NEW YORK (TheStreet) -- The upcoming Glencore IPO represents the single most important watershed event to hit the commodity trade ever. I believe its success or failure will give the best directional indication for oil, coal, copper and other metals for the next five years.
Glencore? I hear you saying you've never heard of it. Born from the Clinton-pardoned Marc Rich trading group, Glencore has done its best to keep itself under the radar. This private commodity trader, based in Geneva, has rapidly redefined how commodities are being priced globally. Its IPO is destined to raise $11 billion dollars and deliver a market valuation of more than $60 billion to the company. It will make the CEO, Ivan Glasenberg, worth at least $9 billion and each of his partners worth at least $120 million each. This is heady stuff, but even more important is how Glencore makes their big profits and what that means for commodities -- and how to cash in on the trend. Let's do some quick reconnaissance: In the early days of commodity trading, individuals like me roamed the open outcry pits, searching for an advantage from small dislocations of physical hedgers and making a reasonable living from it. These were the relative stone ages of commodities, when telephone lines and fax machines and people conducted trade in small limited arenas. Slowly, new groups of better=capitalized hedge funds and proprietary desks mostly from the investment banks began to maximize their advantages while also growing both the nominal size of the trade and the participants in it almost 30 times. They relied on their deep relationships both with commercial hedgers and institutional and retail investors and the quickest computers and access to new electronic access points. But Glencore has been finding another way. They've slowly built themselves into a powerhouse by buying assets -- miners, refineries, oil assets -- and spectacularly concentrating on trading financial instruments around those assets -- cash markets, futures and derivatives -- to generate their massive returns. This is company without apologia - its Website proudly proclaim it as a trading company, not a miner nor refiner. Few financial documents from the private company have been made available in the past and its IPO prospectus is a 1,600-page phantom of misdirection, yet it is clear that almost 90% of Glencore's profits are from trading. Add Comment Tweet 1 2 Last » Next › adsonar_placementId=1341527;adsonar_pid=879768;adsonar_ps=-1;adsonar_zw=600;adsonar_zh=280;adsonar_jv='ads.adsonar.com'; try { function DM_onSegsAvailable(segs, cust_id) { for (var i=0;i //* Global Functions *// function metadataRegisterNS(ns){ var nsParts = ns.split("."); var root = window; for(var i=0; i Dow Jones S&P 500 NASDAQ 10-Year Note 12552.65 1337.69 2808.05 31.6 Oil * 112.9 UP 73.07 UP 8.71 UP 24.84 UP 0.39 10 Yr 3.16% SPDR Gold 145.85 0.59% 0.66% 0.89% 1.25% Data delayed 20 minutes Most Popular Stories and Tools var randnum = Math.floor(Math.random() * 100) if (randnum < 45) { document.write("Ex-Dividend Date Calendar"); document.write("Cramer's Latest Picks from Mad Money"); document.write("Bank Safety Ratings and Screener"); document.write("Top-Rated Stocks"); document.write("Highest-Yielding Dividend Stocks"); document.write("Warren Buffett's Portfolio"); } else { document.write("10 Best Dow Dividend Stocks"); document.write("Top 10 'Buy'-Rated Stocks Under $5"); document.write("10 Cities Unaffected by a Bad Economy"); document.write("13 Ugliest Phones of the Mobile Era"); document.write("10 Celebrities Who Lost Big Financially"); document.write("Paulson's 10 Best New Investment Ideas"); } Twitter Facebook RSS Mobile App adsonar_placementId=1341369;adsonar_pid=879768;adsonar_ps=-1;adsonar_zw=320;adsonar_zh=280;adsonar_jv='ads.adsonar.com'; Brokerage Partners Free Newsletters from TheStreetAfter the Bell
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