies.”
- Macro themes (deglobalization, government debt, “debasement”) are considered but have not universally shown up in other asset classes (e.g., Treasury demand remains strong).
Why Commodities Are Working Now
- Commodities shined as a 60/40 inflation hedge, outperforming most asset classes since before Covid, including S&P minus the “Mag 7” stocks.
- “Commodities still end up being one of the best asset classes you could have owned.”
(Greg Share, 16:45)
- “Commodities still end up being one of the best asset classes you could have owned.”
- Real assets (commodities) also offer liquidity unmatched by real estate/infrastructure, making them unique during market dislocations.
- Structural demand drivers: AI major build-out, energy transition (infrastructure, wind/solar), military-industrial spending, supply chain “redundancy/hoarding.”
- “Today when we sit and look at the demand growth centers, they are: AI ... energy transition ... military industrials capex ... supply chain redundancy.”
(Greg Share, 17:57)
- “Today when we sit and look at the demand growth centers, they are: AI ... energy transition ... military industrials capex ... supply chain redundancy.”
- Global “artificial demand” for stockpiling/hoarding of strategic resources is boosting near-term demand.
Commodities vs. Equities: Decoupling?
- Not just “when stocks are bad, commodities are good”—recent years saw both doing well, partly driven by global growth, fiscal stimulus, and a higher inflation regime (from 2% to 3%).
- “We have real growth industries ... plus the strategic building of inventories to build resiliency. These are moments where you can get strength and support.”
(Greg Share, 20:18)
- “We have real growth industries ... plus the strategic building of inventories to build resiliency. These are moments where you can get strength and support.”
- AI's influence could cut both ways: if build-out slows, commodities could fall with tech (“risk off” event); otherwise, demand for materials could remain strong.
Rotation Into “Real Assets”
- Recent equity market volatility has driven capital into sectors considered inflation/AI “hedges” — energy, materials, consumer staples.
- “Every single material stock is beating the index this year. 95% of energy stocks are beating the index this year.”
(Michael Batnick, 23:37)
- “Every single material stock is beating the index this year. 95% of energy stocks are beating the index this year.”
- Uncertainty around “late cycle” vs. “re-acceleration;” resource constraints could become the new “limiting regulator” (inflation risk) in future growth but cycle narrative can change quickly.
Portfolio Management & Rebalancing
- CMDT portfolio is fully active, rebalanced weekly (some positions over four weeks) to avoid overconcentration in volatile assets (like silver after parabolic moves).
- “We are fully active and rebalancing as the market signals change ... In a given week, we could have a view that silver buying is going to continue to come. But if we’re managing to a risk target ... you have to be careful.”
(Greg Share, 28:07)
- “We are fully active and rebalancing as the market signals change ... In a given week, we could have a view that silver buying is going to continue to come. But if we’re managing to a risk target ... you have to be careful.”
- Uses volatility targets to manage position sizes and to prevent concentration risk.
Agriculture & Energy
- Agriculture: Recent years benefited from good harvests; supply shocks from Russia/Ukraine have faded, so prices have mostly declined.
- “Agricultural space ... is largely driven by relatively good harvest over the last few years ... The Russian invasion of Ukraine deteriorated Ukraine’s ability ... now they’ve been generally falling over the last couple of years.”
(Greg Share, 30:17)
- “Agricultural space ... is largely driven by relatively good harvest over the last few years ... The Russian invasion of Ukraine deteriorated Ukraine’s ability ... now they’ve been generally falling over the last couple of years.”
- Oil: Market split by sanctions. Russian/Iranian oil stockpiles are building (“shadow fleets”), creating bifurcated global markets. Tradable (deliverable) oil has held up in price.
- “We have the situation in the oil market where the tradable oils actually had a meaningful decline ... if that was deliverable to the market, we would have a more bearish outlook on oil because the oil is there, but it’s not deliverable ... This is a unique backdrop.”
(Greg Share, 31:22)
- “We have the situation in the oil market where the tradable oils actually had a meaningful decline ... if that was deliverable to the market, we would have a more bearish outlook on oil because the oil is there, but it’s not deliverable ... This is a unique backdrop.”
Tax Considerations
- CMDT structured for US investors to avoid K-1 forms, with a Cayman vehicle for tax efficiency (1099 instead).
- Not tax advice, but "this is not a K-1, so that actually is helpful."
(Greg Share, 32:50)
- Not tax advice, but "this is not a K-1, so that actually is helpful."
Notable Quotes & Memorable Moments
- “The cure for higher prices is higher prices and the cure for lower prices, lower prices.”
(Ben Carlson, 01:43) - “Right now we’re in a world where there’s a changing global landscape ... after 2022, when the US and Europe froze and seized Russian assets ... was a big watershed moment.”
(Greg Share, 09:15–09:38) - “Commodities tend to be the most effective hedge to a 6040 portfolio when there is an inflation surprise.”
(Greg Share, 15:14) - “If it turns out that the AI buildout is just not going to happen, then yes, then both [stocks and commodities] are susceptible for sure.”
(Greg Share, 21:36) - “For the first time in my career ... after 27 years, this is a unique backdrop [in oil] ... you’re not trading oil in general, you’re trading specific types ...”
(Greg Share, 32:10)
Important Timestamps
- Commodities and Trend-Following: 00:43–02:17
- CMDT Fund Overview & Strategy: 02:20–04:57
- Collateral Management & Futures Curve: 05:39–06:45
- Gold’s Modern Role: 07:54–10:12
- Active vs. Index Management: 10:12–13:00
- Factor Decomposition & Macro/Momentum Mix: 13:00–14:42
- Why Commodities Are Working (Inflation/AI): 15:09–20:01
- Commodities vs. Stock/Both Rising: 19:15–22:32
- Real Assets Rotation / Late Cycle Talk: 22:32–25:40
- Central Bank Gold Demand: 25:40–27:31
- Portfolio Rebalancing & Risk: 27:31–29:50
- Agriculture & Oil Insights: 30:06–32:39
- Tax Structure/Investing Mechanics: 32:39–33:21
Conclusion
This episode provides a contemporary look at commodities, highlighting both strategic portfolio roles (inflation hedge, liquidity, diversification) and new dimensions (AI, policy, geopolitics). Greg Sharen details how PIMCO’s active approach incorporates macro and quantitative signals, and why active management and volatility-awareness are more important than ever in today's dynamic commodity markets.
For further info visit: pimco.com