by John Rubino
Dollar Collapse
A thread just appeared on Twitter in which a couple of people who seem to understand the commodity trading business explain the nightmare that now confronts those traders. Here’s an excerpt, with a few technical terms explained for clarity:
Commodity trading houses have had to manage liquidity at current price by re-entering the market and upsizing their facilities. They are obviously under pressure and the bond market is repricing. Here you have the CDS [credit default swap, a form of insurance against bond default] of Louis Dreyfus, a trading house active in the agri space. Friends tell me Blackstone already walked out on [global commodities trader Trafigura Group]. Capital and LOCs [letters of credit] are exceedingly hard to come by in this space and part of the reason you saw oil pricing blow out to $130 and then collapse back below $100.