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Crashing Crude's First Casualty: One-Time Commodities Giant Phibro Liquidating
While we were expecting that one-time "god of crude oil trading" would have a poor year as a result of his consistent bullishness on the crude space, we were quite astounded to learn, as Bloomberg first reported yesterday, that Andy Hall - the man whose name was for a decade legendary in the commodity space - would call it a day. And yet that pales in comparison to the WSJ report overnight than Phibro itself, Andy Hall's 113 year old employer currently owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer, marking the end of an era.
Phibro Trading’s Andrew Hall and his daughter, Emma, in 2012
What is paradoxical, and as we reported yesterday, Hall's hedge fund Astenbeck, has not done badly in 2014. In fact, it was up another 1.2% in November and was up 7.2% year to date despite a roaring bear market in commodities.
Alas, that is cold comfort for Phibro. As the WSJ reports, "the 113-year-old company, founded in Germany by two scrap-metal dealers, is winding down its U.S. operations after it failed to find a buyer, according to a person familiar with the situation. The sale process for units in London and Singapore continues, the person said. Phibro specialized in physical trading of oil and other raw materials, seeking to profit by moving actual barrels and acting as an intermediary between producers and consumers. The pool of potential buyers for these kinds of operations has dwindled in recent years amid a regulatory crackdown on Wall Street banks’ involvement in these markets."
As for Hall, while he will sever his relationship with Phibro, he will continue working for his $3 billion hedge fund Astenbeck, of which Occidental owns 20%.
Mr. Hall is expected to continue trading energy derivatives through his $3 billion hedge fund, Astenbeck Capital Management LLC, which has avoided taking much of a hit from this year’s plunge in oil prices because Mr. Hall curtailed bets and shifted to holding cash.
The end of Phibro is another stark reminder, that bull markets make geniuses out of everyone, but it is when the bear markets tide flows out that we truly learn who was swimming naked.
The effective demise of Phibro underscores investors’ fading interest and the challenging trading conditions in many energy and commodity markets, which in recent years have been pummeled by the combination of rising supplies and tepid demand growth. Mr. Hall reaped huge profits by correctly betting on rising commodity prices in the 2000s, which was driven by rapid growth in China.
That kind of strategy worked well during the commodities boom, but fared more poorly during a period of relatively stable oil prices that ended in the middle of this year. The price of benchmark U.S. oil futures has plunged about 40% in the past six months. On Tuesday, the front-month contract rose 1.2% to $63.82 a barrel on the New York Mercantile Exchange. The decline in prices accelerated in November after the Organization of the Petroleum Exporting Countries agreed to maintain its production target.
Phibro employees were being notified of the developments Tuesday, according to the person. Analysts have said Phibro added little to Occidental’s financial performance and that executives were uncomfortable with the volatility it sometimes brought to results. Earlier this year, Hess Corp. also sold its internal trading arm, Hetco.
In retrospect perhaps the liquidation of Phibro shouldn't come as a surprise: "Occidental in February said it was pulling back from proprietary trading of crude oil and other commodities amid a corporate reorganization, and a spokesman on Tuesday reiterated the Houston company’s plans to reduce exposure to these activities. Phibro executives had been shopping the operation to prospective buyers since the February announcement, according to another person familiar with the situation."
Still the complete lack of interest for a legendary name in the commodity trading space is somewhat stunning.
Founded as Philipp Brothers in the early 1900s, Phibro went on to become at one point the largest supplier of raw materials in the world. In 1981, it acquired investment bank Salomon Brothers, and the trading firm became part of Citigroup in 1998.
Mr. Hall and his traders were known for placing big, long-term bets. In 2007, Phibro accounted for 10% of Citigroup’s net income.
As for Hall, who as recently as September went "all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less", what is his outlook now?
Mr. Hall cut back sharply on his wagers in August, moving much of his portfolio to cash. “We think longer-term oil prices are supported in the $70-$80 range,” Mr. Hall said in a Dec. 1 letter to investors, which was reviewed by the Journal. But for now, near-term prices “will stay under pressure and could become very volatile as the market strives for equilibrium without intervention” from OPEC, he wrote.
And, like yesterday, we leave it off with the $64K question: has Hall [and Phibro] already liquidated his long positions yet, or is he yet to liquidate them? Judging by the relentless slide in Brent and WTI, with the latter just touching on a $61 handle, the market is less than eager to wait around for the answer.
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Sacrificial lambs lining up for slaughter
And the Dominos begin to fall.
Fuck them, let them be crushed like bugs!
Not the daughter though, that ho looks delicious.
Gotta love it when a plan comes together....
Even the best of scams must one day come to an end.
i cant believe all the "crude" "drilling" "lube" "their she blows" and "this well is finally dry"...thoughts that are entering my mind at this moment...
Either that's not his daughter or his wife has amazing genes
The Peak Oil myth served the entire energy sector for over 40 years. Now that it has exploded, there will be blood.
Let it run.
Or demand has dropped due to an obviously slow global economy getting slower.
Yes we can......damn.....it's finally here!
Demand for gasoline in the US has been falling secularly since 2005. New techology for transportation and obtaining oil plus natural gas has rendered oil redundant in the short, medium and long term.
The price of oil remained stubborly high and now has dropped suddenly due to the ending of the financial games played with this commodity.
So MF, oil wil never peak? As for positive cash flow on the marginal barrel, that's already history.
Oil will never peak because there is more than enough to get the world to the next technologies. Oil had a reign of more than a century due to technology suppression. Those days are over.
Much of the earth's remaining oil will remain in the ground, beause it won't be needed at any price.
looks like someone did a little photoshop on her left shoulder.
For your consideration...
More Wealthy Offspring
DaddyO
Listen here all newbies: This trick isn't new. It was pioneered by John Meriweather after the collapse of Long Term Capital. Here's the steps:
1. Close fund down. So you don't have to deal with those pesky high water marks.
2. Put yourself on ice for a year or 2 to "spend time with your family", etc.
3. Start a new fund using your initials.
Rinse, wash, repeat!
Color this guy smart. He got out first and clean. Gonna be a lot of dead bodies floating by in the river. Scum going back over 40 years are going to meet the reaper.
Good times.
I don't know what this Phibro is, but they deserve to go bust. Everybody knows the real money is in Grumpy Cats.
Theft, the liquidation of assets, and the destruction of debt are the only options left in a debt based no growth society.
"Got a hunch, bet a bunch - lose on your hunch, lose a bunch." I didn't know "Gods" had unprofitable opinions - who knew?
www.traderzoo.mobi
At least he's not short silver!
daddy fucked up
And who's liquidating him?
In the ME, Russia, Africa, Mexico, Colombia, etc, where they got real men taking real action, it'd be a done deal already. In the USSA, OTOH, it would not be "moral" or "correct". Even with the millions of guns, it isn't happening. Impotent nation. LMAO.
The bankster oligarchy, Nuland-Kagans included must see, when they look at the heroic and successful defense of E. Ukraine something that interferes with their sleep.
This is playing out well for the elite and connected with consolidation of all money and all power one conquest at a time.
the black-swan.
wait did the guy work for Philbro or himself? Or just trade one against the other? What a screwed up system our government supports. It should have been liquidated with Citibank!
-1 for usage of the term "our government."
You oughta know better by now. ;)
He is the chief executive of both Phibro, which is now owned by Occidental Petroleum, and Astenbeck Capital of which Occidental owns 20%. Seems like there would be some sort of conflict of interest.
more:
"Public furor over a $100 million payday for Mr. Hall in 2009, when Phibro was part of Citigroup Inc., spurred the trading firm's sale to Occidental Petroleum Inc. Citigroup was criticized for guaranteeing Mr. Hall a hefty bonus at a time when the New York bank required a bailout from the U.S. government.
Read more: http://www.nasdaq.com/article/phibro-to-shut-us-business-20141209-01268#ixzz3LWo2AmjX
And Philbro also owned Salomon Brothers from 1981-1998, which included the treasury scandal years.
Creepy glasses
Another person with the dress style of Bernard-Henri Levy.
There will be blood.
Just make sure you get the church people behind you......or it's gonna be your head.
"it failed to buy a buyer"
Surely there was a bid somewhere above zero?
No one is buying Fukishema based businesses either.
if the independent oil and gas cos in USA hedged their production as they say - who took the counter trade? where is the banks that provided this?
I think there are major lies that will materialize by January and Bk's
They can't even buy a buyer? For fucks sakes....this MUST be serious!
I understand Belgium is fully booked for other clients.
I guess not enough people read to the bottom. Maybe he bailed first, preservation of capital is a major win for anyone in a move like this. However, a God would have reversed and been short.
"How much for the girl?"
Oil still sliding down and the dow down over 100.
Is his name Hallberg?
Just curious...
With his daughter on the auction block, the losses could certainly be recouped!!!
what's sad is that the average joe or suburban housewife who doesn't read, surf the web or even think things through other than their current sense of entitlement has no concept of the implications of the oil price crash. It just means they can buy more unnecessary junk for christmas or be able to drive more. Depression? Not even a whiff of it as far as they're concerned.
facebook doesn't count...?
this an auction? how much for the blonde?
Oxy WAS big in Russia and Iraq and Libya, when Hammer ran it.
Now its all over. Armand Hammer really knew how to wield the sickle!
And Andy is now gonna feel the pain of the Saudi Sickle as it scythes down the market like mowed grass.
Annie Hall was that girl's surrogate mother, until she took a fall into Murders in Manhatten.
So how does a blonde now feel when her dad says "I'm gonna keel over".
Timberrrrr !
Maybe she will make a name selling "My real daddy was a sugar HF who played it both ways. And he left me the cake."
Amen. Oligarchs know how to surf ahead of the wave. Not their muppet followers, they are like grass !
Another 999 of these ASSHOLES going under and we have a good start.
I would drink her Milkshake
I would drink her bathwater.
Crude just hitting new lows at 61.55 on this live chart: the next target is 60:
http://www.investing.com/commodities/crude-oil-advanced-chart
So it looks like Hall was doing the exact opposite for his hedge fund than he was for his employer Phibro. It kind of smacks of the way he shit all over Citi once they decided to get rid of him and Phibro too. Bottom line, these guys don't care who they screw over to make money, even if it's their own employers and investors.
Sheeesh, oil down another $1.10 to new lows at 60.93 in just 10 minutes. Soon the credit and equity charts will look like this.
Well, he can always trade his daughter for a Saudi Oil Prince...
Perhaps he should have taken a closer look at this chart. He could have saved himself some financial grief...
http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...
As I have said, Giants will Fall; Many Lesser will Be Crushed under their Weight.