Pop up episode to talk about the recent price action relating to Gamestop shares on the equity exchanges.

Retail versus the elite investors. Hedge Funds taking a serious beating from the unwashed masses.

We explore how this little dust up is a microcosm of the sentiment in the country between the street and the elite institutions.

We look at the ramifications of blockchain and crypto currencies and what needs to happen for them to scale to challenge the existing order.

What does the transition to a Peer to Peer network for transactions do to third party facilitators of commerce like banks and credit cards? What are the benefits of this happening? What are the drawbacks?

How will the existing orders that are considered natural order of things like the international currency system and inter-bank payments network (SWIFT) react to this disruption?

We take a trip through the following:

- History of crypto-anarchists and cypher-punks from the 1980s. Founding developers of DoD sponsored ARPANET, the predecessor to the Internet.

- The protocol used to create BitGold that became Bitcoin

- The paradigm for understanding value is usually via visual sensory input or because everyone agrees that something is of value. Now we are changing the way we see value.

- Cryptocurrencies are undiscovered country that has its foot in the old and the new.

- It has aims to be a currency but currently functioning as a commodity - mimicking electronic gold.

- What are fundamentals driving Bitcoin prices today? What are the other variants tied to blockchain technology and how do they differ from Bitcoin? What is blockchain?

- Bitcoin resembles the internet in the early stages of its development. It is a means of exchanging value and keeping records of transactions.

- Government intervention (SEC lawsuit against XRP foundation) into the development of bitcoin.

- An old testament biblical style story of rise, pride and ensuing fall.

- Center of an era filled with Young smart and ambitious people working at these uber trading firms in Houston that dominated energy trading around the world. Downtown renaissance. Energy firms were putting technology innovations out that rivaled what Silicon Valley was doing at that time.

- They were visioning the future - Broadband trading. Did a deal with Blockbuster that was a pre-runner to Netflix.

- Energy industry lost its swagger when Enron collapsed.

- Note how despite the speed and size of Enron’s fall, Fed did not have to get involved, no systemic risk, no bailouts for institutions. Goes back to the point that energy markets have natural self correcting mechanisms + Enron’s fall had more to do with accounting/financing than the corruption of the markets they engaged with and created.

- Separate fact from myth. Why so many today owe their livelihood to the risks that Enron took to be successful.

- Ultimate first mover advantage. An aggressive appetite for risk.

- NGPA - removal of federal price controls at well head and FERC Order 363 unbundling gas supply from gas delivery. Without that no choice in electricity providers that we enjoy today.

- Ken Lay’s role in lobbying for deregulation and his connection to the Bush family.

- They did not fail from being successful traders but from financial leverage.

- Enron online and the financialization of core markets of energy trading.

- The conflict of being a “super local” in the physical markets for gas and power. How they would push their market position and view of market positions.

- Valuing optionality of assets, securitizing them - meant that you did not have to own the asset to operate in the energy markets.

Topics:

- CFTC interim staff report on negative WTI Futures prices released 11/23/20

- Already causing dissension amongst CFTC commissioners for not being prescriptive enough to point fingers at those who may have benefited

- Reads like a freshman economics book report. “Dog ate my homework.”

- The faustian bargain struck with Algorithms for market liquidity leads to jump events.

- Vitol agrees to pay a record $135MM fine to settle bribery charges in Brazil, Ecuador and Mexico with the US DOJ.

- Charged with FCPA violations stemming from 2008 to 2014 for $8MM bribes paid to fraudulently win fuel oil tenders with NOCs

- Ghost of Marc Rich looms over his children

References:

https://www.justice.gov/opa/pr/vitol-inc-agrees-pay-over-135-million-resolve-foreign-bribery-case

https://www.bloomberg.com/news/articles/2020-12-08/-an-mba-in-corruption-how-top-oil-trader-paid-bribes-for-years

https://www.cftc.gov/MarketReports/StaffReports/index.htm

The journey goes deeper into the mechanism of markets and how futures markets work. The global network of energy markets and how they are self correcting because of relationships of product value over time, location and quality.

Topics:

- Market context and musings

- The Turtles (Richard Dennis and Bill Eckhardt - Original Duke Brothers of “Trading Places bet” fame)

- Marc Rich (Sanctions busting and the rise of the Swiss Trading Giants)

- Andrew Hall & Phibro. Mr. $100MM

- John W. Henry. Exploiting edge. From commodity futures to the Boston Red Sox and Liverpool FC - Bill James, Sabermetrics & Moneyball

References:

Money Ball - https://www.amazon.com/Moneyball-Art-Winning-Unfair-Game/dp/0393324818/ref=sr_1_2?dchild=1&keywords=moneyball&qid=1604263470&sr=8-2

The King of Oil - https://www.amazon.com/King-Oil-Secret-Lives-Marc/dp/031265068X/ref=sr_1_1?dchild=1&keywords=the+king+of+oil&qid=1604263508&sr=8-1

Sabermetrics - https://www.amazon.com/Bill-James-Historical-Baseball-Abstract/dp/0743227220/ref=sr_1_13?dchild=1&keywords=sabermetrics&qid=1604263540&sr=8-13

The Market Wizards -

https://www.amazon.com/Market-Wizards-Updated-Interviews-Traders/dp/1118273052/ref=sr_1_4?crid=6MTVBTN36CED&dchild=1&keywords=market+wizards&qid=1604263811&sprefix=market+%2Caps%2C212&sr=8-4

The New Market Wizards -

https://www.amazon.com/New-Market-Wizards-Conversations-Americas/dp/0887306675/ref=sr_1_5?crid=6MTVBTN36CED&dchild=1&keywords=market+wizards&qid=1604263843&sprefix=market+%2Caps%2C212&sr=8-5

Trading Places -

https://www.imdb.com/title/tt0086465/

When Genius Failed -

https://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259/ref=sr_1_1?crid=XHTG6HNC4C4J&dchild=1&keywords=when+genius+failed&qid=1604377667&sprefix=when+gen%2Caps%2C194&sr=8-1

Topics:

- Market context/musings

- Price of first barrel of crude pulled at Titusville in context. Or “Whale oil was the butterfly that unleashed the Tsunami.”

- The seven sisters.

- Rockefeller and Standard Oil, Louis Brandeis & Teddy Roosevelt - “Standard Oil of NJ and Standard Oil of California”

- War machines. First Lord of the Admiralty - Winston Churchill. “Why did Hitler invade the Balkans? Why did the Japanese Invade Burma? Why were we in Iraq? Why are the Turks fucking around in the Agean?”

The Anglo Persian Oil Company - “Or why the Iranians hate our guts”

- Aramco = Arab American Oil Company

References:

The Prize

Book: https://www.amazon.com/Prize-Epic-Quest-Money-Power/dp/1439110123/ref=sr_1_1?dchild=1&keywords=the+prize&qid=1604263621&sr=8-1

Videos: https://www.amazon.com/Our-Plan/dp/B01M11EMKD/ref=sr_1_2?dchild=1&keywords=the+prize&qid=1604263657&sr=8-2

Welcome to margin call

Connect with George

Connect with Alex

This is Margin Call – A podcast that explores the oil markets. We pull the pieces together to talk about how every cut of the barrel is marketed and why prices behave the way they do. With your guides Alex Chandy and “Big” George Paraskevpoulos.Topics:

– Introduction to Alex and George

– Prologue – what are we about and what this podcast is about

– 4/20/20 – Facts and set up (system and market)

– What went wrong.  How did the system break?

– What are the implications – future problems this causes (moral hazard)

– Segue to history of energy markets – just a chapter in a 3 century story that is still being written.

 

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