The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders by Kate Kelly Read Free Book Online Page B

to keep a short-term hold on a trading account from one finalization date to the next, was exotic compared to its less imaginative opposite.)
    The trade was a huge score. Around the office, though, there were no high fives or champagne popping. Andurand was waiting for things to turn.

    By the early summer of 2008, Brent futures were trading at stratospheric prices. Meanwhile, the U.S. markets were in distress. Bear Stearns had collapsed into JPMorgan Chase’s arms, Lehman Brothers was flirting with failure, and housing in the U.S. was tumbling downward. No matter how great the demand out of China, the breathless pace of commodities prices would have to slow.
    BlueGold’s partners told investors their optimism had cooled. After crude oil hit $135, Andurand and Crema wrote in an investor letter, the fund had sold off some of the positions it had taken when betting that crude would trade much higher in the longer term, and focused those bets more on the immediate future. BlueGold was now effectively betting that the price of crude would stay high for the next few months, but fall sharply in the coming few years.
    Andurand was nervous. Every day he’d get up and pore through the overnight market reports, searching for clues. Mornings were typically slow in London’s commodity markets, so he had plenty of time to bum around his Knightsbridge apartment and worry. There was a lot of noise about the broad market’s movements, mushrooming crises in the banking and mortgage sectors, and stubbornly high crude futures, which had become the source of much hand-wringing in the U.S., where members of Congresswere convening hearings almost weekly to address the public’s outrage over ballooning costs of gas and other products.
    But there was little a newspaper could tell Andurand that would ultimately change his thinking. For all his research, he traded essentially on gut instinct. It was clear to him that things had recently shifted, and that the price of crude and refined products would be depressed by the global tumult. He thought all this would bear out in the coming months; he just wasn’t sure when.
    The rest of the market appeared equally torn. As a result, oil prices fluctuated multiple dollars per day, in huge moves at a time. The argument for higher prices was that geopolitical issues—threats of a possiblenuclear weapon in Iran, or labor strikes in Nigeria—would crimp the production of oil, leading to sticker shock for the supplies that were available. The case for lower prices was that the U.S. credit crisis was worsening, dampening orders and spending in other continents and ultimately risking oversupply of crude.
    Longtime market watchers were stumped by the mixed messages, and some even argued to reporters that the oil market was broken. “This whole industry has been absolutely turned on its head,” an energy analyst told the
New York Times
. Price moves that had once taken five years, the
Times
pointed out, were now taking far less time—such as the $60 upswing that had occurred over the prior twelve months. Overall, prices had been climbing for seven straight years, the
Times
added—a trend unheard of since oil drilling began in the 1850s.
    On June 6, Andurand had his gallbladder removed at a North London hospital. Awakening from general anesthetic, he looked around the room hazily, focusing first on the window shades,then the shapes of a girlfriend he was then seeing and a few other friends who had come to check on him.
    His first focused thought was about the markets.
    “Can I have a look at the BlackBerry?” he asked. Someone handed the device over. In his dreamlike state, Andurand pressed a few buttons to check the market’s prices. His eyes widened. Oil contracts were up $10 from where they had been when he had gone into surgery a few hours earlier. In fact, they were experiencing the biggest single-day increase—over $10 at their maximum point that day—they had ever seen.
    It figured. Andurand was