Saturday, October 2, 2010

Living La Vida Cocoa: [Armajaro’s] "Tony Ward’s BS Exposed by the FT–But the FT Doesn’t Even Know It"

Whenever a hedge fund makes a disclosure that is not required, mandated or elicited by force,
there is reason to be skepical.
Our posts on Ward et al. are below.
From Streetwise Professor:
Weather in Ghana has been good to the cocoa crop this year, which is putting downward pressure on prices:
After four years of shortages that sent the price of cocoa to its highest level in three decades, traders almost unanimously believe that the cocoa market is set to move into a surplus in the 2010-11 marketing year, which starts on Friday.
The looming oversupply has sent cocoa prices down by a third in the past two-and-a-half months.
The surge in production in west Africa, which accounts for nearly 70 per cent of the world’s supplies of the commodity used in chocolate, is a setback for investors such as hedge funds Armajaro and Clive Capital, which bet on rising prices earlier this year.
The cost of cocoa in London – the benchmark – has fallen to about £1,900 a tonne, down from a 33-year high of £2,732 a tonne set in July.
So Tony Ward must be hurting, right?  After all, he told the world–the world–that due to his super-sophisticated weather forecasting system, a proprietary network of weather stations, and the best weather data in the world, he knew a crop shortage was coming. So he must have been way long, and the price fall must have crushed him.
Well no, actually:
Investors say that Anthony Ward, the founder of Armajaro’s flagship CC+ fund, has suffered less than expected, however, as bearish hedges cushioned the fund from the price drop.
Oh, really?  Hedges, huh?
This means that the story he was flogging in July and August was complete bilge.  He wasn’t bullish on the new crop. It would be more accurate to say that he was bullsh*t on the new crop....MORE
A couple weeks ago Fox reported "Armajaro flagship hedge fund gained 0.6 pct in Aug"

Our recent cocoa posts (we also have quite a few posts on Warren Buffett including the cocoa bean/common stock arbitrage):

July 19
UPDATED: "Mystery trader buys all Europe's cocoa"
Original post:There have been rumblings about oddities in this market for at least a month....
August 4
"Cocoa market manipulation? The evidence suggests..."
Just yesterday I took a stroll down memory lane to look at the Hunt brothers attempted corner of the silver market in "Wheat prices ease after Russia predicts stable exports" and "...Speculators ‘Hunt What’s Moving" and today this came over the transom via a reader's email.
From Knowledge Problem:
yes: cocoa market manipulation says Craig Pirrong.  He comes to that conclusion after his examination of price movements in cocoa markets revealed all the fingerprints of a classic squeeze.

In brief, Pirrong compared July London cocoa prices against September and November London prices and July New York prices over a period from January 2000 to June 2010.
August 10
"Commodities to Tumble as Deflation `Blob' Eats Credit: Technical Analysis"
In other news, wool futures were up over one percent on word that Wall Street would try to pull the product of genus ovid over Main Street's eyes.
I mean, who knows?
The cocoa guy is getting nibbled at by tiny drops in the price of the dark goddess and I am so close to retelling the story of Fat Marvin, The Great Winfield and cocoa that I could burst:
"...For, after all, I had been into cocoa a bit myself. That was back when The Great Winfield had discovered cocoa trading. Occasionally in those more leisured days I would sit with him lazily watching stocks move, like two sheriffs in a rowboat watching catfish in the Tennessee River...."