Pages

Thursday, April 9, 2015

Hedging -- April 9, 2015

I mentioned this in passing earlier this morning. Here's another take on the same story. Bloomberg is reporting:
Shale drillers didn’t count on prices staying high forever. While oil traded for more than $90 a barrel last year, many bought insurance against a crash. Now that prices have plunged more than 50 percent in less than a year, drillers have started to collect. They netted at least $2.4 billion from hedges in the fourth quarter of last year, according to data compiled by Bloomberg, and they stand to collect as much as $26 billion if crude stays depressed.
The insurance—in the form of derivatives contracts—was sold by the same Wall Street banks that financed the biggest energy boom in U.S. history, including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Wall Street passed on the risk to hedge funds, airlines, oil refiners, and utilities. “The folks who were willing to sell it were left holding the bag when prices moved,” says John Kilduff, partner at Again Capital, an energy hedge fund.
The swift decline in U.S. oil prices—to below $50 a barrel from more than $107 in June—caught the industry by surprise. Harold Hamm, the billionaire founder of Continental Resources, cashed out his company’s protection in October, betting on a rebound. Instead, crude kept falling.
***************************** 
The Muscle Car Collection

Earlier today I mentioned Warroad, Minnesota, in passing. This is a video of Bob's collection of muscle cars.

Bob's Collection, Warroad, Minnesota


I've seen the Nethercutt Collection in the San Fernando Valley and the Petersen Car Museum in west Los Angeles. Memo to self: road trip to Warroad.

2 comments:

  1. It's looking like Hamm head-faked OPEC, the ND tax department, Wall Street squids like GS and the too big to fail banks, all at the same time, to the benefit of the American public. That's freaking sweet! He ought to run for President.

    ReplyDelete
    Replies
    1. With regard to GS, I really didn't understand the bailouts back in 2008/2009 -- after reading David Stockman's book, it became very, very clear what that was all about -- literally saving the very, very hyper-rich -- the top 0.1% -- from taking a huge, huge paper loss, and perhaps driving some of those guys to personal bankruptcy. For those who have been saying the bailout was to simply save a few very wealthy families (and a very few big financial institutions), they were exactly correct.

      Delete

Note: Only a member of this blog may post a comment.