Amaranth Loss / Nat Gas Futures

TRS · Veteran Poster Joined: 11 Aug 2005 Posts: 188

How they gave one trader that amount of leverage, risky.

http://www.thefirstpost.co.uk/index.php?menuID=2&subID=931&WT.srch=1

rffrydr · Posted: Mon Apr 30, 2007 9:06 pm Post subject:

Gas takes down Bank of Montreal:

http://www.resourceinvestor.com/pebble.asp?relid=31344

They'll recover...450million?
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Today is the Tomorrow you worried about Yesterday!

dash · Veteran Poster Joined: 12 Apr 2005 Posts: 488

What asset classes has all the hot money been chasing over the last 18 months? You'd think these are going to suffer the most from deleveraging, and emerging markets and commodities have got to be at the top of the list:

diesel · Posted: Wed Mar 14, 2007 1:23 pm Post subject:

Yeah, looks like the whole energy complex is breaking back down to me. rffrydr, you gone short the xle?

Prospero · Senior Poster Joined: 01 Mar 2006 Posts: 82

It looks to me like that triangle is breaking to the downside...

diesel · Posted: Wed Mar 07, 2007 12:51 pm Post subject:

Gotta love those triangles. NATGAS now well into the 5 year range, continuing cold weather should put a bid under NATGAS for time being. I am long a NATGAS junior at the moment. Well see what happens. Cool

rffrydr · Posted: Wed Mar 07, 2007 9:39 am Post subject:

Hey Diesel, time to dust off those Nat Gas stock lists. We've got a large triangle back to Oct. '06. Open interest on the futures is still very strong with the players in balance. Strangle?
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Today is the Tomorrow you worried about Yesterday!

HenryTo · Posted: Mon Jan 01, 2007 2:20 pm Post subject:

More on John Arnold vs. Amaranth:

http://www.michaelcovel.com/archives/000982.html

HenryTo · Posted: Sun Dec 31, 2006 5:01 pm Post subject:

I was having dinner last week with a friend from SUEZ Energy North America - and he told me an interesting story. By the time August arrived, the fact that Amaranth was holding so much concentrated, leveraged, and illiquid positions in nat gas was longer a secret. Amaranth was vulnerable, but not many folks really stuck it to them. The guy that really stuck it to them, however, was John Arnold - former "star trader" at Enron who now runs $2 to $3 billion in his own hedge fund. This is a guy who can do multi differential equations in his head and the execution was perfect. But he is also known for his lack of risk management skills (at Enron, he was up over $200 million in one year but then had a bad streak and ended down over $200 million for the year) so many traders are now betting that he will also blow up at some point - sooner rather than later.

Looks like John Arnold had a pretty good 2006 at the expense of the San Diego County, etc.

I then subsequently had lunch with another friend last Thursday whose boss is a friend of Greg Whalley, former president at Enron who now works with John Arnold. Says that the fund has employees' money, and two other investors - with the major one being George Soros. Also says that Mr. Arnold can pick up the phone anytime and Soros can wire to them $50 million within 48 hours. Must be a cool luxury to have in troubled times.

http://www.nytimes.com/2006/01/15/business/yourmoney/15traders.html?pagewanted=1&ei=5035&en=6b0d2c03cd871b41&ex=1223701200&partner=MARKETWATCH

rffrydr · Posted: Thu Dec 21, 2006 1:13 am Post subject:

One man's trash... is a fertilizer maker's treasure--ironically on the squeeze put on global grain production for ethanol and biodiesel:

http://finance.google.com/finance?q=POT

The quote is of the exception, potash producer. Check out the comps for nat gas based producers for heady times in ag.
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Today is the Tomorrow you worried about Yesterday!

HenryTo · Posted: Thu Oct 12, 2006 12:55 pm Post subject:

Thanks for the tidbit, rffrydr. Amazing that a sector that is more leveraged to oil prices and more cyclical could have a significantly higher P/E and P/B than the XLE.

By the way, I just got off a conference call with the CIO at Tremont this morning. Says that the Amaranth debacle was not new. Nothing that hasn't been totally discussed before, such as:

1) The fund got too big for the markets they had the expertise on initially. Had to branch out to other markets which they did not have good knowledge of.

2) From inception to the end of 2004, Amaranth was known for its risk management expertise - and their standard deviations numbers were the one of the lowest in the industry. In 2005, returns doubled but S.D. doubled as well.

3) Head of energy trading book left in March 2006.

4) Fund posted a 13% return in April of this year. Amaranth would definitely have gotten out of their positions if they could - but they couldn't so the returns were not real returns.

5) Fund of funds were taken by surprise since not many risk managers had expertise in the natural gas markets.

rffrydr · Posted: Thu Oct 12, 2006 11:17 am Post subject: OIL SANDS ETF

Anybody looking to short a bounce in the equity arena this is what should be hit hardest at $50 oil:

http://biz.yahoo.com/ifunds/061006/20061006_oilsands_new_etf_jb.html?.v=1
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Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Wed Oct 11, 2006 2:02 pm Post subject:

Here's your divergence, check out Amaranth on

www.hedgebay.com

It's "units" are still worth something: the bid is around 20cents on the dollar.

HenryTo · Posted: Tue Oct 10, 2006 9:35 pm Post subject:

diesel,

I had thought about that but I am still sitting tight. Spot and November futures prices close to a $2/MMBtu differential so producers are injecting as much gas as they can. Spring 2007 prices at over $7.70 which is totally ridiculous given a mid-cycle slowdown scenario with current inventories at over 400 Bcf higher than last year's at this time:

http://tonto.eia.doe.gov/oog/info/ngs/ngs.html

If we don't have a colder-than-expected winter, then Spring 2007 futures prices will continue to come down.

Henry

rffrydr · Posted: Tue Oct 10, 2006 6:18 pm Post subject:

Yeah, that's what it looked like at 62 crude. We're now leaving 60 behind us. XLE's sticky, in part because the magic world of Exxon accounting and other stock specific stuff... Maybe's it's real. XAU/GOLD is at a long term support two days ago bounced... and then today.

I'm taking a longer view and staying short, making in crude what I'm not in the stocks. The investments houses are going back to commodity recs.

But, as we saw last May, big moves will push the oscillators, and divergences. If there's no rally in the next few weeks there's gonna be alot year-end bonus lock-ins. If you like the idea that these stocks will still be raking it in no matter what the price I'd rather buy Alcoa. I wouldn't buy any oil co with Russian exposure that's for sure.

But I'm crazy, I'm not a Peak Oil BELIEVER.

diesel · Posted: Tue Oct 10, 2006 4:55 pm Post subject:

Lots of positive divergences in MACD, RSI and the stochastics indicators in the NATGAS producers now and positive price action. Looks like a good entry point for a short term trade to me. Thoughts?