Glencore: Goldman's worst nightmare?

Brady4MVP's picture
Rank: Neanderthal | banana points 3,188

Interesting article on business insider about how Goldman is freaked out about the Volcker rule. Specifically, they're scared of Glencore and the threat it poses to their commodities business. Goldman is one of the 3 big BB commodities players, along with Morgan Stanley and Barclays. Because Glencore is not regulated, it can do whatever it wants with regards to leverage, prop, and compensation.

This seems to confirm Midas' post yesterday on the big commodity players.

The Real Reason Goldman Should Be Freaking

Comments (27)

May 5, 2011

Nice find, actually planning on making a Glencore specific post in the next few days.

May 5, 2011
Midas Mulligan Magoo:

Nice find, actually planning on making a Glencore specific post in the next few days.

The anticipation is killing me, yesterday's post was a tease.

May 5, 2011

Was reading the article before. There is a fundamental difference between the two though. While Glencore is maybe the largest commodities trader int he world, they deal with physical commodity trading and logistics, also production as well now. Although Goldman does deal with both physical trading and logistics (sometimes) it's in less risky environments, and a major portion of Goldman's activities come from commodity linked securities, where they provide risk management for clients. I think this ipo scares Goldman because glencore is going to use its position to be a player across the commodities supply chain, more so now starting with production and be aggressive in Goldman's specialty, which is securities. Before there was glencore dealing with the risky stuff and the end customers were bb's and their clients and the major oil companies. with the ipo and if acquisitions go accroding to plan, glencore will dig it out of the ground and be able to get it to the end customer without anyone else in the middle

May 5, 2011

what Glencore is trading is only a small % of what the banks are.. its not an apples to apples market

May 5, 2011

Still think it is a terrible idea for Glencore to go public. They make a ton of money doing shady shit, and now that's going to be out there for everyone to see. Raping Africa's natural resources and various other shady activities are going to get a lot more attention from regulators and the public.

As they say: If it ain't broke, don't fix it.

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May 5, 2011
porkbellies:

Still think it is a terrible idea for Glencore to go public. They make a ton of money doing shady shit, and now that's going to be out there for everyone to see. Raping Africa's natural resources and various other shady activities are going to get a lot more attention from regulators and the public.

As they say: If it ain't broke, don't fix it.

i tend to agree

May 6, 2011
porkbellies:

Still think it is a terrible idea for Glencore to go public. They make a ton of money doing shady shit, and now that's going to be out there for everyone to see. Raping Africa's natural resources and various other shady activities are going to get a lot more attention from regulators and the public.

As they say: If it ain't broke, don't fix it.

So basically you are a shady character that is ok with shady business. Do you work at goldman sachs?

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May 5, 2011

The partners have to cash-out somehow. Makes me think this is a top in commodities - look at Blackstone or Fortress in the PE/HF bubble. Additionally, way to drum up a story Business Insider, as if the IBs weren't already aware of the worlds largest commodity trader!

May 5, 2011

I think it means they think top in commodities will come in the next few years. They not actually cashing out at all right now. Just giving themselves the option to do so slowly and eventually.

May 5, 2011

commodities are not going anywhere in near or long term... partners life will end before you see a top or bottom for that matter in commodities

May 5, 2011

On the flip side glencore hone reason for the ipo is to buy up more assets. Would be strange to buy more exposure if they thought it was all about to collapse. Or is my logic flawed?

Monty what makes you so sure beyond 10 yrs say?

May 5, 2011

*have sited the main reason

May 5, 2011

glencore bread and butter is raw commodities... and nothing in this world can move forward without.. also who is a possible number 2 to replace them?

May 5, 2011

I'm not sure I understand. The commodities supercycle will persist cause its glencores bread and butter?

I'm not trying to be a smartass. Just dint understand.

Number 2 to glencore? Trafig

May 5, 2011

trafigura, vitol.....with regards to commodity peak, whether it stays here or goes up or down everyone needs the products these guys are selling. it seems they think its going up given their plan to acquire assets across the world. natural resources are the most fundamental input in economics, and its non renewable. one of the dynamics which drives prices are one emerging markets and inflation, also there are no new large deposits being found across the world, whether it be oil or copper, even gold.

May 5, 2011

Nice to see the world wake up overnight to the Glencore story. That said I have heard no version of Dodd-Frank to date that says put "us based banks" at a disadvantage. Goldman also has physical assets in some markets and for sure will be fighting for "end-user" and "non-bank swaps dealer" vs the uber tough "bank swaps dealer" designation.

Glencore did not just show-up overnight either. For instance in global physical oil/products trading, Glencore competes with the banks, oil majors, nationalized oil companies, independents (see above) everyday.

May 5, 2011

It's important to note that Glasenberg and the other BSDs at Glencore have a 5 year sell restriction on their new shares. Goldman, MS, Barclays, DB or anyone with a decent size book could be in a lot of pain. Glencore is definitely in the financial game too, mostly OTC. Who knows how deep the rabbit hole goes? I was dumbfounded when I heard about the IPO. That walk-in closet has skeletons piled up to the ceiling. All I know is, I'd love to go to sleep knowing that when I woke up you could tag $10B onto my net-worth.

May 6, 2011

Glencore is no new threat,so Goldman has nothing new to fear about...
Glencore and its predecessor (Mark Rich & co) has been the top commodities trader for over 30 years.

May 6, 2011

Having met a few Traders from Glencore, it's no wonder why they're at the top.

May 6, 2011
Walkio:

Having met a few Traders from Glencore, it's no wonder why they're at the top.

.....care to elaborate on this?

May 6, 2011

On a whim I decided to submit my resume for the direct entry deals desk role at the Stamford office of Trafigura. I submitted the resume at 1:20 AM central time and got a rejection at 1:53 AM! Talk about efficiency!

My guess is I had too much experience for this role since it is an entry level position geared towards recent grads.

May 6, 2011
Brady4MVP:

On a whim I decided to submit my resume for the direct entry deals desk role at the Stamford office of Trafigura. I submitted the resume at 1:20 AM central time and got a rejection at 1:53 AM! Talk about efficiency!

Holy shit

barboon:
porkbellies:

As they say: If it ain't broke, don't fix it.

So basically you are a shady character that is ok with shady business. Do you work at goldman sachs?

This company is in the same category of shady as XE or the CIA, possibly worse, as the justification is money as opposed to national security....it puts GS to shame, hands down.

I too am curious to know how they are going to get around all of the changes to the regulatory systems over there. I guess if you sit at the historical nexus of shady financial transactions, it's probably the best place to take such a company public....they know where all of the bodies are buried and who to bribe to keep their mouth shut.

May 5, 2011
Brady4MVP:

On a whim I decided to submit my resume for the direct entry deals desk role at the Stamford office of Trafigura. I submitted the resume at 1:20 AM central time and got a rejection at 1:53 AM! Talk about efficiency!

My guess is I had too much experience for this role since it is an entry level position geared towards recent grads.

BP does the same. Most european firms have a script screener if you don't hit 80% of the keywords or criteria. No human see's your resume.

May 6, 2011

I don't think it signals a peak in commodities. Players like this love volatility in the markets. Prices going up can be good. Prices going down can be good (except for the producer end). But all in all, the physical marketers are less dependent on absolute price, more so on differentials (product differentials such as light vs heavy oil, ngls vs spec, location differentials, etc.)

May 6, 2011

I recently read an article that mentioned one of the reasons they're going public (other than partners cashing out) is to add more transparency to the company that will hopefully attract customers who are withholding business because they do "shady shit".

The % factor is negligible when comparing to GS, MS, Barcap etc. because those firms are participating in a rather efficient futures/forward exchange so the profits are pretty tight.

Actually delivery of commodities in connection with a futures/forward market (not to mention currency arbitrage) is wildly more inefficient so the profits will be way higher if you're good at it (which evidently Glencore is).

May 14, 2011
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May 6, 2011