Noble Group’s Kurtosis Awakening Moment For The Commodity Markets

Tyler Durden's picture

Noble Group’s Kurtosis Awakening Moment For The Commodity Markets

Trust is everything in commodity trading, it is also what is maintaining a constant risk premia in this market.

Noble Group is Asia’s largest commodities trader.

According to GMT research, Noble Group took what they have estimated as between $4 to $6 billions worth of fair value gains on asset valuation over the last 5 years.

Just prior their Q2 earnings release, we published the reasons outlining why we believe that the trader is an accounting hocus-pocus.

Since we are exactly one week after their Q2 results, in theory Standard and Poor’s had time to do their homework.

We expect a big announcement of S&P on Noble Group later this week.

UK insurers (who have also a foot in the cargo insurance market) have dumped Noble Group bonds overnight.

The S&P downgrade was leaked or they have just anticipated it.

Bonds maturing 2020 now trading in mid 80’s; private bank clients waking up to risks? Company no longer has access to capital markets.

6 months after repeated ­assurances from Alireza that the financial accounting inquiry’s findings would not trigger a scramble for capital…

 

... 5 yrs CDS paper quoted at 743 bps, stands at the highest level since 2009, 100bps bid-ask

Energy credit analysts wonder where Noble Group’s financing will come from going forward with the downgrades.

The trader will lose its access to their counter parties because of stricter limitations to deal with them now.

Below is an excellent interview from GMT Research founder Gillem Tulloch made on Bloomberg Television.

Trading firms should be the experts at managing market risks; it’s at the core of our job to stay in business but when a major trader is on the brink of, and the market is pricing an event, the commodity market and market risk become extremely fungible.

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knukles's picture

You'd think there was something wrong the way some people are acting.

junction's picture

What, a company that does not follow GAAP.  That is unbelievable!  Next, you will be telling us that big banks launder billions of dollars of Sinaloa drug money on instructions from the Department of Justice.  Or that Obama closes the Oval Office for 30 minutes a day to pray facing Mecca.  Balderdash!

Winston Churchill's picture

Obozo believe his is the deity so I doubt he prays except in front of  a mirror.

knukles's picture

God of Narcissism. 
And if ya' don't believe it, you're screwed.

max2205's picture

Trust we can.    'Nt

Winston Churchill's picture

Strong stench of shit filled pants in the air.

Counterparty risk looks like a phrase everyone is about to start using again.

knukles's picture

I absolutely adore the morphing of Goldman.  About a bed time story ago, they were viscious in the protection and dedication to their "client".  If say, Ford Credit was coming to market and they were lead, they were 100% committed to the success of the issue.  Period.  And everybody knew it.  That was one reason you wanted, at the time, to be a "client" of Goldilocks.  Post partnership and into shareholder days, "clients" became "counter-parties" so that everybody could be raped equally as well.  No matter your relationship with them, you, the counter-party, simply became another Muppet to be skullfucked.
But yes, who is that masked dip-shit on the other side of the trade where "pairing off" or "Offsetting" no longer matters, all of a sudden.
Yieeee-hah!

Rainman's picture

Mark-to-unicorn is just one of the scams going on here.

                     http://www.reuters.com/article/2015/08/17/us-noble-group-accounts-idUSKCN0QM15S20150817?type=companyNews

Atomizer's picture

Another prisoner's dilemma ponzi game. Nobel group may need to phone Blithe Masters to avoid another fucked up commodity paper trail. 

SSRI Junkie's picture

i thought kurtosis was a disease, still wondering even after i looked it up

ich1baN's picture

The simple straight forward explanation in my humble opinion is that kurtosis is one element in statistics that proves markets do not follow (at least not 100%) random-walk theory and that we are not at the Strong-Form of EMH (I know everyone already sort of knows this intuitively, but this sort of puts the nail in the coffin).

Kurtosis is the shape of a normal distribution curve and anything above 3 is considered "Excess Kurtosis". There is something called leptokurtosis which is a type of "kurtosis" where the area around the mean is "more-peaked" than what a normal distribution would show and then the areas at the tail are "fatter" than a normal distribution, meaning that there are more return observations that occur near the mean and more returns greater than say 3,4,5 and 6 standard deviations and the same on the left end of the tail than what would be expected from a normal distribution.

As we know, 3 sigmas should cover 99.7% of return observations, yet the kurtosis of almost ALL stocks shows that the truth is that we experience signficantly more market return days greater than what "EMH theorists" suggest. A 7 standard deviation event is supposed to occur only once every 1 billion years or so. Yet it happens way too frequently in most stocks. If you were to pick a stock at random and test this yourself over the last year, you would likely find at least 1 return day greater than or less than a 6 sigma move.... and this is in a "supposed" strong market (minus the last couple months). 

Another way to take all this in is that markets don't follow normal distributions and there are other "models" that probably better replicate the market such as complexity theory.

 

tradax01's picture

The WAR is ON. What a trader thinks of another trader: William Randall  (Noble Hong Kong no 2. has been a fly in our s**** since last year" has been on a godamm mission to fuck us in the ass...

be wary of LME metals and commodities for now.

Okienomics's picture

How much paper does Noble have out there and who owns it?  Another Enron-type event and its fallout is a pretty dang good candidate for a "Tipping Point."