Goldman Causes Selloff In Commodities: Closes Top 5 Trade Of 2011: Long Crude, Copper, Cotton And Platinum (CCCP)

Tyler Durden's picture

Wondering what just took the carpet from under the commodity complex? Heeeeeere's Goldman.

We are closing our CCCP basket trade, first recommended on December 1, 2010, for a gain of roughly 25% against our 28% target. This recommendation was premised on our belief that Crude Oil, Copper, Cotton/Soybeans and Platinum remain the key structurally supply-constrained markets. On a 12-month horizon we believe the CCCP basket still has upside potential, but the unrest in the Middle-East and North Africa region, and the potential for further supply shocks pushed the basket up significantly in a short period and our Commodity Research team believes that in the near term the risk/reward no longer favours being long the basket and consequently, we are closing the recommendation with good potential gains. While crude oil, cotton and copper prices have substantially exceeded our targets, platinum and soybean prices have lagged.

In the near-term we see crude oil price risk as becoming more symmetric. While the potential for further contagion risk in the Middle east remains elevated, there are now nascent signs of oil demand destruction in the United States (see April 5 Energy Weekly), but also record speculative length in the oil market, elections in Nigeria and a potential cease-fire in Libya that has begun to offset some of the upside risk, leaving us more neutral at current levels. As the accompanying note from our Commodity team points out Copper and Platinum face headwinds too in the near-term while we see upside in Soybeans (See “Target in sight, closing CCCP trade”, April 11, 2011).

And some more:

Risk-reward no longer favours being long CCCP

Although we believe that on a 12-month horizon the CCCP basket still has upside potential, in the near term risk-reward no longer favours being long the basket and we are recommending closing the position for a 25% return versus a 28% target. While crude oil, cotton and copper prices have substantially exceeded our targets, platinum and soybean prices  have lagged.

Near-term crude oil price risk is becoming more symmetric

Although potential contagion risk in the Middle East and North Africa (MENA) remains elevated and has pushed prices above $125/bbl, at these price levels the risks are becoming more symmetric, which shifts the risk/reward of being long oil. Not only are there now nascent signs of oil demand destruction in the United States (see April 5 Energy Weekly), but also record speculative length in the oil market, elections in Nigeria and a potential cease-fire in Libya that has begun to offset some of the upside risk owing to contagion, leaving price risk more neutral at current levels.

N-T upside in soybeans, but copper and platinum face headwinds

We still see significant upside in soybean prices, but believe that copper and platinum will face near-term headwinds as higher oil prices potentially translate into a negative demand shock for the metals and as these commodities are exposed to supply chain problems resulting from the earthquakes in Japan. This is particularly the case for platinum given its large exposure to global automobile production. Copper also remains vulnerable to slowing observed demand as high prices and tight credit motivate tight inventory management from key consumer China, which tempers the inventory draw we had expected and the risk of price spikes. As result, we are also closing our long copper and platinum trades, but even in these commodities the structural supply-side story remains intact, and we would look for new entry points to establish new longs.

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TruthInSunshine's picture

Commodities are efficiently priced based on supply/demand equilbrium.

 

/snark

TruthInSunshine's picture

Paul Krugman, I had the privilege of reading your analysis that essentially stated that The Bernank could print and drop more money to offset ridiculously high and speculative-fever level commodity prices.

It was in the same piece where you wrote that the U.S. could print the amount of money necessary to pay its national debt off.

Thanks for your Keynesiastic brilliance, Paul. You make economics fun and exciting.

SRSrocco's picture

The day after Zero Hedge posts that Bill Gross of PIMCO is short US DEBT and has $73 billion in cash, the Goldman Sack announces they are going to end the CCCP commodity Trade.

Makes perfect sense if you think about it.  Bill Gross thinks inflation is getting ready to head towards the moon, so Blankfind believes its time to UNLOAD real wealth.

You can't make this stuff up...it's hollywood material right out of Universal Studios.

 

 

Weisbrot's picture

information, gamesmanship, disinformation, and headfakes. looks like the real fun ia about to begin. get the barf bags ready.

66Sexy's picture

**snicker - nudge nudge **

 

like fundamentals matter....

 

BTFDYFI

MachoMan's picture

The whole charade continues on ambiguity...

Careless Whisper's picture

GoldmanSachs is a bank, dammit. They are not a hedge fund. They are not a chinese insurance company or a chinese car company. They make loans to small businesses. They have tellers and atm machines. They don't trade for their own account.

http://www.insurancejournal.com/news/international/2011/04/11/193951.htm

 

LawsofPhysics's picture

That in a nutshell is the whole problem. Banks need to return to being ONLY banks and deal with the risk they create or take on.

Thomas's picture

nascent signs of oil demand destruction in the US? Sounds like tankage to me.

55mph's picture

 

 

Blankfein is the buyer.  proprietary trading is not dead.

jus_lite_reading's picture

Doing Gods work inflating prices of things we need

Problem Is's picture

Then how come "God" sounds just like Morey Amsterdam??

Jan Modaal's picture

And just like God he can create value out of nothing

rocker's picture

GS created the financial crisis, didn't they?  Look at all the value they got for that. Downside $$$ Upside $$$

                                                                                                                   Moral Hazard  $$$$$$$$$$$$$$$$$ 

Id fight Gandhi's picture

Supply demand? Lol.... Speculation and cheap money. Watch them try and short these only to get squeezed out and drive it to nosebleed levels

Pepe's picture

The great puppeteer

The Count's picture

Since about 5 years I am using all 'recommendations' by the big investment banks as asswipe. 

Weisbrot's picture

be careful, some time soon they may be accurate.

The Count's picture

Sure, its like Hitler did some things right too.

NOTW777's picture

right. and they announced it publicly. who believes GS - anyone

obama is also interested in cutting the deficit

Weisbrot's picture

if GS publishes BS then how long until they follow the BS of 2008 in to the history books?

dracos_ghost's picture

How the hell do you close out "potential gains". Wouldn't they be actual?

our Commodity Research team believes that in the near term the risk/reward no longer favours being long the basket

In other words, "Our algos are at a level that they are throwing numeric exceptions(Infinity) due to all the money we made on this carry trade and we must now sell at the peak to all the suckers in mismanaged 401(k)s to book our profits. Once the numbers get back to better levels and our algos can handle it, we will return. All Your Base Are Belong To Us" -- Leroy Jenkins

LibertyIn2010's picture

Maybe just a coincidence, but after viewing this article I went over to The Burning Platform and found this quote just posted -

“Not a word from their mouth can be trusted; their heart is filled with destruction. Their throat is an open grave, and with their tongue they speak deceit. Show their guilt, O Lord. Let their scheming be their downfall. Banish them for their crimes and transgressions, for they have rebelled against you. But let all who take refuge in you be glad.”

Psalm 5:9-11

SheepDog-One's picture

So in reality GS wanted a dip to buy.

mick_richfield's picture

Wow!  Did the author of that piece know these guys?

r101958's picture

They did it because they are more concerned, at this point, with control of the masses than with excessive profits.

Bananamerican's picture

opened a Gideon to a random page after a tryst in a hotel once and it said "She openeth her mouth with wisdom and in her tongue is the law of kindness"

I love that damn book

defn8Dog's picture

How do they do it at GS? Poetry in motion!  Check out today's GS sellside "conviction buy" on KKR.  Someone got a good price.

vote_libertarian_party's picture

In other words.  We think the dollar will sink further and these items will go higher.  So we want to buy them as cheap as possible so we are telling everybody to sell.

unky's picture

but copper is supposely be owned by jp morgan up to 90%

chumbawamba's picture

DING DING DING DING DING

We have a winner.  You prize is a 30 year US Treasury Bond!  Congrats.

The base metals, particularly copper and nickel, have a long way to go in this bull run.

Just wait until most folks get "priced out" of silver and start eyeing copper and nickel as stores of wealth and eventually, once again, money.

I am Chumbawamba.

Mark McGoldrick's picture

Financial advice from a deadbeat who can't pay his own bills. 

Priceless. 

Chumbawamba = The Lenny Dykstra of ZeroHedge.  

chumbawamba's picture

Guess what I bought with all that credit that the bankers were all too happy to throw at me when they thought the ponzi scheme would go on forever?  Silver.

Guess what I'm going to buy when the dollar dies?  You.

I will stuff your gaping vagina hole with bars of silver to disinfect it.

I am Chumbawamba.

Mark McGoldrick's picture

*LOL*

Maxed out the credit cards with silver a few years ago? Yeah, right.  How convenient! 

The mathematical symbol relating liars to deadbeats is an "=" sign.

Your lack of financial acumen is more than replenished with a penchant for gross vulgarity, which I find common among the wing-nut libertarian goons around here.  

 

 

chumbawamba's picture

Isn't a deadbeat someone who is a drag on society?

What do you call someone who's only function is to harangue productive members of society?  And to think you get compensation for that.  Where can I sign up?  Does Cass need any recruits for his loser brigades?

Don't call me a deadbeat, please call me a beatdead, because that's what I'm going to be doing to guys like you when you come looking for a handout from guys like me who have silver.

I am Chumbawamba.

earnyermoney's picture

When was your start date for the Center for American Progress?

chumbawamba's picture

I admit I had to Google that one because I'm not a baseball fag.  After reading a little bit, I still don't get the reference, because I'm not a baseball fag.

Who the fuck likes baseball?  Fags.

I do, however, like maxing out my credit cards by buying silver with them.

I am Chumbawamba.

SamuelMaverick's picture

Yeah, banks, insurance companies, and auto manufacturers union thugs can fucking default on everything, get billions in bailouts, wipe out the shareholders and bondholders life savings. Whoever has a problem with Chumba can bend over and kiss their own ass.  Jerks.

SilverRhino's picture

Strategic default bitch ... what's good for the corporation is good for the citizen.   After all, legally they are the same.

Chumba's a dick but he's no fool.

augie's picture

So Gross and Goldman both have inside info that QE3 isn't going to happen. Great. I just got long silver at 39.80 and now am going to get smoked like i did trying to short the /es

My frustration is not with the situation, its more with my own nievety that I could be "ahead" of the market. Hah boy was i wrong.

topcallingtroll's picture

The end of qe2 without an immediate qe3 has been well telegraphed in advance.

Muir's picture

Shhhh.... no one want's to listen to this.

"Ahhh, just explain to me how this is bullish for silver"

earnyermoney's picture

I went all cash from commodities with this scenario in mind. I think the odds of a pause between QE2 and QE3 are pretty high. I think everything gets hammered in that scenario to form a lower base for the next round of QE.

The Profit Prophet's picture

Nice try Shill.....PMs are golden (pardon the pun).

No worries.....Hedgers will survive the upcoming JP/Goldman bear raid on PMs......there's milllions of us just waiting to BTFD!!!!

T.E.I.N. everyone!