in the news the past few days is a hedge fund Amaranth that bet that natural gas would go higher.
actually their star energy trader in Calgary (along with 20 others) may lose 4.5 billion; was orginally reported 4 billion so let us put it in a range 4-5.5 billion.
the hedge fund loss 35% of its assets if not more. on the trade. and will probably not survive this; the fund was up 26% year to date in August....september was not kind.
the fund was leveraged 5-1 on natural gas going up, the trader last year made the same bet and made 1 billion for the fund and 100 million for himself. now this year the same play has lost 4.5 billion.
it seems they bet on one hurricane hitting and a more active huricane season, Ernesto did not do the damage they thought.....kind of scary when a well respected hedge fund can blow 4.5 billion on a storm.
In Canada and the US mutual funds are heavily regulated compared to hedge funds.....would like to see less regualtion on mutual funds especially on mutual funds... not sure about hedge funds, but the investor has to be very carefull.
many of these hedge funds are structured so the managers are encouraged to take huge risks. ie. 2-3 Managment fee, however many have performance fees of 20% (and sometimes higher), Amaranth took a huge leveraged gamble on natural gas 5-1 which will cost investors in the fund 35% invested capital (if not more).
as for natural gas I am long term bullish but have been bearish short term. simply because storage levels are increasing.
the great bear would come if storage was full, then prices may plumet to 3-4. from 5.
however just as in the past there are a few factors that could send natural gas much higher; no more hurricanes however a cold winter would quickly take care of the inventory problems.
companies like Cdn. Natural resources and Encana were cutting back on some drilling at 6, many more companies will do the same at 5. no company makes money in north america at 5.
let me re-word that 98% of them do not, unlike 12 years ago when companies made buckets at 3, most drill locations are more expensive, and cost of materials and labour have gone up sharply.
will wait have sold most energy positons own Tailsman, Petro Canada, Suncor, Nexen, Penwest income trust.
and oil (jr.)
have sold my other juniors and have covered calls on all of the above positions, except Suncor (own it in a drip/spp),
penwest is a much small position and have covered calls in place.
will not catch the bottom but if it is a cold winter these stocks will have a very good 3-6 month run, so I can wait.
bearish in the next few weeks, on the sector.
thanks
selkirk
actually their star energy trader in Calgary (along with 20 others) may lose 4.5 billion; was orginally reported 4 billion so let us put it in a range 4-5.5 billion.
the hedge fund loss 35% of its assets if not more. on the trade. and will probably not survive this; the fund was up 26% year to date in August....september was not kind.
the fund was leveraged 5-1 on natural gas going up, the trader last year made the same bet and made 1 billion for the fund and 100 million for himself. now this year the same play has lost 4.5 billion.
it seems they bet on one hurricane hitting and a more active huricane season, Ernesto did not do the damage they thought.....kind of scary when a well respected hedge fund can blow 4.5 billion on a storm.
In Canada and the US mutual funds are heavily regulated compared to hedge funds.....would like to see less regualtion on mutual funds especially on mutual funds... not sure about hedge funds, but the investor has to be very carefull.
many of these hedge funds are structured so the managers are encouraged to take huge risks. ie. 2-3 Managment fee, however many have performance fees of 20% (and sometimes higher), Amaranth took a huge leveraged gamble on natural gas 5-1 which will cost investors in the fund 35% invested capital (if not more).
as for natural gas I am long term bullish but have been bearish short term. simply because storage levels are increasing.
the great bear would come if storage was full, then prices may plumet to 3-4. from 5.
however just as in the past there are a few factors that could send natural gas much higher; no more hurricanes however a cold winter would quickly take care of the inventory problems.
companies like Cdn. Natural resources and Encana were cutting back on some drilling at 6, many more companies will do the same at 5. no company makes money in north america at 5.
let me re-word that 98% of them do not, unlike 12 years ago when companies made buckets at 3, most drill locations are more expensive, and cost of materials and labour have gone up sharply.
will wait have sold most energy positons own Tailsman, Petro Canada, Suncor, Nexen, Penwest income trust.
and oil (jr.)
have sold my other juniors and have covered calls on all of the above positions, except Suncor (own it in a drip/spp),
penwest is a much small position and have covered calls in place.
will not catch the bottom but if it is a cold winter these stocks will have a very good 3-6 month run, so I can wait.
bearish in the next few weeks, on the sector.
thanks
selkirk
