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Cuckoo For Cocoa Curves

Submitted by Tyler Durden on 07/19/2010 10:56 -0400

As we noted over the weekend, there have been some really cuckoo moves in the cocoa curve, now that someone (Anthony Ward) has been doing everything in their power to sequester all the physical cocoa in the world (literally). The chart below shows the recent moves in the July-Sept European contract spread, which exploded over the past two weeks from 150 to 300, doubling profits for those who were positioned properly with advance knowledge of this front-month squeeze. Now that the July contract has expired, look for some comparably odd action to occur in the September-December European pair. Surprisingly enough, none of these oddities are happening on the US side of the cocoa curve.

Jul-Sept, now defunct:

Sept-Dec: this one will be fun to watch as it either shoots to the moon, should the manipulation continue, or plummets, as profits are taken.

Yet all such forms of blatant market manipulation always end in tears. We remind readers of the sad case of Ebullio Capital Management, which lost 95% in the first two months of 2010, after some comparable shenanigans in the nickel market.

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Mon, 07/19/2010 - 10:57 | 476881 centerline

Chocolate, bitches (ha, ha).

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Mon, 07/19/2010 - 11:13 | 476906 ratava

cuckoo as in a black dude doing your wife?

Mon, 07/19/2010 - 11:52 | 476988 Red Neck Repugnicant

No. Cuckold - as in you after the black guy did your wife.

Mon, 07/19/2010 - 11:14 | 476908 firstdivision

Did Oprah fall off her diet?

Mon, 07/19/2010 - 11:23 | 476927 Red Neck Repugnicant

Ha! Very clever.

Mon, 07/19/2010 - 11:14 | 476912 Muir

You can't make this shit up even if you tried.

Mon, 07/19/2010 - 11:16 | 476913 tunaman4u2

So Cocoa goes to the moon... M&Ms are $3 a bag, demand goes way down, M&Ms lays off workers. Economic recovery

So lets try this with metal... Ford has to make a focus for 40K, demand down, layoffs

Keep printing money & expect a different result

Mon, 07/19/2010 - 11:16 | 476916 Cognitive Dissonance

Get them now while you still can. Woo hoo, I'm cuckoo for Cocoa Puffs. :>)

http://en.wikipedia.org/wiki/Cocoa_Puffs

Mon, 07/19/2010 - 11:20 | 476919 truont

Wooo! Lookie the spike! I wonder if they make any cocoa bullion? Oh yeah! They do--those gold foil covered chocolate coins.

Stack 'em, baby.

I got a 10oz Ghirardelli chocolate bar in my fridge, so far. Can't wait to add to my stack. Too bad my fridge is too small.

Mon, 07/19/2010 - 11:19 | 476921 Porkbellytrader

Cocoa getting crushed in NY as we speak....

Mon, 07/19/2010 - 11:19 | 476922 carbonmutant

Sugar's having problems too.

"When you have about 75 vessels waiting to load in Brazil then that is scary. The possible logistical problems are huge," the dealer added.

http://www.forexyard.com/en/news/SOFTS-Sugar-jumps-on-Brazil-Thailand-de...

Mon, 07/19/2010 - 11:20 | 476923 Careless Whisper

maybe some hedge fund thinks its coca

http://www.youtube.com/watch?v=M59I8eShAr8

Mon, 07/19/2010 - 12:58 | 477117 Rusty Shorts

LMAO

Mon, 07/19/2010 - 11:20 | 476925 hellboy

buy straddle, does that make sense or sit back and watch?

Mon, 07/19/2010 - 11:46 | 476978 lettuce

i would say to do nothing but watch here.

Mon, 07/19/2010 - 11:23 | 476931 imapopulistnow

I'm thinkin boycott....

Mon, 07/19/2010 - 11:24 | 476935 spartan117

Ebullio is a commodity fund, trading/investing in commodities, but believes we are headed for a deflationary collapse? No wonder why they lost 95% of their equity.

Mon, 07/19/2010 - 11:47 | 476980 lettuce

ever heard of short-side participation?

Mon, 07/19/2010 - 12:04 | 477007 spartan117

It's called "Ebullio Commodity Fund". If they are going to go short, perhaps they should call themselves, "Ebullio Bear Commodity Fund", no? If my view is that of an inflationary environment, and I buy into a commodity fund, the last thing I want my manager to do is to short commodities and get blown up. Now if they went long and blew themselves up, then at least it's understandable.

Pretty stupid to go contra your own stated fund objectives.

Mon, 07/19/2010 - 12:16 | 477039 lettuce

sorry but you get the "RTFM" treatment on this one. nowhere does this hedge fund identify any index or benchmark in their objectives other than generic objectives to maintain positive returns (which they failed to do hehe).

so, as usual, the devil is in the details. when you assume and don't pay attention to what you are talking about, you have the potential of being wrong. sorry dude...

http://www.ebullio.co.uk/thecommodityfund.html

Mon, 07/19/2010 - 12:28 | 477064 spartan117

Well, they actually stated that they were long in Jan 2010, which caused the 95% loss. They have since changed their stance and believe that we are headed towards deflation. My question is, why remain a commodity fund? Sure they can go short, but if your belief is that we are in for a long bout of deflation, the last thing you want to do is continue to market yourself as a commodity fund.

I don't see how my position is wrong - it's horrible marketing, and obviously the fund manager(s) is/are not very good at what they do - manage money.

Mon, 07/19/2010 - 12:46 | 477093 Cognitive Dissonance

Fund Assets of only $1.47 million USD

Minus -95.83 pct YTD and minus -89.63 pct since inception (August 2008)

Ouch, that's gonna leave a mark. The money quote.

"Most Managers would probably try to hush this up and not send out this Newsletter, but we have always been about transparency and having broadcast our winning months, we are going to do the same with our (albeit quite a lot more spectacular) losers and take the heat that comes with the territory."

Mon, 07/19/2010 - 12:50 | 477098 lettuce

you're missing the point of what it means to be a commodity fund: it means to trade commodities. it does not necessarily suggest that your bias is long or short but that your investment vehicles are based around the price of commodities. done. over.

Mon, 07/19/2010 - 13:44 | 477185 spartan117

And you seem to be missing my point. If you think deflation is the expected environment, the last thing you want to do is to market a commodity fund. They are not very smart at trading nor business management. I never said you can't short commodities. It's kinda like starting a bond fund and then going out in public saying rates are going to the moon. Pretty lame.

Mon, 07/19/2010 - 11:43 | 476968 Reductio ad Absurdum

The Ebullio newsletter pdf can be downloaded here:

http://www.newdeal20.org/wp-content/uploads/2010/03/ebullio_capital_mana...

Really dislike "Scribd"'s attempts to act as middleman in these things.

-----

"we regret to report a return -86.25 pct for the month, which brings our total return for the year to -95.83 pct"

"The good news is that ... the fund continues to do business as usual."

"as a token of confidence in the future, [Ebullio has] waived its 2 pct management fee for 2010."

-----

To be honest though, Ebullio did gain 91.91 pct in 2008 and 29.27 pct in 2009.

Mon, 07/19/2010 - 11:48 | 476981 lettuce

yes and if you start with $100.00 in jan08 you have $10.35 after feb10. i hope that someone was able to cash out in the meantime ! ! !

Mon, 07/19/2010 - 11:52 | 476986 morph

A 90% drop requires a 900% gain to break even. 900% gains don't come by often.

Mon, 07/19/2010 - 12:16 | 477040 lettuce

so was the black swan the 90% drop or will the black swan be the 900% gain???? ;)

Mon, 07/19/2010 - 11:49 | 476983 Pez

My guess next 2-3 years chocolate is $30 per lbs. 2-3 years after that .30 per lbs until the idiot speculators are beheaded.

Mon, 07/19/2010 - 12:24 | 477054 Ms. Erable

In related news, choco ration will be increased by 25%. Double Plus Good!

Mon, 07/19/2010 - 12:47 | 477095 Muir

" In honor of this massive overfulfillment of the ninth three-year plan...it's been announced that chocolate ration is to be increased to 20 grams per week!"

script from?

Mon, 07/19/2010 - 12:53 | 477103 lettuce

man, seeing those things bounce and thinking about chocolate is a really nice combination. i could go for a cold dark beer too.

Mon, 07/19/2010 - 14:02 | 477215 Muir

What nobody liked 1984?

Mon, 07/19/2010 - 19:30 | 477803 Ms. Erable

Thought the answer was too obvious to post. That, and I was hypnotized by your... what were we talking about again?

Mon, 07/19/2010 - 12:58 | 477099 Rusty Shorts

This is where your chocolate comes from, the white pulp around the cocoa seeds is actually better than chocolate in my opinion, but you have to get it when it's fresh.

http://www.youtube.com/watch?v=SyTvZl9swf4&NR=1

http://www.youtube.com/watch?v=28NQPEOd7k0&feature=related

http://www.youtube.com/watch?v=ys0wd5IRPlk

Mon, 07/19/2010 - 12:59 | 477118 Mr Lennon Hendrix