Amaranth Feedback
From a reader:
“Strangely now Amaranth is saying they are “eliminating energy trading from our strategy”. I wonder how that will help? Wouldn’t the same style of crazy leveraged bets be ruinous in another market as well? Amaranth went on to say “liquidity dried up so quickly that the fund was not able to unwind its energy positions.” WHAT?? NG contracts are not liquid? Something is wrong here. Could Amaranth have had such a large position that they were a significant percentage of the entire open interest? Michael, I think this is a better chart than the one you posted on your blog.”
“It clearly shows a downtrend in 2006. Why would somebody bet that prices would go even higher when they peaked last year and hadn’t really come off that much since? That is, if one is looking for weather correlation, shouldn’t there be a tighter spike with rapid decline after Feb? To me, if you weren’t in on the 2005 uptrend, it appears that one should have put on a small short position in Feb 2006 with a wait and see attitude and a stop order. Was Amaranth buying all the way down expecting an even higher price than December 05 peak at $11.20? Maybe hindsight is 20/20, but it sure looks like a downtrend to me.”
