My dear extended family,
As promised during our recent call for subscribers, please see below opinion regarding Noble from our dear friend Gijsbert Groenwegen, I agree the information that is public that they got caught long so speculation what side they got killed on with credit lines.
Failure is high risk.
• Either they were long silver and had to liquidate because the silver price was falling and went against them considering the low margin for silver futures or indeed they had some other losses because the increasing real interest rates and thus had to sell silver because it is one of the most liquid assets.
• I wonder if they were long silver and other commodities such as copper perhaps as a dollar hedge against the Yuan because as we know the 5 versus 10y sovereign bond rates inversed for the first time in the Chinese history last week meaning a weak outlook for the Chinese economy. And as you see below the copper price is still ok and in my point of view no real short coverings or otherwise.
• I will call a guy in London tomorrow who knows a lot about Shibor the Shanghai Libor, in other words the tightness in the Eurodollar market in china . Probably none of the Western banks wants to roll over 3 months US dollar loans in China because of the deteriorating situation in China hence also the weakening outlook for the Yuan. See FT article below about Noble’s financial situation. So perhaps Noble couldn’t roll over and had to liquidate silver.
• Though if the Yuan is expected to weaken that would mean that silver and copper and other US denominated commodities should do well. Although that didn’t happen the GDX and GDXJ have been very lackluster for 4-5 weeks now! Inside info?
• I also wonder if they were wrongly positioned with respect to oil and gas. A lot of traders in oil and gas have been wrongly footed lately!!Someone is keeping the price up and Vitol (Dutch!!!) mentioned that the fundamental demand for oil was weak.
• Look at this Financial Times article of March of the year. They seem to have problems with their debt. As mentioned perhaps the banks don’t want to roll over Noble’s loans.
Noble Group plans $300m bond
March 6, 2017
Noble Group, the Singapore-listed commodity trader, is planning a $300m bond issue as it looks to replace short-term credit lines with longer-term funding.
Sample the FT’s top stories for a week
The trading house, which has been hammered by two years of questions over its accounting during a commodity slump, is looking to take advantage of a rally in Asian high-yield debt market to launch the issue.
But the bonds are still likely to carry a coupon of 9 per cent, according to people familiar with Noble’s plans. Cheap finance is essential to commodity traders that typically operate on razor-thin margins.