From the WSJ: The commodities market's historic surge is generating huge paydays on Wall Street. One of the biggest beneficiaries has been Andrew J. Hall, an enigmatic British-born trader who, five years ago, anticipated an important shift in the way the world valued oil -- and bet big.
Over the past five years, Mr. Hall's compensation has totaled well over a quarter-billion dollars, according to a Wall Street Journal analysis of securities filings and Mr. Hall's compensation structure. One of those years he out-earned his boss, the head of Citigroup Inc., about five times over. Last year, an unusually rough one for Citigroup, Mr. Hall's secretive trading unit, Phibro, generated close to 10% of the bank's total net income. Mr. Hall's power at Citigroup is the result of his winning bets on oil and natural gas, part of a broader commodities boom that has swept the world this decade.
… Mr. Hall's bet -- that long-term and short-term energy prices would soon abandon their historical relationship with one another -- looked like a long shot when he made it. In making it, Mr. Hall individually took on more risk than Citigroup typically permits some groups of traders to carry, according to a person familiar with the bank.
Now, after 15 straight profitable years, Mr. Hall has considered breaking out on his own. Last year, for the first time, he began managing outside money for clients including investment giant Blackstone Group and others. Officials at Citigroup say they are "committed" to Mr. Hall and to Phibro, a once-legendary but now nearly forgotten commodities firm that Citigroup inherited a decade ago…
Late last year, Citigroup told Phibro executives that it was interested in broadening the unit's scope by merging it into Citigroup's asset-management arm. That would effectively turn Phibro into a hedge fund, managing money for clients but much less of Citigroup's own capital. The 57-year-old trader balked. Mr. Hall called the idea "a complete nonstarter," according to a person familiar with the exchange
NEWS - Commodites, Agriculture, Green Investment - NEWS
3/02/2008
Connective Capital`s picks are in solar, energy storage, water … and biofuels
From GreenTechMedia.com: In spite of biofuels' troubles, a Connective Capital partner says there's still money to be made in the sector. And fund executives say greentech isn't headed for a crash.
Despite all the difficulties facing the ethanol industry -- such as shrinking margins, canceled plants, environmental concerns and even a study suggesting an ethanol fire is harder to extinguish than a gasoline fire -- Rob Romero, a managing partner at Connective Capital, still thinks biofuel investments are worth pursuing.
At a hedge-fund investment panel Wednesday at the Cleantech Forum in San Francisco, he listed biofuel as one of his interest areas as a fund manager. It’s not that Romero is blind to the ethanol industry’s hardships. He just thinks investors have to know where to look. And he’s looking to invest, not in ethanol manufacturers, but in the industry’s supporting businesses.
"All the people who are making money aren’t the ethanol refiners," Romero said, adding that the moneymakers are farmers, seed suppliers and fertilizer manufacturers. "[Those are] the type of markets we are chasing as a hedge fund," he said. "It’s not investing across the value chain, but frankly making long and short investments to keep the volatility down for our investors."
Speaking to a crowd with an entrepreneurial bent, Romero also dispensed hints for venture capitalists and startups. He sees a big opportunity for energy-storage technologies that can expand the use of solar and wind power, as well as for companies that can lower the cost of solar energy to that of conventional electricity -- about $1 per watt, he said…. Full article: Source
Opalesque note: Connective Capital Management, LLC is a Silicon Valley based investment adviser seeking superior returns by investing primarily in technology equities. It launched its third hedge fund in April 2006. Corporate website: Source
Despite all the difficulties facing the ethanol industry -- such as shrinking margins, canceled plants, environmental concerns and even a study suggesting an ethanol fire is harder to extinguish than a gasoline fire -- Rob Romero, a managing partner at Connective Capital, still thinks biofuel investments are worth pursuing.
At a hedge-fund investment panel Wednesday at the Cleantech Forum in San Francisco, he listed biofuel as one of his interest areas as a fund manager. It’s not that Romero is blind to the ethanol industry’s hardships. He just thinks investors have to know where to look. And he’s looking to invest, not in ethanol manufacturers, but in the industry’s supporting businesses.
"All the people who are making money aren’t the ethanol refiners," Romero said, adding that the moneymakers are farmers, seed suppliers and fertilizer manufacturers. "[Those are] the type of markets we are chasing as a hedge fund," he said. "It’s not investing across the value chain, but frankly making long and short investments to keep the volatility down for our investors."
Speaking to a crowd with an entrepreneurial bent, Romero also dispensed hints for venture capitalists and startups. He sees a big opportunity for energy-storage technologies that can expand the use of solar and wind power, as well as for companies that can lower the cost of solar energy to that of conventional electricity -- about $1 per watt, he said…. Full article: Source
Opalesque note: Connective Capital Management, LLC is a Silicon Valley based investment adviser seeking superior returns by investing primarily in technology equities. It launched its third hedge fund in April 2006. Corporate website: Source
If climate sceptics are right, it is time to worry
By Paul Klemperer
Published: February 28 2008 18:38 | Last updated: February 28 2008 18:38
Al Gore says the science on global warming is clear and there is a major problem. Vaclav Klaus, Czech president, contends that climate change forecasts are speculative and unreliable. Whose claims are scarier?
Of course, Mr Klaus exaggerates (he is a politician) but if he is partly right, we should be more concerned, not less. Consider an analogy. If, like many of my neighbours in Oxford, you believe that new building exacerbates flooding, how would you feel if models that predicted bad news were discredited?
It depends. If the original models were biased, your best guess of the height of future floods is now lower. But if the models merely underestimated the uncertainty, the range of plausible outcomes is now greater, so flood defences would need to be higher for us to feel safe.
Likewise, if our understanding of climate systems is flawed, our best guess about the dangers we face may be less pessimistic, but extreme outcomes are more likely.
Mr Klaus is probably right that there are fewer certainties than many claim. Even commentators who support the conclusions of the Intergovernmental Panel on Climate Change point to methodological weaknesses in its economics. A UK High Court judge recently required that a list of “scientific errors” be sent to schools that show Mr Gore’s remarkable polemic, An Inconvenient Truth – confirming the impression that the film goes some way beyond established facts (Mr Gore is also a politician).
But we hardly need Mr Klaus to teach us that experts’ models can be incomplete and a strong consensus can be badly flawed. Financial Times readers do not need reminding that, only last summer, hedge fund managers found their stock market models’ predictions were, in their own words, “25 standard deviations” from the outcomes; that, less than two years ago, a new drug nearly killed six human volunteers in tests in London, even though the dose was 1-500th of the amount administered to animals; or that it was a complete “out of model” surprise to biologists that feeding bonemeal to cattle would cause an epidemic of mad cow disease.
How confident can we be about the way a system as complex as earth will respond to conditions it has never encountered before? Although greater uncertainty means climate change might be less bad than we fear – for example, an “iris” effect means increases in cloud cover may slow global warming – it also means it might be much worse. While the central predictions of climate change models are arguably not so much worse than many other difficult problems the world faces, the worst possibilities are far, far nastier.
Consider the “clathrate gun hypothesis” that warming seas could lead to clathrates (the frozen chunks of methane at the bottom of the sea) exploding into the air, which is what might have caused mass extinction at the end of the Permian era. Or the concern that the carbon dioxide could cause hydrogen sulphide gas to build up first in the oceans then in the atmosphere, exterminating most of life (and potentially also attacking the ozone layer, permitting the sun’s ultraviolet radiation to kill remaining life) – this, too, has been blamed for previous mass extinctions.
I am not losing any sleep about these specific scenarios. In part that is because they seem so improbable (in spite of Mr Klaus’s eloquent expositions of how little we really know). But it is also because the fact that we have already thought of these risks means that, if it becomes necessary, we probably have time to organise a last-ditch geoengineering solution (seeding the ocean with an antidote, for example) that would at least mitigate the very worst consequences.
But what of completely unanticipated possibilities? Even Donald Rumsfeld, former US defence secretary, understood that it is the “unknown unknowns” that should really worry us. Serious scientists worry that feedback effects such as release of methane from the Siberian permafrost (or those underwater clathrates), or reductions in the earth’s reflectivity due to polar ice loss, could cause runaway greenhouse warming, with unforeseeable outcomes that would look like bad science fiction from today’s perspective.
The continuing scientific uncertainty about the pace of climate change should make us more concerned, not less. And it is those who doubt the climatologists’ models who should be the most frightened.
The writer is Oxford university’s Edgeworth professor of economics
Published: February 28 2008 18:38 | Last updated: February 28 2008 18:38
Al Gore says the science on global warming is clear and there is a major problem. Vaclav Klaus, Czech president, contends that climate change forecasts are speculative and unreliable. Whose claims are scarier?
Of course, Mr Klaus exaggerates (he is a politician) but if he is partly right, we should be more concerned, not less. Consider an analogy. If, like many of my neighbours in Oxford, you believe that new building exacerbates flooding, how would you feel if models that predicted bad news were discredited?
It depends. If the original models were biased, your best guess of the height of future floods is now lower. But if the models merely underestimated the uncertainty, the range of plausible outcomes is now greater, so flood defences would need to be higher for us to feel safe.
Likewise, if our understanding of climate systems is flawed, our best guess about the dangers we face may be less pessimistic, but extreme outcomes are more likely.
Mr Klaus is probably right that there are fewer certainties than many claim. Even commentators who support the conclusions of the Intergovernmental Panel on Climate Change point to methodological weaknesses in its economics. A UK High Court judge recently required that a list of “scientific errors” be sent to schools that show Mr Gore’s remarkable polemic, An Inconvenient Truth – confirming the impression that the film goes some way beyond established facts (Mr Gore is also a politician).
But we hardly need Mr Klaus to teach us that experts’ models can be incomplete and a strong consensus can be badly flawed. Financial Times readers do not need reminding that, only last summer, hedge fund managers found their stock market models’ predictions were, in their own words, “25 standard deviations” from the outcomes; that, less than two years ago, a new drug nearly killed six human volunteers in tests in London, even though the dose was 1-500th of the amount administered to animals; or that it was a complete “out of model” surprise to biologists that feeding bonemeal to cattle would cause an epidemic of mad cow disease.
How confident can we be about the way a system as complex as earth will respond to conditions it has never encountered before? Although greater uncertainty means climate change might be less bad than we fear – for example, an “iris” effect means increases in cloud cover may slow global warming – it also means it might be much worse. While the central predictions of climate change models are arguably not so much worse than many other difficult problems the world faces, the worst possibilities are far, far nastier.
Consider the “clathrate gun hypothesis” that warming seas could lead to clathrates (the frozen chunks of methane at the bottom of the sea) exploding into the air, which is what might have caused mass extinction at the end of the Permian era. Or the concern that the carbon dioxide could cause hydrogen sulphide gas to build up first in the oceans then in the atmosphere, exterminating most of life (and potentially also attacking the ozone layer, permitting the sun’s ultraviolet radiation to kill remaining life) – this, too, has been blamed for previous mass extinctions.
I am not losing any sleep about these specific scenarios. In part that is because they seem so improbable (in spite of Mr Klaus’s eloquent expositions of how little we really know). But it is also because the fact that we have already thought of these risks means that, if it becomes necessary, we probably have time to organise a last-ditch geoengineering solution (seeding the ocean with an antidote, for example) that would at least mitigate the very worst consequences.
But what of completely unanticipated possibilities? Even Donald Rumsfeld, former US defence secretary, understood that it is the “unknown unknowns” that should really worry us. Serious scientists worry that feedback effects such as release of methane from the Siberian permafrost (or those underwater clathrates), or reductions in the earth’s reflectivity due to polar ice loss, could cause runaway greenhouse warming, with unforeseeable outcomes that would look like bad science fiction from today’s perspective.
The continuing scientific uncertainty about the pace of climate change should make us more concerned, not less. And it is those who doubt the climatologists’ models who should be the most frightened.
The writer is Oxford university’s Edgeworth professor of economics
Why Energy Companies are Not Investing in The Future
By Peter Fusaro
Daily IssueAlert
2/28/2008
Free
The underinvestment in clean energy and clean technology is mind boggling, considering the market opportunity. Capital outlays on research and development seem not to be focused on the approaching carbon constrained world and the myriad opportunities presented.
The outlays for R&D last year were $4 billion for U.S. energy companies—that includes oil, gas and power companies. We see little movement this year, as well. The Federal government's outlay was $7.5 billion in many politically wired projects. The energy industry is the most capital-intensive industry on the planet and requires vast reservoirs of capital. The funny thing is that the industry is awash in capital but seems content on stock repurchasing and dividend boosting. It's not a very enlightened approach to the future.
In fact, it can be argued that the major oil companies are now in a liquidation phase of their existence. Their reserves-to-production ratio is declining, and they are now beginning to peak as they now produce and monetize their depletable assets. Investment in a new energy future is not being pursued by many energy companies yet. I see the energy companies, therefore, as the buyers of the new clean energy technology, not the innovators producing them.
Large Pools of Capital Are Not Being Deployed
So, the energy companies don't seem to have the vision to create a better future in alternative energy, cleantech, gasification and energy efficiency. Why aren't large institutional investors filling this capital vacuum? The answer is that they don't like government regulated and mandated markets, as well as tax leveraged investments. To test this thesis, I recently spoke at a Dow Jones private equity conference in New York City. I didn't realize that there are hundreds of private equity funds with names that most people were unfamiliar with besides the KKR, Carlyle Group and Blackstone. These funds are tracking the sector, but not deploying capital. We are talking about many funds in the $5 to $10 billion range and up. They are focused on subprime workouts, leverage buy outs, and replatforming companies in roll ups. My take-away from the conference was that the investment consensus was that this was a great time to play in the distressed asset space. Despite the three high profile funds in the alternative energy space, most private equity shops are not investing in the energy sector outside traditional oil, gas, and coal production plays. There is some interest in uranium as well.
Part of the reason for this phenomenon is that Wall Street is always focused on fees. Investment banking fees, legal fees, engineering fees, and other deal fees. The research on this new emerging clean energy sector is scarce and large investment houses in New York don't focus on areas that don't feed the fee machine. That is why the preponderance of deals has been focused on ethanol, wind and PV solar. To say the sector is under researched is an understatement. Smaller boutique houses such as Jefferies, Ardour Capital Management and Piper Jaffray are carrying the bulk of research on public companies, and Cleantech Venture Network and Clean Edge are providing much of the intellectual capital for the private companies.
Carbon is the Green Equalizer
Many folks holler about the need for a level playing field for renewable and clean technology. Well, one is coming, and it's called carbon constraints. They are going to be economy wide, and that has not happened before. And many companies outside the energy sector don't have much if any experience in reducing their emissions footprint. You can look at greenhouse gas reductions as a business cost center or an opportunity. The opportunity is to invest in the future and make more money in streamlining business practices. But the learning curve will be steep. What's really needed is price discovery for the price of carbon on all economic inputs and outputs. That will move the needle, and that day will arrive in two years with Federal mandatory greenhouse standards.
Market Opportunity Immense, Capital Currently Deployed Miniscule
Last year's investment in Cleantech in the United States and Europe was $5.18 billion, according to the Cleantech Group (www.cleantech.com). This was up from $3.6 billion in 2006, and $3.95 billion of that investment was in North America. That investment was concentrated in energy generation, energy storage, transportation, energy efficiency, recycling and waste reduction. While investment was up for the sixth consecutive year and will most probably grow again this year. This level of investment is far short of what is needed to move not only the US economy, but the global economy, onto a cleaner and greener economic path."
I am convinced more than ever that two things are now going to occur to accelerate this transition and economic transformation. One is the U.S. movement into the greenhouse gas reduction scheme on a national and international basis. So, carbon will be an accelerator in this economic equation and a facilitator for cleantech investment. The second factor is the scale of capital needed, and ironically the capital is there as the graph shows below. The private equity sector is going to have to get over its apprehensions of government mandates and see the economic opportunities. That means investment returns. If it looks likes project finance, which many of the technologies do, it is not going to excite Wall Street to invest full tilt. But if the investment returns can show 5, 10 and 20 times capital invested, then not only excitement but a shift to defining or game changing technologies then investment starts in earnest . It's the scale that's needed.
On the street today, Goldman Sachs has invested in 11 later stage defining technologies for their own portfolio. The other banks have not moved that far, as yet. But they will. The hundreds of private equity funds are nibbling around the edges and the studying the sector. Deployment of capital is now needed in the hundreds of billions range. It's infrastructure, transport, energy efficiency and most importantly it's carbon reductions will ignite this new investment acceleration. The entrepreneurs and the dreamers are out there in the hinterlands creating the next economic cycle, and it is not a bubble. Higher sustained energy prices, more rapid technology shift and a price for carbon will materialize investment in tangible projects for today and next generation technologies for tomorrow. This is the holy grail of sustainability - building a sustainable future backed by sustainable returns.
Peter C. Fusaro has been active in the energy and environmental arena for 33 years during countless market cycles. He holds the annual Wall Street Green Trading Summit VII (www.wsgts.com) on April 2nd and 3rd and a pre-conference carbon markets seminar on April 1st in New York.
Gold and oil rise to hit record highs
By Chris Flood
Published: February 29 2008 02:00 | Last updated: February 29 2008 02:00
Gold and oil both achieved records levels for a second consecutive session yesterday while wheat markets saw further volatility after news of a commodities trader at MF Global who substantially exceeded his authorised trading limits.
The dollar's weakness has been widely cited as a key driver of the present rally. But analysts at Barclays Capital disagree. "Commodity prices are going up in all currencies. Supply losses, strong demand and low inventory levels are the key drivers, not exchange rates," said Barclays.
Gold hit a record $967.30 a troy ounce, supported by dollar weakness, concerns about inflation and the deteriorating outlook for the US economy. Bullion rose 0.8 per cent to $965.60 by the end of European trading.
In the oil market, Nymex April West Texas Intermediate surged $3.00 to a record $102.64 a barrel, surpassing the $102.08 peak reached in the previous session. ICE April Brent also pushed past the $100 level, jumping $2.43 to $100.70 a barrel.
Speculative buying and news of a small pipeline leak in Nigeria provided support. However, the main focus for traders' attention remains next week's Opec meeting in Vienna amid mounting confidence that the cartel is unlikely to cut supplies with oil prices trading at about $100 a barrel.
Harry Tchilinguirian, senior oil market analyst at BNP Paribas, said there was "no credibility" in Opec arguing for a cut in supplies on expectation that demand will soften in the second quarter.
Mr Tchilinguirian said: "Crude demand will be rising in the second quarter as Atlantic Basin refiners emerge from maintenance and increase production ahead of peak summer demand."
Saudi Arabia could even push for a supply increase of 0.5m barrels a day, according to Mr Tchilinguirian, who said this would be a public gesture to address consumers concern without sparking a significant price correction.
In base metals, copper added 0.9 per cent at $8,510 a tonne, supported by a fall of 1,750 tonnes in LME stocks and talk of strong demand from China. Market speculation that copper will exceed its $8,800 peak is gathering steam, while aluminium, up 1.6 per cent to $3,140 a tonne, is also thought likely to breach its previous record of $3,300 if production problems in China persist.
Nickel jumped 5.8 per cent to $30,899.8 a tonne as hedge funds closed out short positions on concerns over a strike at BHP Billiton's Cerro Matoso ferronickel mine in Colombia, which accounts for about 4 per cent of global nickel supply.
Tin hit a record $18,900 a tonne before easing back to $18,700, up 4.2 per cent on the day, on concerns over supplies from Indonesia and the Democratic Republic of Congo. Zinc rose 3.5 per cent to $2,780 a tonne, extending its gains after a jump of 7.6 per cent on Wednesday, helped by short-covering and buying by short-term momentum players.
Wheat prices remained volatile after seeing wild gyrations in Wednesday's session due to the unwinding of the MF Global trader's positions. CBOT March wheat fell 98½ cents to $11.80½ a bushel.
Exporters will be able to resume shipments from Kazakhstan, one of the world's largest grain suppliers, after depositing quantities of wheat into government warehouses. Reports suggested Kazakhstan would follow Russia in imposing export restrictions.
Copyright The Financial Times Limited 2008
Published: February 29 2008 02:00 | Last updated: February 29 2008 02:00
Gold and oil both achieved records levels for a second consecutive session yesterday while wheat markets saw further volatility after news of a commodities trader at MF Global who substantially exceeded his authorised trading limits.
The dollar's weakness has been widely cited as a key driver of the present rally. But analysts at Barclays Capital disagree. "Commodity prices are going up in all currencies. Supply losses, strong demand and low inventory levels are the key drivers, not exchange rates," said Barclays.
Gold hit a record $967.30 a troy ounce, supported by dollar weakness, concerns about inflation and the deteriorating outlook for the US economy. Bullion rose 0.8 per cent to $965.60 by the end of European trading.
In the oil market, Nymex April West Texas Intermediate surged $3.00 to a record $102.64 a barrel, surpassing the $102.08 peak reached in the previous session. ICE April Brent also pushed past the $100 level, jumping $2.43 to $100.70 a barrel.
Speculative buying and news of a small pipeline leak in Nigeria provided support. However, the main focus for traders' attention remains next week's Opec meeting in Vienna amid mounting confidence that the cartel is unlikely to cut supplies with oil prices trading at about $100 a barrel.
Harry Tchilinguirian, senior oil market analyst at BNP Paribas, said there was "no credibility" in Opec arguing for a cut in supplies on expectation that demand will soften in the second quarter.
Mr Tchilinguirian said: "Crude demand will be rising in the second quarter as Atlantic Basin refiners emerge from maintenance and increase production ahead of peak summer demand."
Saudi Arabia could even push for a supply increase of 0.5m barrels a day, according to Mr Tchilinguirian, who said this would be a public gesture to address consumers concern without sparking a significant price correction.
In base metals, copper added 0.9 per cent at $8,510 a tonne, supported by a fall of 1,750 tonnes in LME stocks and talk of strong demand from China. Market speculation that copper will exceed its $8,800 peak is gathering steam, while aluminium, up 1.6 per cent to $3,140 a tonne, is also thought likely to breach its previous record of $3,300 if production problems in China persist.
Nickel jumped 5.8 per cent to $30,899.8 a tonne as hedge funds closed out short positions on concerns over a strike at BHP Billiton's Cerro Matoso ferronickel mine in Colombia, which accounts for about 4 per cent of global nickel supply.
Tin hit a record $18,900 a tonne before easing back to $18,700, up 4.2 per cent on the day, on concerns over supplies from Indonesia and the Democratic Republic of Congo. Zinc rose 3.5 per cent to $2,780 a tonne, extending its gains after a jump of 7.6 per cent on Wednesday, helped by short-covering and buying by short-term momentum players.
Wheat prices remained volatile after seeing wild gyrations in Wednesday's session due to the unwinding of the MF Global trader's positions. CBOT March wheat fell 98½ cents to $11.80½ a bushel.
Exporters will be able to resume shipments from Kazakhstan, one of the world's largest grain suppliers, after depositing quantities of wheat into government warehouses. Reports suggested Kazakhstan would follow Russia in imposing export restrictions.
Copyright The Financial Times Limited 2008
MF Global Announces $141.5 Million Bad Debt Provision
Company Remains Well-Capitalized with No Impact to Client Funds
NEW YORK--(BUSINESS WIRE)--Feb. 28, 2008--MF Global (NYSE: MF), a leading broker of exchange-traded futures and options, announced that during the early hours of Wednesday morning, February 27, a registered representative in one of its U.S. branch offices, trading in the wheat futures market in his personal account, substantially exceeded his authorized trading limit. The registered representative concerned has been terminated effective immediately.
A failure in one of the company's retail order entry systems permitted the representative to establish significant positions in his own account which were liquidated later that morning. The unauthorized activity resulted in him incurring a loss of $141.5 million, which the company, as a clearing member, is responsible to settle at the clearinghouse. As a result, the company recorded a bad debt provision for the full amount.
The company believes it has made the appropriate adjustments to its order entry systems to prevent a recurrence of unauthorized trading of this type in the future. In addition, MF Global has engaged a third-party risk technology consultant to review its relevant order entry systems.
Client funds are not at all impacted by this event.
The company's capital and liquidity position remain strong. The loss represents approximately six percent of the company's equity, in addition to which it has close to $1.5 billion in undrawn committed credit facilities.
In the company's fourth fiscal quarter to date, net revenues are exceeding all comparable prior periods of this fiscal year. MF Global remains confident in its business prospects and long-term financial performance.
The company will hold a conference call at 11:00 a.m. EST today to discuss the matter.
Dial-in information: U.S. (800) 659-2056
International (617) 614-2714
Participant Passcode: 47046771
A live audio webcast of the presentation will be available on the investor relations section of the MF Global Web site and will be available for replay shortly after the event.
ABOUT MF GLOBAL
MF Global Ltd. (NYSE: MF), formerly Man Financial, is the leading broker of exchange-listed futures and options in the world. It provides execution and clearing services for exchange- traded and over-the counter derivative products as well as for non-derivative foreign exchange products and securities in the cash market. MF Global is uniquely diversified across products, trading markets, customers and regions. Its worldwide client base of more than 130,000 active accounts ranges from financial institutions, industrial groups, hedge funds and other asset managers to professional traders and private/retail clients. MF Global operates in 12 countries on more than 70 exchanges, providing access to the largest and fastest growing financial markets in the world. It is the leader by volume on many of these markets and on a single day averages six million lots, more than most of the world's largest derivatives exchanges. For more information, please visit mfglobal.com.
FORWARD-LOOKING STATEMENT
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this press release, including statements relating to the Company's future revenues and earnings, plans, strategies, objectives, expectations and intentions, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated. We caution you not to place undue reliance on these forward-looking statements. We refer you to the Company's filings with the Securities and Exchange Commission (SEC) for a description of the risks and uncertainties the Company faces.
CONTACT: MF Global Ltd.
Media:
Diana DeSocio, 212-589-6282
ddesocio@mfglobal.com
or
Investors:
Lisa Kampf, 212-589-6592
lkampf@mfglobal.com
or
Media or Investors:
Jeremy Skule, 212-319-1253
jskule@mfglobal.com
SOURCE: MF Global Ltd.
NEW YORK--(BUSINESS WIRE)--Feb. 28, 2008--MF Global (NYSE: MF), a leading broker of exchange-traded futures and options, announced that during the early hours of Wednesday morning, February 27, a registered representative in one of its U.S. branch offices, trading in the wheat futures market in his personal account, substantially exceeded his authorized trading limit. The registered representative concerned has been terminated effective immediately.
A failure in one of the company's retail order entry systems permitted the representative to establish significant positions in his own account which were liquidated later that morning. The unauthorized activity resulted in him incurring a loss of $141.5 million, which the company, as a clearing member, is responsible to settle at the clearinghouse. As a result, the company recorded a bad debt provision for the full amount.
The company believes it has made the appropriate adjustments to its order entry systems to prevent a recurrence of unauthorized trading of this type in the future. In addition, MF Global has engaged a third-party risk technology consultant to review its relevant order entry systems.
Client funds are not at all impacted by this event.
The company's capital and liquidity position remain strong. The loss represents approximately six percent of the company's equity, in addition to which it has close to $1.5 billion in undrawn committed credit facilities.
In the company's fourth fiscal quarter to date, net revenues are exceeding all comparable prior periods of this fiscal year. MF Global remains confident in its business prospects and long-term financial performance.
The company will hold a conference call at 11:00 a.m. EST today to discuss the matter.
Dial-in information: U.S. (800) 659-2056
International (617) 614-2714
Participant Passcode: 47046771
A live audio webcast of the presentation will be available on the investor relations section of the MF Global Web site and will be available for replay shortly after the event.
ABOUT MF GLOBAL
MF Global Ltd. (NYSE: MF), formerly Man Financial, is the leading broker of exchange-listed futures and options in the world. It provides execution and clearing services for exchange- traded and over-the counter derivative products as well as for non-derivative foreign exchange products and securities in the cash market. MF Global is uniquely diversified across products, trading markets, customers and regions. Its worldwide client base of more than 130,000 active accounts ranges from financial institutions, industrial groups, hedge funds and other asset managers to professional traders and private/retail clients. MF Global operates in 12 countries on more than 70 exchanges, providing access to the largest and fastest growing financial markets in the world. It is the leader by volume on many of these markets and on a single day averages six million lots, more than most of the world's largest derivatives exchanges. For more information, please visit mfglobal.com.
FORWARD-LOOKING STATEMENT
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this press release, including statements relating to the Company's future revenues and earnings, plans, strategies, objectives, expectations and intentions, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated. We caution you not to place undue reliance on these forward-looking statements. We refer you to the Company's filings with the Securities and Exchange Commission (SEC) for a description of the risks and uncertainties the Company faces.
CONTACT: MF Global Ltd.
Media:
Diana DeSocio, 212-589-6282
ddesocio@mfglobal.com
or
Investors:
Lisa Kampf, 212-589-6592
lkampf@mfglobal.com
or
Media or Investors:
Jeremy Skule, 212-319-1253
jskule@mfglobal.com
SOURCE: MF Global Ltd.
2/22/2008
London manager on low wheat inventories, mass urbanisation, OPEC - `commodities super cycle` is not a marketing gimmick
Opalesque Exclusive: London manager on low wheat inventories, mass urbanisation, OPEC - `commodities super cycle` is not a marketing gimmick
From Benedicte Gravrand, Geneva: Chris Brodie is the senior fund manager of the Krom River Commodity Fund and has 14 years of commodity trading experience. The fund itself is a discretionary pure multi-commodity fund, producing alpha in all market cycles, fundamentally and technically driven with transparent risk management. It was launched in June 2006, is domiciled in the Caymans and manages US$60 million. The June 07 NAV was at 119.43. The fund is soft-closed throughout August and September, during which time the managers are reassessing its positions as the AUM has grown significantly since inception, but it will re-open in October. Mr. Brodie gave his views on matters that bring home some real concerns.
Low inventories
“The grain inventories have just about halved since 2000 from 600 million mt to 300 million mt. In terms of days, inventories globally are at almost record low levels since 1960. This year for example, corn acreage increased by almost 12 million acres and yet next year, due to increased demand from the ethanol refiners, corn acreage will have to be increased again - this time by about 3 million acres. This will be difficult as there will also be a need to increase soybean and wheat acres. The central issue of the grains markets is not about supplying a certain crop; it is about not having enough acres to meet total demand.”
Indeed, Dow Jones reported on Wednesday that with wheat futures hovering within 75-85 cents of all-time record highs, some market analysts have recently been advising growers to actively sell their 2007 production and hedge future wheat crops, as well. "Wheat is currently trading at the highest price in history for this time of year," said analyst Bob Utterback. "We believe all wheat producers must be looking at multiple year sales now."
Exposed situation
“The theme to focus on is not the individual market but the individual conditions. The conditions in a boom market are low inventories where supply problems cause price explosions. Now in the grains, we have low inventories and high prices in grains like wheat and soy beans; high demand means we have reached low inventories and high price ranges despite the fact that we have not yet had a severe drought. If we now have even a mild drought we have a serious food problem on our hands.”
Ethanol: close to the price of unleaded
“Ethanol will be priced off petrol as essential substitute. Therefore give or take some problems in the wheat distribution, it should be very close to the price of unleaded petrol plus the actual benefit from any incentives.”
Mass urbanisation
According to the U.N., 2007 is the first year in human history in which more people live cities than in the countries. Mass urbanisation is a phenomenon that many decry as disastrous. Not Mr. Brodie. “It is an interesting concept that explains a lot. Mass urbanisation involves moving subsistence farmers who are not really economically interacting with the rest of the economic universe into cities. Urbanised, they become producers and consumers and develop an economic footprint. The more urbanisation you have, the greater the impact it has, not only in that specific country, but globally.”
It is a virtuous cycle
“The interesting thing for me is that mass urbanisation leads to stronger economic growth cycles requiring additional workers creating more economic growth; it is a virtuous cycle – it feeds on itself. The consequence of mass urbanisation is that the economies grow at a rate which is higher than demographics would normally suggest. That is why globally the world has been doing extremely well over the last 7 or 8 years. It is not just a question of China or of India, but it is about all the other developing countries as well. This year is the first year in human history when more people are living in towns and cities than to the countryside.”
Impact of growth on commodities
“These people are suddenly very big consumers of commodities. How long is this going to go on for? Probably to around 2020. Which means that the commodity demand growth is going to go on a lot longer and stronger than previously thought. One of the interesting facts that came out of a recent Bloomberg conference was that the average wage in India today is US$2 a day and in China US$5 a day. If you think that we potentially have a dozen years of growth ahead due to mass urbanisation, and if you consider that the commodity prices at the moment are extremely stressed even though the average wages are low it makes you understand exactly what sort of impact this growth is going to have on commodities.”
Super-cycles
“When I first heard of the world super-cycle, I thought it was a marketing gimmick. The more I look into it the more I buy into the concept. People who don’t believe it, I think, don’t understand the concept of mass urbanisation and its impact on the global economy.” A commodity super-cycle is a long period of higher prices.
In the same line, Francisco Blanch, Merrill Lynch’s head of global commodities research recently said to the Financial Times that “there are many differences between the commodity super-cycle of the 1970s and the current commodity super-cycle: monetary policy has been more accommodative despite the commodity price increases, we have not seen any major commodity supply shocks yet (such as the one created by the Iranian revolution 27 years ago), there is less scope for commodity demand substitution, and there is no massive investment program in the horizon that could create a significant productive capacity overhang over the next five years. Moreover, demand for commodities from emerging economies is incredibly strong and incredibly resilient, given the high prices… given the limited growth in supply across most markets I believe that oil, gold and grains prices will still have to increase substantially from the current levels in the next 10 years to slow down the healthy demand growth from emerging countries.” Full article.
`I am still friendly towards the price of oil`
“The demand for oil within OPEC is growing faster than the production of oil in OPEC. That explains why over the last few years, OPEC production has increased substantially but have not actually managed to increase exports substantially. Today, demand for oil is a million barrels a day higher than last year, but production is a million barrels a day less. What that is telling you is that you should expect oil prices to remain stressed while inventories remain low and vulnerable to supply disruptions. In other words, I am still, even at these prices, very friendly towards the price of oil. One of the interesting things about oil, is the way the way the market pricing has changed from a contango to a backwardation on WTI. That is telling you the market is a lot more prone to volatile prices.”
“Mass urbanisation leads to higher global demand for all commodities - including energy; as a result, if energy prices stay, high grain prices will remain high as well.” Corporate website: Source
Additional reporting from the FT today on oil, natural gas, wheat and metals: Oil resumes its climb amid volatile trading, Full article.
Additional reporting from Forbes: Commodities Rise Along With Crude Oil Source
Not a typo: $8,000 silver? (In 15 years), How Silver is different from Gold
From ResourceInvestor.com: Jason Hommel, publisher of the Silver Stock report, outlines several reasons why he thinks that, in 15 years, silver could push $8,000 an ounce.
Hommel says in this interview: “all of history nearly 5.0 bilion ozs. (155,000 tonnes) of gold have been mined with over 90% of that gold still existing. On the other hand, of the total 45 billion ounces of silver ever mined, about 9% remains, the rest has been consumed. Doing the math, the total value of existing gold equals about $3.3 trillion, yet for silver only $52 billion!”
So, Hommel says, "I think silver will head beyond $8000 an oz. in less than 15 years!" Full interview:
Article source: http://news.silverseek.com/GoldIsMoney/1186061730.php - Opalesque is not responsible for the content of external internet sites
From Benedicte Gravrand, Geneva: Chris Brodie is the senior fund manager of the Krom River Commodity Fund and has 14 years of commodity trading experience. The fund itself is a discretionary pure multi-commodity fund, producing alpha in all market cycles, fundamentally and technically driven with transparent risk management. It was launched in June 2006, is domiciled in the Caymans and manages US$60 million. The June 07 NAV was at 119.43. The fund is soft-closed throughout August and September, during which time the managers are reassessing its positions as the AUM has grown significantly since inception, but it will re-open in October. Mr. Brodie gave his views on matters that bring home some real concerns.
Low inventories
“The grain inventories have just about halved since 2000 from 600 million mt to 300 million mt. In terms of days, inventories globally are at almost record low levels since 1960. This year for example, corn acreage increased by almost 12 million acres and yet next year, due to increased demand from the ethanol refiners, corn acreage will have to be increased again - this time by about 3 million acres. This will be difficult as there will also be a need to increase soybean and wheat acres. The central issue of the grains markets is not about supplying a certain crop; it is about not having enough acres to meet total demand.”
Indeed, Dow Jones reported on Wednesday that with wheat futures hovering within 75-85 cents of all-time record highs, some market analysts have recently been advising growers to actively sell their 2007 production and hedge future wheat crops, as well. "Wheat is currently trading at the highest price in history for this time of year," said analyst Bob Utterback. "We believe all wheat producers must be looking at multiple year sales now."
Exposed situation
“The theme to focus on is not the individual market but the individual conditions. The conditions in a boom market are low inventories where supply problems cause price explosions. Now in the grains, we have low inventories and high prices in grains like wheat and soy beans; high demand means we have reached low inventories and high price ranges despite the fact that we have not yet had a severe drought. If we now have even a mild drought we have a serious food problem on our hands.”
Ethanol: close to the price of unleaded
“Ethanol will be priced off petrol as essential substitute. Therefore give or take some problems in the wheat distribution, it should be very close to the price of unleaded petrol plus the actual benefit from any incentives.”
Mass urbanisation
According to the U.N., 2007 is the first year in human history in which more people live cities than in the countries. Mass urbanisation is a phenomenon that many decry as disastrous. Not Mr. Brodie. “It is an interesting concept that explains a lot. Mass urbanisation involves moving subsistence farmers who are not really economically interacting with the rest of the economic universe into cities. Urbanised, they become producers and consumers and develop an economic footprint. The more urbanisation you have, the greater the impact it has, not only in that specific country, but globally.”
It is a virtuous cycle
“The interesting thing for me is that mass urbanisation leads to stronger economic growth cycles requiring additional workers creating more economic growth; it is a virtuous cycle – it feeds on itself. The consequence of mass urbanisation is that the economies grow at a rate which is higher than demographics would normally suggest. That is why globally the world has been doing extremely well over the last 7 or 8 years. It is not just a question of China or of India, but it is about all the other developing countries as well. This year is the first year in human history when more people are living in towns and cities than to the countryside.”
Impact of growth on commodities
“These people are suddenly very big consumers of commodities. How long is this going to go on for? Probably to around 2020. Which means that the commodity demand growth is going to go on a lot longer and stronger than previously thought. One of the interesting facts that came out of a recent Bloomberg conference was that the average wage in India today is US$2 a day and in China US$5 a day. If you think that we potentially have a dozen years of growth ahead due to mass urbanisation, and if you consider that the commodity prices at the moment are extremely stressed even though the average wages are low it makes you understand exactly what sort of impact this growth is going to have on commodities.”
Super-cycles
“When I first heard of the world super-cycle, I thought it was a marketing gimmick. The more I look into it the more I buy into the concept. People who don’t believe it, I think, don’t understand the concept of mass urbanisation and its impact on the global economy.” A commodity super-cycle is a long period of higher prices.
In the same line, Francisco Blanch, Merrill Lynch’s head of global commodities research recently said to the Financial Times that “there are many differences between the commodity super-cycle of the 1970s and the current commodity super-cycle: monetary policy has been more accommodative despite the commodity price increases, we have not seen any major commodity supply shocks yet (such as the one created by the Iranian revolution 27 years ago), there is less scope for commodity demand substitution, and there is no massive investment program in the horizon that could create a significant productive capacity overhang over the next five years. Moreover, demand for commodities from emerging economies is incredibly strong and incredibly resilient, given the high prices… given the limited growth in supply across most markets I believe that oil, gold and grains prices will still have to increase substantially from the current levels in the next 10 years to slow down the healthy demand growth from emerging countries.” Full article.
`I am still friendly towards the price of oil`
“The demand for oil within OPEC is growing faster than the production of oil in OPEC. That explains why over the last few years, OPEC production has increased substantially but have not actually managed to increase exports substantially. Today, demand for oil is a million barrels a day higher than last year, but production is a million barrels a day less. What that is telling you is that you should expect oil prices to remain stressed while inventories remain low and vulnerable to supply disruptions. In other words, I am still, even at these prices, very friendly towards the price of oil. One of the interesting things about oil, is the way the way the market pricing has changed from a contango to a backwardation on WTI. That is telling you the market is a lot more prone to volatile prices.”
“Mass urbanisation leads to higher global demand for all commodities - including energy; as a result, if energy prices stay, high grain prices will remain high as well.” Corporate website: Source
Additional reporting from the FT today on oil, natural gas, wheat and metals: Oil resumes its climb amid volatile trading, Full article.
Additional reporting from Forbes: Commodities Rise Along With Crude Oil Source
Not a typo: $8,000 silver? (In 15 years), How Silver is different from Gold
From ResourceInvestor.com: Jason Hommel, publisher of the Silver Stock report, outlines several reasons why he thinks that, in 15 years, silver could push $8,000 an ounce.
Hommel says in this interview: “all of history nearly 5.0 bilion ozs. (155,000 tonnes) of gold have been mined with over 90% of that gold still existing. On the other hand, of the total 45 billion ounces of silver ever mined, about 9% remains, the rest has been consumed. Doing the math, the total value of existing gold equals about $3.3 trillion, yet for silver only $52 billion!”
So, Hommel says, "I think silver will head beyond $8000 an oz. in less than 15 years!" Full interview:
Article source: http://news.silverseek.com/GoldIsMoney/1186061730.php - Opalesque is not responsible for the content of external internet sites
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