Until we learn which hedge funds REALLY got clobbered, Chris Levett’s $5 billion Clive Capital, which lost $400 million, will be known as the hedge fund that just got clobbered by the commodities dump.
Clive was “at a loss to explain what had caused crude oil markets to be “annihilated,” Clive’s management said, according to the FT.
We assume Levitt’s will bounce back. But for some smaller funds, what happened last week was game over.
Until then, check out what Clive Capital was saying about commodities in October.
Below is a summary from their October letter to investors. We published Clive’s macro view in November.
From Clive Capital’s October letter to investors:
— Bullish on gas, power, and emissions
- Estimates for U.S. onshore oil production growth are continually revised up
- In Asia, Chinese oil demand continues to beat expectations
- With floating inventories of crude and products continuing to whittle away, oil fundamentals appear to be tightening. Onshore commercial inventories would be the next to draw, which should be supportive to oil spreads in general.
- Ethanol shortages in 2011 look increasingly possible, which would be supportive for gasoline, particularly in Brazil and the U.S.
- Gas is expected to remain in a competitive position versus Coal all winter long and throughout 2011.
- Germany will reach 2008 level power consumption by the end of 2011 if current growth trend is sustained.
— Bullish on Precious Metals Growing fears over the value of the major paper currencies as well as the persistence of ultra low real rates across the world should be bullish for Precious Metals as a group going forward. We made no major changes to our Gold positioning and should continue to benefit from a move higher in prices… PGM’s also rallied in October; with Palladium outperforming Platinum and seeing Palladium prices reach 9-year highs. The longer-term bullish supply story is not only a function of constrained supply but also of increased cost pressures (particularly in the face of a strong South African Rand and power tariff increases), which are reducing producer profit margins despite these higher prices. On the demand side, tighter emissions legislation around the world has been a positive driver for many years. The implementation of regulations for off-road vehicles (e.g. those used in agriculture, construction) in Europe and North America in 2011 as well as demand from stationary fuel cells should add two further demand components to markets that are already struggling/unable to supply enough metal for all the other uses.
— Bullish on Copper and Tin Market balances for 2011 are pointing towards market deficits in Copper, Tin and Lead while Nickel and Zinc should see small surpluses… Copper mine supply is expected to expand by less than 500kt in 2011 (compared to annual refined production of around 19mt)… To put this into perspective, global demand is expected to expand by around 700kt (with the bulk of that growth coming from China and using very conservative assumptions for the G3). As such, there is a strong likelihood that the market will record an even bigger deficit in 2011 than the estimated 300-400kt deficit in 2010. Add in the growing likelihood of physically backed Base Metal ETFs and one could easily envisage a scenario where several metals, particularly Copper and Tin, trade well into record territory in 2011 while others, such as lead, Zinc and Nickel (which are still well below their respective 2007/08 peaks) will see prices rising closer to those prior highs.
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