Saturday, April 18, 2009

Commodities - Hedge Funds | Bruce Kovner and Caxton Associates

While it wouldn't be completely accurate to describe Bruce Kovner and Caxton Associates as a commodity hedge fund, it's close enough to make it appropriate.

In reality, what Caxton Associates is is a trend fund, or macro fund, where they look for anything in any sector in any location in the world to invest in. That's why Caxton Associates have been so good at wealth management, and great investment managers and money managers.

So more accurately, they not only invest in commodities, but in whatever sector, like bonds, currencies, debt or equities where there is an opportunity to cash in on significant movements.

After a season of time of finding what it was he wanted to do professionally, Bruce Kovner decided on trading for a living, where he initially borrowed $3,000 against his MasterCard and started trading in soybean futures contracts. He learned a good lesson from the start, as he didn't hedge that first trade, which helped him in the future learn to manage risk properly. The contract went as high as $40,000, before leveling off at $23,000 before he sold.

Kovner eventually ended up at Commodities Corporation which later became a part of Goldman Sachs, where he earned his bones, along with respect; racking up millions in profits for clients and Commodities Corporation. That success led Kovner to launch his own company - Caxton Associates, in 1983.

While there is no sure way of proving it, its supposedly among the top ten largest hedge funds in the world at this time.

Over a period of 10 years Bruce Kovner provided an extraordinary 87% annual return for his investors, on a compound basis, truly making him and Caxton Associates among the leading market wizards.

Caxton Associates is registered as a Delaware limited liability company and also is registered as an Investment Adviser with the U.S. Securities and Exchange Commission. The company is also registered pursuant to the Commodity Exchange Act, as amended, as a commodity pool operator and commodity trading advisor and is a member of the National Futures Association as a CPO and a CTA.

Interestingly, Kovner isn't like a lot of money managers and businessmen who love to enter the limelight, probably marketing themselves than really marketing the company. In the case of Kovner though, his professional and private lack of publicity is the way he like it, yet he is a powerful mover and shaker behind the scenes in the many things he appreciates and believes in.

So there you have it. One of the most successful, powerful, and wealthy men in the world that you never knew, and he likes to keep it that way.

Those who have enlisted Bruce Kovner and Caxton Associates for wealth management know who he and the company are, and as participants in one of the top hedge funds in the world, get to enjoy the profitability ride with their money and investment manager.

Investors would do a lot worse than allowing the trading strategies of Bruce Kovner and Caxton Associates guide their economic futures. They're all laughing all the way to the bank, as these money managers put a smile on all their faces.

Saturday, April 11, 2009

Oil Commodities | Oil Commodity Becoming a Commodity

When I used the play on words concerning oil commodities and oil becoming a commodity, I mean it in the sense of something that has no competitive advantage at this time.

In business in general, to become a commodity product or service, means you no longer have a moat to protect you, and you're vulnerable to those who can run operations better than you, as you only compete on price.

As far as oil goes, the demand for it is becoming slow low because of the horrific economic turmoil, that even low prices can't get people to travel more and vacation, as fears are keeping them close to home and thinking of ways they can do things for less. That isn't going to change with crude futures prices any time soon.

The latest projections from the International Energy Agency confrim this, saying oil demand will be at the lowest levels since the early part of the 1980s.

Much of the projections for oil commodities demand is based on the number for the first quarter being much lower than it was thought they would be, and so now forecasts are that over 2009 oil demand will come in at about 83.4 million barrels a day globally. That's a huge 2.4 billion barrels of oil a day less than 2008.

There is a growing consensus that oil commodity demand will not rebound until 2010. There is still room for global economic contraction, now expected to drop by 1.4 percent this year.

All of this means oil prices will continue to stay down, and even if they don't, it won't matter, as the oil commodity prices we're now experiencing, along with falling oil demand, tells us that no matter what happens to prices, until economic contraction stops and a real recovery begins, oil will continue to be a commodity in the sense of having a lot of it, but many not willing to over spend on it no matter what the price.

Other than oil contango, there's not really much to get excited about for oil while its in its commodity status.

Hopefully you understand what it means when oil commodities become a commodity, as we're in that stage now, and until that changes, it won't matter what temporary bumps and swings happen, over time demand will continue to stall, along with oil prices.

We are definitely seeing one of the weakest oil commodities experience in a long time.

Friday, April 10, 2009

Commodities | Commodity Loan Repayment Rates

Payment rates for a number of commodities will be the recipients of a new USDA repayment program, in an attempt to offer a more stable system for making a decision on "non-recourse marketing assistance loan repayment rates and loan deficiency payment rates," according to a press release from the USDA.

Included in the commodities that could benefit from the latest system would be feed grains, wheat, mohair, pulse crops, wool and oilseeds. Commodities not being affected by the change are cotton, peanuts and rice.

Supposedly the new system will keep fluctuations in the loan repayment rate from swinging too widely, and will 'moderate' those actions.

Taking into account the 2008 Farm Bill, the loan repayment rate could in reality be anything, as it's determined by either the average market prices over the prior 30 days, or any type of alternative method a Secretary of Agriculture decides.

In mid April, the USDAs Commodity Credit Corporation will list the repayment rates from the last month for wheat, corn, grain sorghum, soybeans, barley, oats, canola, flaxseed and sunflower seed.

During the same period, evidently the Commodity Credit Corporation will also list a repayment rate in relationship to the last five days.

The existing method of determining repayments is based on the market rates of the day before. Now it will be the lower of the two methods mentioned.

There are other elements of the 2008 Farm Bill which eliminated the Secretary of Agriculture from establishing loan and repayment rates for other cops as well. Some crops will have loan repayment rates based on U.S. grade #1.