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Nomura Commodity Desk Liquidation Blamed For Commodity Weakness

Tyler Durden's picture




 

Reuters is reporting that Nomura is "downsizing" its commodities trading desk, resulting in some "job losses" - that is a modest euphemism. According to an insider, virtually the entire London commodity desk at Nomura was shown the door over the past several days, with deep cuts globally. This process however did not start today, and has been going on for a few days. As a result market expectations emerged earlier that there are commodity-related liquidations originating at Nomura. These are now likely very much unfounded, yet per two traders, the weakness in commodities is driven on expectations there is an legacy position unwind bottleneck. To an extent this is true, and the main reason why the WTI-Brent spread collapsed yesterday was due to the unwind of opposing bets by Nomura. Said unwinds are however now said to be completed, with little if anything left for liquidation, and we expect that the spread will promptly revert to its recent historical level in the $14-18 range, as the oversupply issues at Cushing persist as evidenced by today's DOE update. Additionally, the technical overhang on crude will soon be lifted after trading desks realize the order flow from Nomura has ceased.

The official version per Reuters:

Japan's largest brokerage, Nomura Holdings Inc, is trimming its global commodities and energy-trading business and cutting jobs just when the markets are booming and competitors are expanding to capitalise on the opportunity.

The bank gave no exact reason for the move but a Tokyo-based company spokesman said expected job losses would be in the "low double-digits".

The bank's trading personnel were told late on Tuesday that the company was downsizing the business, particularly for oil and soft commodities, and affected staff had already been informed, two company sources told Reuters.

The move follows a reshuffle announced on March 7, when the company appointed its first female chief financial officer.

"The oil-trading team in Asia made money last year and it is a shock that they are down-sizing the operation," said one of the sources, who declined to be identified because he is not authorised to speak to the media. "It has more to do with re-strategising the bank's business as a whole."

Asked to comment, a Singapore spokesman for the company said: "Nomura continually reviews its cost base to ensure that it is appropriately-sized for market conditions."

The firm has an energy trading team of at least four in Asia, including Executive Director Shaun Lim, the head of the desk who was hired over a year ago, a distillates trader, and several support staff.

 

 

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Wed, 03/09/2011 - 14:53 | 1033675 greg merrill
Wed, 03/09/2011 - 14:55 | 1033689 Dr. Richard Head
Dr. Richard Head's picture

So if there is a correlation between oil and copper (do correlations matter anymore?) and JPM has tried to corner the copper market in order to offset their loses from their silver derivatives position, does that mean we can expect Jamie and his ilk to be smashed finally? 

Silver is going up due to massive physical purchases and copper is going down due to oil price increases.  Are the heavens about to open finally?

Wed, 03/09/2011 - 15:12 | 1033728 greg merrill
greg merrill's picture

:)

I didn't add the section about JP Morgan and their massive copper position on the LME.  I was going to save that for part 2 of my bearish copper case, but yeah, they may be in a world of HURT soon...

Wed, 03/09/2011 - 15:19 | 1033756 Dr. Richard Head
Dr. Richard Head's picture

I could only hope.  Here is an intersting article about the JP's naked short position in silver and how its derivatives position in this short will cause losses at multiples of what many believed.  Good ol' Max Keiser.  Between him and Tyler, I owe them some good single malt.

http://maxkeiser.com/2011/03/09/jp-morgans-suppliers-there-appear-to-be-about-100-refiners-on-their-list-and-they-cant-find-enough-silver-to-back-even-5000-contracts-for-25-million-oz-of-silver/

Wed, 03/09/2011 - 15:28 | 1033790 Zero Govt
Zero Govt's picture

Dr Richard

does anyone know for sure JP Morgans Silver position is (still) overwhelmingly short?

Wed, 03/09/2011 - 15:36 | 1033803 Dr. Richard Head
Dr. Richard Head's picture

Ted Butler and Harvey Organ have linked to the documents to prove the short position.  I just don't have enough time to go grab those links.  I think the LME lists those positions per reporting requirements?  I don't know, I am just a moron peon in the whole scheme of things.

Who knows what is reality anymore and what is not? 

Wed, 03/09/2011 - 17:04 | 1033950 Zero Govt
Zero Govt's picture

first I don't 'get' why the JPM (and Fed) would want to suppress Gold and Silver prices if they were trying to 'corner' a market.. they'd have bought as much as possible way back when Silver was $9 Oz and Gold $240 Oz.... if you'd bought the stuff you'd want the price to skyrocket and sell out on the way to the top.

Next this Silver short JPM position is a little f'ing 'public' to my mind. What bank would allow it be known they had such an exposed marker!

Sorry just my spider senses going off with the sillyness of the whole 'story line' surrounding Silver gets my goat! 

Wed, 03/09/2011 - 19:10 | 1034466 Thomas
Thomas's picture

This story is incomplete--bikini journalism.

Wed, 03/09/2011 - 19:11 | 1034475 New_Meat
New_Meat's picture

p'raps u could expose more?

esp' with your .. er .. top?

;-)

- Ned

Wed, 03/09/2011 - 15:59 | 1033865 UninterestedObserver
UninterestedObserver's picture

Right there with you - how bad is JPM getting hurt when Silver is up and copper getting smashed

Wed, 03/09/2011 - 16:17 | 1033921 Dr. Richard Head
Dr. Richard Head's picture

Hopefully more pain than I experienced with the brand new custom-built house I bought in 2007. At the time, a time when I didn't read ZeroHedge and watched the TV, I though $99 a square foot was a flipping great deal.

Wed, 03/09/2011 - 20:28 | 1034690 william the bastard
william the bastard's picture

......Hic.

Wed, 03/09/2011 - 17:25 | 1034129 Misstrial
Misstrial's picture

Speaking of silver....1-oz or 5-oz silver bars make nice graduation gifts.

Recently, I purchased 3 one-ounce bars for that purpose - I can gift with an appreciating asset *and* do a Max-on-JPM all at the same time. Lots of fun....:)

~Misstrial

Wed, 03/09/2011 - 14:55 | 1033687 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture

Next up, Blythe is shown the door, silver goes to $98.42, and I retire to the country :)

Wed, 03/09/2011 - 15:05 | 1033714 whatsinaname
whatsinaname's picture

seeing some funny & phony remarks by Pandit (Citi) about emerging markets when the leading indicators in India, China & Brazil are all pointing lower -

http://www.planbeconomics.com/2011/03/08/charts-china-india-brazil-leading-indicators-drop/

Wed, 03/09/2011 - 14:58 | 1033696 Oh regional Indian
Oh regional Indian's picture

So interesting. I ran a Japanese sub here in India and lay-offs and firings are total anethma to them. it was crazy making. it was an all around failure if it happened.

But, anyways, commodities are ultimately headign in only one direction, because the coming inferno in the middle east will crimp oil. Badly.

What then?

ORI

http://aadivaahan.wordpress.com/2011/03/09/axis-of-evil-doing/

Wed, 03/09/2011 - 15:13 | 1033733 TradingJoe
TradingJoe's picture

Oil is having a breather at roughly 105, next leg up? Only SA "knows"!

Rest, is/will be History!

Wed, 03/09/2011 - 14:58 | 1033697 duo
duo's picture

So every time a revolution starts in an oil-producing country a prop desk has to close shop to keep a lid on commodities?  How many prop desks are left?

Wed, 03/09/2011 - 15:00 | 1033699 RobotTrader
RobotTrader's picture

Looks to me that smart money is rotating out of "Things" and back into "Paper".

Note how "resilient" the regional banks are.  And they pay no dividends.

On the other hand, FCX pays 4% now, and MSB pays nearly 7%!!

Yet they are being dumped.  Go figure.

 

Wed, 03/09/2011 - 15:17 | 1033747 william the bastard
william the bastard's picture

FCX eliminated their divvy in December 2008. I know because I bot it on the news. Meanwhile you get a K-1 w MSB.

Wed, 03/09/2011 - 16:57 | 1034031 Pegasus Muse
Pegasus Muse's picture

Whoever is rotating out of "Things" and back into "Paper" is not Smart and will soon be sans Money.

Wed, 03/09/2011 - 17:31 | 1034154 rocker
rocker's picture

AUY and DROOY both paid me a dividend this year, thank you very much.

I am still short KBE index, the contrarian view on Robo's idea.  Normally I think Robo has been right. But now is the time for a correction at best.

 

Wed, 03/09/2011 - 17:04 | 1034066 augmister
augmister's picture

Yup.  Bill Gross dumps UST for the "other" paper and Carl Icahn dumps his heldgefund...Canairies in the coal mine.

Wed, 03/09/2011 - 15:03 | 1033708 max2205
max2205's picture

Fired at the top of the market/....go figure

Wed, 03/09/2011 - 15:20 | 1033754 william the bastard
william the bastard's picture

Contrary indicator? Savvy management? Thinking Blackstone IPO.

Wed, 03/09/2011 - 15:15 | 1033740 TWORIVER
TWORIVER's picture

Planets are lining up for a shift. Look at whats going on in Japan over the last 24 hours.

http://earthquake.usgs.gov/earthquakes/recenteqsww/Maps/10/140_40.php

Wed, 03/09/2011 - 15:18 | 1033749 NOTW777
NOTW777's picture

LOL who believes this is the reason for "weakness"

Wed, 03/09/2011 - 15:24 | 1033770 NOTW777
NOTW777's picture

spot and futs gold and silver all green

Wed, 03/09/2011 - 15:40 | 1033814 NOTW777
NOTW777's picture

gold and silver green but someone is unloading PM equities

Wed, 03/09/2011 - 15:19 | 1033757 99er
99er's picture

Copper

Love them Japanese and their copper positions!

http://www.zerohedge.com/forum/99er-charts-0

Wed, 03/09/2011 - 15:21 | 1033758 russwinter
russwinter's picture

I spotted this from a just released GS report: 
http://www.docstoc.com/docs/73288599/GS-2011-03-04-CN-RE

Additionally:

There were 3,535 housing units sold in Beijing during February. That's down 69.4% MoM, with January seeing the lowest trading volume in three years. The GS reports indicate that March will also set new lows, with the markets in former hot cities described as frozen. The catalyst is described as "home purchase restrictions" (directed at speculators) that have been implemented. Land prices in China's development market have fallen 10-15% since December

The action has all the manifestation of a bursting bubble.

Wed, 03/09/2011 - 15:27 | 1033787 Misean
Misean's picture

TYVM

Wed, 03/09/2011 - 15:39 | 1033815 greg merrill
greg merrill's picture

+1

Thanks

Wed, 03/09/2011 - 15:24 | 1033771 cygnusx1
cygnusx1's picture

Ok, so Nomura was short Brent and Silver.  Now that they have blown up and covered, how is that bullish for the commodities?

Wed, 03/09/2011 - 17:30 | 1034149 Misstrial
Misstrial's picture

*toasts cygnusx1*

~Misstrial

Wed, 03/09/2011 - 15:40 | 1033820 trendybull459
trendybull459's picture

Bill Gross is wise man,but you are who posting here is doomed,because i counted over 30posts and asked to vote for FED existence in my blog:

http://trendybull777.blog.com/2011/02/21/hello-world/

But it was just 3 brave people to respond,which meaning that all of you is sartisfied with current environment and you probably forgot that today Jasmin reolutions based on internet first by FED elite to screw nations,I calling for thoose who wish FED abolished to vote or to leave comments at least,the thing which is world lags today is trust between us!!!

Go and vote,World should not affaid of monster eating into our wealth on everyday basic

Wed, 03/09/2011 - 17:27 | 1034147 Misstrial
Misstrial's picture

Best thing to *not* do when promoting your own site is to come on here and insult the forum.

FWIW.

~Misstrial

Wed, 03/09/2011 - 23:42 | 1035292 Iam_Silverman
Iam_Silverman's picture

From the posted link:

"About gorodskij

Self educated individual sophisticated private investor growing his hard earned private capital from 100k$ into multipal six digits numbers investing from 1998 into gold,healthcare,biotech,tech and other financial instruments"

Home schooled?

Just curious, ESL?  Not bashing, just observant of the consistency of the syntax/spelling errors on the blog and survey.

Wed, 03/09/2011 - 15:49 | 1033837 mt paul
mt paul's picture

silver plated 

pork chops...

Wed, 03/09/2011 - 16:40 | 1033981 A_MacLaren
A_MacLaren's picture

At least this one wasn't blamed on Waddell & Reed.

Finger pointers...  Sheesh....

Do NOT follow this link or you will be banned from the site!