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2 May 20 2010 @ 10:35am by Matt Smith in Economy, energy consulting, Global Energy, risk management, Risk Strategy

Commodityspeak Through the Medium of Shakespeare.

To tie in with the shindig that is the launch party of our UK office at Shakespeare’s Globe Theatre on June 15th, I present to thee forthwith ten quotes Billy the Bard would say if he were involved in commodity risk management:

1) There is nothing either good or bad; but thinking makes it so – yes, markets are driven by various forces passing the parcel, from fundamentals to technical analysis to outside influences. But sentiment, opinion and fear/greed also play a starring role. So even if something is not in bad shape, if the consensus makes it so, then prices will reflect this.

2) Measure for Measure – a measured approach to mitigating risk is the way forward, and ties directly to my haiku on risk management: uncertainty is…..an ever-present threat so….hedge hedge hedge hedge hedge.

3) Chaos is come again – Othello knew where it was at…crude down 23% in 13 unlucky trading days, from top of the pops (high of the year $87.15 on May 3rd) to the drop of all drops ($66.91 today – May 20th).

4) Better three hours too soon than a minute too late – hedging is not about picking the bottom of the market, it is about mitigating risk.

5) Though this be madness, yet there is method in’t – why it makes sense to quantify risk in commodity markets. Although no-one can perfectly predict the future, by equipping yourself with a Batman-like utility belt of tools for assessing the potential evolution and volatility of a market – from macroeconomic or econometric models to Value-at-Risk to technical analysis – you can establish parameters to quantify present and future risk and reward.

6) Foregone conclusion – Pah! Shazbat! Unlike in Othello, there is no foregone conclusion in commodity markets. Which is probably a good thing too, as there would be no need for an energy consultant (= Unhooray!).

7) Screw your courage to the sticking-place, and we’ll not fail – having the knowledge to stand by your convictions on market opinions is key. And then develop, evolve, and expand on this opinion by using research, analysis, facts, and cement.

8) The winter of our discontent – no thank you, we have already been through this – no need for a sequel.

9) When shall we three meet again? – the witches from Macbeth are always good for a quote, even without mentioning hubbling and bubbling, toil and troubling. There’s many clichés to describe this – a rising tide lifts all boats, in times of crises all markets correlate, etc, etc, – the point is, following commodities is about monitoring all assets – be it equities, bonds or currencies, as they all influence each other, and can provide insight into the short-term movement in another.

10) By the pricking of my thumb, something wicked this way comes – two words for you – hurricane season. This year is predicted to be one of the most active seasons for years based on some key factors. That said, some say a trained chimp can predict hurricanes better than NOAA.

If you wish to attend the UK event, please click on the ‘Much Ado..’ picture at the top of the post.

I bid thee farewell.

2 Comments on this post:

  1. Ginny says:

    If we crude prices have offended,
    Think but this, and all is mended,
    That you have merrily blogged here
    While these visions did appear.
    And this mitigating risk theme,
    No more yielding but a dream,
    Please, do not reprehend:
    if you pardon, we will mend:
    And, as I am an honest poet,
    Luck will find us and we’ll know it
    Now to ‘scape the serpent’s tongue,
    We will make many hedges ere long;
    Else the market could take your money;
    So, tis good news sweet as honey.
    Give me your hands, if we be friends,
    And then we shall restore amends

  2. Matt Smith says:

    Good to know your are still a nutcase – great stuff, Ginny!!!!

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