Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Divest Fossil Fuel Stocks?

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A trend popular at many American universities has been to divest their holding of the stock of companies in businesses related to fossil fuel production. More recently, even the church has become involved.  In reaction to the papal environmental encyclical “Laudato Si,” Catholic Institutions worldwide are considering divesting fossil fuel holdings. Despite its popularity, there are three reasons to conclude that this effort is misguided.

First, from a strictly financial point of view constraining investment opportunities must have a downward impact on investment performance of any fund compared to unconstrained investment portfolios.  After all, an unconstrained investor can always choose to hold a constrained portfolio, but the reverse is not true.  In addition, adding constraints limits portfolio diversification which will negatively impact the risk-return tradeoff.  How important this depends on how broadly the term “fossil fuel companies” is interpreted.  If it means just major producers of fossil fuels, the issue can be largely ignored because they are a small fraction of the global market.  However, if the term is interpreted more broadly, it leads to the second point.

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FICC Short Gamma

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One firm rakes more money trading energy in three-months then this entire industry 90th percentile in one year, it’s Goldman Sachs. For us Goldman FICC unmitigated success in the energy is the ultimate expression of the systemic dollar-at-risk entrenched in the long-gamma commodity firms and trade finance world.

Goldman’s Model

Goldman banks/deals with the solid counterparty, manage their risks, and then trade the insights 1/4 sec ahead of the earnings or physical in the finish line.

Goldman uses few or no working-capital.

Goldman commodity traders raked in $1 billion after positioning for april’s oil market collapse from Simon Jacques

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