Boone Pickens Hedge Fund (BP Capital) Has Rough July ~ market folly

Thursday, August 14, 2008

Boone Pickens Hedge Fund (BP Capital) Has Rough July

From Reuters:

"The commodity half of oil tycoon T. Boone Pickens's BP Capital hedge fund lost 35 percent of its value in July, the New York Post said, citing sources."

Ouch. Sounds as if old T. Boone needs to spend a little bit less time campaigning for his PickensPlan, and a little more time running his hedge fund. (Okay, maybe that's a little harsh considering he is poised to make big $$$ should his 'Plan' materialize in any way shape or form). Nevertheless, it will be interesting to see what his 13F looks like when he files that here in the next few days. It sounds as if he was pretty stubborn with some natural gas and oil plays though, that's for sure. Considering that commodities took it on the chin in July, and given the fact that his fund is energy-centric, the losses make sense. But, you'd think that someone with as much experience in the energy markets as Boone would be a bit quicker to react/adapt to what was happening.


Mark said...


I was just going to post this myself

J, don't take this the wrong way but from your writing you seem to believe hedge fund guys are like omnipresent beings who nail mostly everything. They are humans, and they get things wrong - they were all in the same trade (mostly all) long energy/short financials - you see that by the crazy unwinding. They are herd animals just like us, but with more money, leverage, and access to information.

I know you have contacts in the industry and maybe that gives you a different view and more positive spin but from what I read and see they are (aside from the deep value guys) devolving into pack animal momo guys and there is nothing different or special from that then what I read on many financial sites. Just with a lot more money behind their trades!

I only say this because you seem surprised and for example in the Gendell article you almost assume he was going to be out of steel and commodities and most likely missed the move down. ;) Maybe he did. But judging from the stocks reactions a lot of rats left the ship at the same time i.e. late.

They are humans too. Who are getting killed by computers ;)

market folly said...

haha no offense taken. i do have somewhat of a 'positivity' bias or something of the sort.

i think just with boone though i expected "better" ya know? a loss was fully feasible given how rough july was. but, i just didnt think he would get hammered as hard as he did. you're definitely right, everyone's human and makes mistakes.

on the gendell article i made that assumption just because the massive selling we saw in say steel was definitely institutional money outflow. so, i took a guess that gendell was in there at least reducing his position sizes to reduce his risk.

and i fully agree with your assessment that theyre devolving into momo guys. you can definitely see the 'value' guys are morphing into growth at a reasonable price guys, and the 'macro' guys are swarming whatever the hot macro sector idea is for the month.

times are a changing

Mark said...

I don't think Boone or anyone else expected natural gas to fall 40% in 3 weeks

Yes maybe over 3 months, but 3 weeks in crazy

the velocity of such changes is the difference nowadays. I keep writing that. What once took months to play out now takes weeks. What took weeks, now takes days. Etc.

i.e. reversals
Now things reverse on a dime. Literally. In the past you looked for a basing period of a broken stock and then when it formed a nice 2-3 week based, seller were exhausted and you get in.

Now? There is no clue or pattern. Something reverses out of the blue after being down 9% the day before and falling 40% in 4 weeks. There is no "basing" Just the reversal.

Time frames have been compressed to such a degree than the old rules simply are not working. I am sure Pickens and the whole cohort are being blindsided by that. Especially when you've been conditioned for 10, 20, 30 years to look for X pattern and X does not appear anymore.

Ave hedge fund had a horrible July at 4.5% loss in 1 month. With the whole idea of hedging that is awful. Annualized 50% loss. You know that as well as I, which is why I say don't celebrate these guys or assume they are "so agile that on 6/30 they hold this but I'm sure there is a great chance they were out by the time the correction happened" ;)

Mark said...

speaking of old times, MA is forming an old fashioned nice bottom

right above resistance, in a tight range - lasting 2 weeks - wow, something I recognize. Doesnt mean it will hold or not break down but it looks promising and something you can actually see a formation building over time.

market folly said...

yea been watching MA patiently myself too. now that you recognized that though, you know what will happen right? it will start tanking for no reason haha

Mark said...

yes but you can stop out and it will be a normal pace, i.e. below 225

thats a normal course of action and trade

its when things gain / rise 15% daily in total random action that kills you