We promised NHO will be different. Here’s the only racing page you’ll find on an business energy website.
Many UK energy managers aren’t comfortable with anything but a fixed price, equating floating prices with gambling. And to those unfamiliar with commodity markets, we can see the point, while drawing attention to the fact that fixing forward prices often ends up ensuring worst case scenarios come to pass: the biggest gamble of all.
The role of hedge funds in the commodity super surge of recent months is ascribed by many as a prime cause of upward movement in non-prompt delivery of oil, gas and power. Just how big a gamble the funds make is debatable, but recent news from the horse racing world is indicative of how funds are blurring the line between prudent investing and good old fashioned taking a punt.
On Derby Day in the UK, we turn our eyes to Big Brown. BB had already won the Kentucky Derby and the Preakness and was favourite to win the Belmont Stakes, the first horse to win the Triple Crown since 1978. BB’s main owner is International Equine Acquisitions Holdings, whose stated purpose is to be an equine hedge fund that delivers profits to its investors by consistently racing winners.
IEAH sounds like capitalism at it’s rawest: Rooting for the firm and its co-president and public face, Michael Iavarone (who was fined and suspended in 1999 by the National Association of Securities Dealers for unauthorized trades and who was ordered to pay a judgment in 2003 for not paying for horses he bought at auction), would be validating a “win at any price” mentality. It gets worse: his current trainer Richard Dutrow, is even more notorious for pushing the envelope. He has a list of violations longer than most anyone else’s in the history of the sport... and went on to say last week that Big Brown’s victory here in the mile-and-a-half Test of the Champion, as the Belmont is known, was a “foregone conclusion.”
Foregone conclusions don’t belong in investments, energy buying or horse racing. Big Brown came last.
There is a God. At least a four-legged one.
