No replies to this topic

[a673teamster]

By STEVENSON JACOBS, AP

NEW YORK -The deflating commodities bubble is claiming its first casualties as large investment funds absorb staggering losses from bad bets that prices for oil, precious metals and grains would keep going up.
Hedge fund operator Ospraie Management LLC notified investors Tuesday that it's closing its flagship fund after it suffered losses in August on positions in energy, mining and other natural resource-related stocks that left the fund down nearly 40 percent year-to-date. It's believed to be the first hedge fund to go bust in this latest commodities boom as prices come crashing down after a historic bull-run earlier this year.
And the bloodletting may have only begun. Wall Street analysts say similar trouble looms for other funds that got caught up in the exuberance of the boom but were too late in getting out.
They say Ospraie's misfortunes illustrate one of the hard lessons emerging from the commodities bubble: Many money managers have never been through a commodities boom and so were ill-prepared for the hyper-volatility associated with hard assets.

Full story here http://money.aol.com/news/articles/_a/bbdp...vestment/159189

Lehman-backed hedge fund fails as oil play peters out
Posted Sep 3rd 2008 9:55AM by Peter Cohan

BBC News reports that another hedge fund has closed down thanks to its failure to bail out of the oil speculation trade that boosted oil to a peak of $147 in July. This is yet another piece of evidence that people like Hank Paulson, who insisted that record oil prices were due to supply and demand, were either being less than honest -- particularly since his former employer Goldman Sachs Group (NYSE: GS) was a big beneficiary of this speculation -- or ignorant of reality.

The hedge fund in question this time is Ospraie Fund, which invested in commodities like oil and gold. It "has lost 38% of its value since the start of the year." Gold is down 22% to $800 from its $1,030.80 an ounce high in March. Oil has tumbled 25% to $109 since peaking in July, according to BBC News. But 1440 Wall Street suggests that the biggest commodity culprit in Ospraie's demise was copper's tumble. The lesson here is that if a sufficient number of big money speculators get together and decide to, say, short the dollar and go long commodities, there will seem to them to have safety in numbers.

But when the government started investigating the cause of spiking oil prices, the trade got very unprofitable very fast. As I posted, the Commodities Futures Trading Commission (CFTC) recently found that 81% of oil trading volume was driven by speculation. Then we witnessed the failure of SemGroup and the indictment of Optiver Holding for manipulating energy prices -- those funds who were too slow to reverse their positions and got creamed.

Now, Ospraie Fund's failure will hurt a big Wall Street name which owns 20% of it -- Lehman Brothers Holdings (NYSE: LEH), according to BBC News.

Full story here http://www.bloggingstocks.com/2008/09/03/l...lay-peters-out/

Speculation accounts for 81% of oil trading volume
Posted Aug 21st 2008 8:50AM by Peter Cohan

Upset about paying $3.80 a gallon for gasoline? Hank Paulson, former Goldman Sachs Group (NYSE: GS) CEO, argued that it was all supply and demand so quit your bellyaching. I thought speculation was playing a big part -- traders who bought oil and sold the dollar to drive up the price. Indeed, a few months agao I found a source who thinks 60% of the volume was from speculators.

Seems even that was too low an estimate. The Washington Post reported Wednesday that the Commodities Futures Trading Commission (CFTC) has analyzed the books of oil traders and calculated that 81% of oil trading volume was conducted by speculators.


Guess who broke open the opportunity for oil speculators to trade oil in a loosely regulated fashion? Goldman. The Post reports that In 1991, its J. Aron unit argued that "it should be granted the same exemption given to commercial traders because its business of buying commodities on behalf of investors was similar to the middlemen who broker commodity transactions for commercial firms."

The CFTC granted this request. More exemptions soon followed, including one to Enron that allowed it to trade huge positions for speculative purposes. The Post also reports that the biggest firm speculating on oil -- which bears the most responsibility for your high gasoline prices -- is a Swiss trader called Vitol, which at one point in July, "held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange." While the CFTC may change the rules to stop such speculation, that's not a long-term concern for Goldman and Vital.

Full story here http://www.bloggingstocks.com/2008/08/21/s...g-volume/print/