T Boone Pickens Has a Rough July

Ok I thought I had a rough July - I guess it is all relative - especially considering these guys can do a lot more effective hedging against long positions than we can do.

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The New York Post said T. Boone Pickens “took a beating” investing in natural gas and oil in July.

The commodity portfolio of his BP Capital lost 35%.

Overall, the fund lost 10% last month, the tabloid said.

Pickens said a “steep decline” in natural gas and oil had an “adverse impact on our performance” in an investor letter.

The Post called the downturn “embarrassing” for wildcatter Pickens. The Texas oilman, 80, is campaigning to boost alternative energy output.

Pickens has sided with the “Peak Oil” premise and in April predicted the cost of oil would top $150 a barrel. But after hitting a record high of $147.27 in July, the cost of oil per barrel has plummeted $35 to $113.

Pickens was not the lone casualty of the commodity backlash. The average hedge fund lost 4.35% on the HFN Hedge Fund Aggregate Average in July.

Dallas hedge fund BP Capital has $7 billion under management.

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Another "gray haired" guy who got trapped by the new era of fast money and has been playing by the "old rules" we all thought still apply... (note at this point anyone who has entered the market over 5 years ago I now consider a "gray haired" guy since we're playing by the wrong set of rules) I don't think one of the best investors/corporate raiders of the past 30+ years suddenly got stupid; the rules have simply changed (at least for now).

I think this showcases yet again how heavily the "long commodities/short financials" trade was weighted by the hordes of institutional money. When all these rats decided to jump ship at the same time, we all capsized (note - I use the word rats affectionately) The velocity of the moves nowadays are really the only difference - what used to takes months to unwind is now taking days or weeks at most. If you dare sit back and think about the situation over a couple of weeks, you are down 30%. Shoot first, ask questions later.

So now as they flee into healthcare and technology stocks - you can bet at some point in the future those ships will capsize when the time comes for them to leave en masse and move to the next sector to feast upon (en masse). And we'll sit here perplexed asking why these "safe" stocks are down 40% in 3 weeks when the fundamentals have not changed. Same Bat time, same Bat channel - only the names of the innocents destroyed will be different. Follow the bouncing ball across the deck, and try not to be the in the last few groups without a lifeboat. This market is all about momo chasing guys (and their friendly computers) levered up the nose. (remember, we're just gnats on their behind(s)) It's all good until the trend changes - then it can get dangerous fast. Welcome to your new world of (ahem) "investing".

[Jul 8: Readers Homework - Do Your Pickens]
[Apr 17: World's Best Oil Investors Thinks Oil Goes Higher, not Lower]