So, you think you know risk management? Have a seat. The World For Sale wants to show you a thing or two.
Javier Blas and Jack Farchy’s debut book, The World For Sale, isn’t about the types of traders who are typically glamorized by Hollywood in movies like The Wolf of Wall Street or The Big Short. (Although after this book, they will be.) They don’t trade stocks or bonds. They trade physical commodities, sometimes exchanging hundreds of thousands of barrels of crude in a single day. And their appetite for risk is insatiable.
Commodity traders play one of the most fascinating roles in the global economy. They’re pulling puppet strings from dozens of angles and wielding an outsize influence on geopolitics, all behind the scenes of the public eye and sometimes world governments. Traders create shell companies and work with fixers to cover their tracks, often bending the rules or skirting regulations to make the most lucrative deals work.
Some traders live quiet lives. Some fail. And some take on Evel Knievel-level risk in deals that turn traders into legends – and billionaires.
A beginner’s guide to commodity trading… and then some
The authors of The World For Sale are two seasoned business journalists who spent decades uncovering the secrets of the commodity traders who rule the markets for oil, metals and grains. Blas and Farchy masterfully tell the history of all the key trading shops that shaped the transformation and development of commodity trading.
The trading companies that dominate global commodity commerce are massive global operations that few have heard of outside of the industry. Vitol, Glencore and Cargill are not names you’d typically see at the top of industry conference headlines, or executing splashy marketing campaigns like Exxon or Chevron. Still, in the decade to 2011, the world’s largest oil, metals and agricultural traders made a combined net income of $76.3 billion. For context, that’s more than Apple or Coca-Cola made in the same period, according to the book.
From Andy Hall’s innovation in crude oil futures trading that made it rain profits, to Glencore’s control of Congo’s extraordinarily high-grade copper ore, commodity traders are the gutsy SOBs who get their hands dirty in the financial world. They jetset across the globe seeking out fresh opportunities from so-called emerging markets, and their stories are both inspiring and twisted.
Since Enverus’ technology delivers market data and analysis not only on the traders, but the risk managers that make commodity trading run our worlds, I couldn’t help but pause at some of the dodgiest trades that were detailed in The World For Sale. I’d rather encourage you to go get your hands on a copy than detail the juiciest stories here. Tea was spilled.
Without giving away any spoilers, I can say that this book reminded me that in the opaque markets of the world’s last swashbucklers, as Blas and Farchy call the commodity traders, risk managers can only do so much to save them. And all the technology in the world couldn’t save a devious trader’s risk manager from the fallout of, say, buying a cargo that contains toxic, untreated chemicals with the hopes of making a profit.
That’s not to say that all traders are outlaws, or that risk managers in the commodity space can’t use technology to reign them in. Overall, this book beautifully pulls into perspective the massive size and scope of this wild little niche industry in which we find ourselves.
You can read an excerpt of The World For Sale here, or purchase a copy. Or check out this blog from Enverus: What we can learn from one trader’s $300 million loss.