Meet Michael Masters.
He invests in stocks that are hurt by rising gas prices, he blames speculative traders in the oil market, and he subtly lobbies the government to do something about it.
The most incredible thing: it has worked, twice. Or he has an uncanny ability to talk about speculation in the oil markets right before the government takes action against speculation (which could be the case, because gas prices spiked).
When yesterday, the President announced his decision to investigate Wall Street speculators for illegally causing the recent spike in gas prices, we suspected that Masters’ interview on Dan Rather’s HDNet show, Dan Rather Reports: Gas Pains, on April 19th, might have had something to do with it.
Masters, who has criticised commodities “speculators” for at least the past 3 years, told Rather that speculators are to blame for rising gas prices. Then on April 21, as gas price hit $5 per gallon, President Obama announced that he was putting a team together to investigate illegal speculation in oil markets on Wall Street.
Now before we go on, you need to check out his latest 13f, a report of what Masters’ hedge fund.
Here’s what he’s investing in:
- American Airlines
- General Motors
- US Airways
- Advanced Battery Technologies, a maker of electric car batteries
- Private equity companies like KKR and Och Ziff
Almost Masters’ entire portfolio of investments are affected by the price of oil (the PE companies, not so much).
And what happened was this: Days after Dan Rather said, “Masters says a recent surge in speculation has thrown the oil market out of balance, making prices at the pump rise and fall at the him of Wall Street.”
“[The team’s job] is to root out any cases of fraud or manipulation in the oil markets that might affect gas prices, and that includes the role of traders and speculators.”
It sounds like Obama is basically investigating whether or not there is any truth to what Masters suggested:
“[The big players, Goldman Sachs– go down the line] are central to the story. Because they are the financial intermediaries behind the scenes and the more they can promote commodities to institutional investors– the higher they can effectively drive the price.”
“Goldman Sachs made a recommendation to sell crude to their clients [last week]. And crude fell the most its fell in several months. It fell about eight dollars a barrel. And what’s more interesting is the price fell without any supply and demand changes.”
So who the heck is Michael Masters?
He claims to be a Wall Street insider with tons of connections. In a testimony he gave before Congress in 2008, he said, “I have been successfully managing a long-short equity hedge fund for over 12 years and I have extensive contacts on Wall Street and within the hedge fund community. Itʼs important that you know that I am not currently involved in trading the commodities futures markets.”
He went on to testify that in 2008, $250 billion had been invested in commodities, up from $13 billion in 2003, through commodities index funds.
No one knew where his numbers came from, but Masters became a mini-sensation in 2008 after he gave that testimony.
So much so that soon after it, the U.S. House of Representatives approved a bill directing the Commodity Futures Trading Commission to invoke emergency powers to “curb immediately the role of excessive speculation” in the oil futures market, partly due to his testimony, according to FOX Business.
But then Greg Newton at Naked Short (who passed away in 2009) did some research on the SEC’s website and found out what Masters’ hedge fund, Masters Capital Management is investing in.
“According to his most recent US Securities & Exchange Commission 13F-HR filings, his hedge fund portfolio is at least knee-deep levered long in US airline stocks and General Motors… doubtless contributing to Masters’ distress at crude oil prices.”
Masters said that Newton’s maths was “way off,” but we checked out what he’s been investing in since telling Dan Rather that the oil market is being thrown out of balance by speculative traders. As you’ve seen above, almost his entire long portfolio is riding on low gas prices. (Masters says he runs a long/short equity fund, which would mean he’s also short some companies, but the SEC doesn’t require hedge fund managers to disclose shorts, so we’re not sure what they are.)
In other words, this guy has an agenda: making money by getting the government to go after other traders. Not saving the American public from commodities speculators.
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