Hedgers

Goldman Sachs, Morgan Stanley lead in commodities

Thu, 22 May 2008 06:59:58 -0400

We noted recently that hedging commodities poses big risks for traditional hedgers, ag companies, airlines, energy companies and the like. Big farm corporation Bunge stands as a cautionary tale. There is indeed a fine line between hedgers and speculators at times. But for the Wall Street dealers, soaring commodity prices and the need for companies to hedge has created a nice revenue stream, notes the Globe and Mail. Goldman Sachs and Morgan Stanley lead the pack, each enjoying a more than 40 percent market share in OTC commodity derivatives (Greenwich Associates). Barclays Capital and JP Morgan also are major players. The most sophisticated hedgers: BP, Exxon Mobil, Lufthansa, Royal Dutch Shell and Southwest Airlines, the survey found.

For more:
- here's the Globe and Mail item

Double-edged sword: Rising commodities prices

Wed, 14 May 2008 06:59:54 -0400

We tend to think of big farm-type companies as hedgers, who take the other side of bets waged by hedge funds. But when you get down to this, there's a fine line between corporate hedgers and raw speculators. There are plenty of corporate treasury employees who have been burned by currency "hedges" that went bad and cost the company a lot in earnings. Same goes for airlines hedging against energy prices. Fortune notes that ag firms are as dependent on the capital markets as ever. It takes a look at Bunge, which is borrowing more than ever and suffering big losses on hedges for soybeans and other crops. This story may not have a happy ending.

For more:
- here's the Fortune article

CME's new futures contract: Employment

Tue, 25 Mar 2008 07:59:55 -0400

The Chicago Mercantile Exchange will launch a new futures contract in April that will allow people to bet on the government's nonfarm payrolls indicators. Such contracts have been gaining steam in recent years. The idea is not news, Business Week Online notes. Goldman Sachs and Deutsche Bank have made markets for years. The CME thinks it will find eager users, but others believe that there is not a market among hedgers. Good marketing may, however, be able to interest traders who bet on currencies and the like. Still, a lack of natural hedgers may undermine the market. We'll see.

For more:
- here's the Business Week Online article

Related Article:
CME-NYMEX's $11B deal. Article