It's early September. Labor Day is past and the kids are heading back to school. For me, as a homeschooling Dad, it's time to get back to work- teaching. Less time on the golf course and more time at home also means more time publishing my musings to this blog.
Thinking back on the summer just passed a line from the Grateful Dead's Truckin' comes to mind- What a long, strange trip it's been.
Back when school closed in the latter half of June the commodities markets were on fire, but soon to roll over. Oil was trading at $135/bbl on its way to $145+ while Gold was hovering around $900 after a late March run above $1000, to cite two examples.
Many, apparently, got on the long commodity train only to find, in hindsight, that it was ahead of schedule. One such fund, Ospraie Management, LLC, has "exceeded the 30% drawdown threshold that provides investors a right to redeem their shares," and has decided to close shop.
This event, as The Oil Drum guys posted recently, is reminiscent of the collapse of Amaranth 2 years ago. Apparently, the old "rule" that oil prices (which lag demand) peaks between Memorial and Independence Days, still holds.
Interestingly, US petroleum (and product) stocks, at least according to the EIA's monthly data, peaked in Sept. '06 at 1,785M bbls (87 days of use), as Amaranth was shutting down. As of 8/22/08 (thus not inclusive of Gustav effects) US petroleum (and product) stocks are 1,700.6M bbls (84 days of use). While Gustav was no Katrina, current levels of petroleum stocks, having climbed some 50M bbls since March '08, may also prove to be a local peak.
Timing, when trading with leverage, is everything.