Anthony Ward's Cocoa Speculation May Be In Trouble
As we speculated earlier, trying to publicly corner a market is a sure way to financial ruin (just ask the Hunt brothers). So far Anthony Ward's seems to be learning this the hard way. Since news of Ward's large purchase leaked out, the price of cocoa has plummeted by approx 10.5%, as an improved crop outlook from the Ivory coast has eased supply concerns. This is contrary to Ward's bet that a poor crop from the Ivory Coast would lead to a supply shortage and higher cocoa prices. It is surprising that Ward could be so wrong when it comes to the supply/demand situation. He has an extensive information gathering operation ,which gives him an inside track to the worldwide cocoa market. In particular, he has people on the ground in the Ivory Coast monitoring the weather, cocoa volume at major ports, and general crop conditions. His firm also acts as a distributor of cocoa and coffee in the region, which gives him an information advantage when it comes to where cocoa is being shipped. But so far, all of this has not helped him with his cocoa operations.
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What would the modern world do without cocoa.
DeleteAs an expert in this area, with 10x the scruples of the fff (fat freckled fuck), I was simply amazed at the incompetence of the financial journalistic community in reporting on this story.
ReplyDeleteNo one takes a full delivery of 250,000MT ($1 billion) unless their short squeeze fails (in this case on a colossal basis). Ward could have acquired a physical position in the cash market at much better prices than he wound up with by taking an exchange delivery.
In this case he paid the highest price possible. I would estimate his long July Ldn vs.short Sep Ldn position at approximately 100 sterling premium. Or if his short hedges were in New York, I understand that premium went to over 1000 dollars.
The full delivery, being the worst day of this moron's life, leaves him no option but to re-tender on Sep Ldn with that switch collapsing towards level, and the Sep Ldn, Sep NY arbitrage collapsing toward level since that fateful day of taking the full delivery.
This buying high, selling low scenario leaves Ward with a loss in excess of $100,000,000.00, probably closer to $150M which should do the firm in.
So my question is, where are the reporters that actually know something, anything about the mechanics of futures markets. All these reports about "Choc finger cornering the cocoa market," were so uninformed. Don't they talk to informed traders, or are the competitor traders to Ward disinclined to report, or are they themselves uninformed?
Ward is so exposed now, the play was obviously to sell the Ldn structure and Ldn/NY arb. But even more diabolical would be to knock out Ward's crutch (his short hedges) by taking a big position on the other side and squeezing his shorts (especially if his shorts are in NY while his physical cocoa is in Europe).
Whatever, I know this Ward character to be about as stupid a person I have ever met, and he'll get called on that stupidity. It's a shame that such a lightweight has been allowed to make hundreds of times of what his real value is as a commodities trader, which is more around the salary of a clerk. He should have been dumped many years ago.
Sorry, but have to sign off anonymously, but would be happy to keep any interested parties (journalists) informed.