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John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

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This Could Deliver Wall Street's Next Windfall

I can tell you right now that cap and trade is going to win the political battle over a carbon tax, hands down.

Don't waste a nanosecond of your time even thinking about it.

Obama doesn't want to be tarred with pushing yet another new tax, and Wall Street is gearing up to make a fortune in the new trading vehicle. Europe has already adopted the system, and a Paris based exchange called Bluenext, partnered with NYSE Euronext, trades Certified Emission Reduction credits (CERS's).

Some 4-6 million CER's trade each day worth $50-$75 million. After peaking last year at €30, CER's crashed to €7.5 in February and then bounced to €12.99 today.

They are traded in 1,000 unit lots, and are backed up with far month futures contracts. Check out their cool website at http://www.bluenext.eu/. Morgan Stanley and Goldman Sachs have already set up trading operations in the instrument.

The EC government grants CER's to green companies, which then sell them to big polluters, which must buy them to expand their business. The true costs are passed on to consumers.

The system contributed to a 3.8% reduction in CO2 emissions in Europe last year.

The current world market for carbon credits is $126 billion, but if the US joins the system, that will jump by $1 trillion.

I was involved in the creation of the Japanese equity warrant market in the early eighties, and I can tell you from experience that new, poorly understood markets with spreads wide enough to drive a truck through are a license to print money for the early players. Perhaps there is hope after all for the legions of traders, market makers, brokers and analysts left unemployed by last year's collapse.   

Article courtesy of: The Mad Hedge Fund Trader




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Leave a comment
  • Anonymous on May 29 2010 said:
    I read you loud and clear, author. I don't know how many lectures of various types I have given on this topic, but people simply refuse to understand. I hope I don't disturb anyone when I say that the acceptance of cap-and-trade is even more nut-house than accepting electric deregulation, especially now that the designers of cap-and-trade have said that it won't work.
  • Anonymous on May 29 2010 said:
    The economists who developed cap-and-trade have said that it won't work, so what is the point. Of course it is going to work wonderfully for brokers and similar operators, but their interest has to do with cash, and not carbon.
  • Anonymous on June 02 2010 said:
    Sigh. The 3 biggest scams in the history of mankind:#3: CO2 cap and trade.#2: fiat-debt-money AKA central banking AKA fractional-reserve#1: non-existent fantasies (governments, organizations, corporations) running and ruining the lives of every real human on earth.
  • Anonymous on June 02 2010 said:
    Congress are puch of criminal they are about to destroy the america economic system
  • Anonymous on June 02 2010 said:
    Cap & Trade and man-made global warming are both a load of crap. Obama simply wants to tax everyone and everything to death so he has funds to redistribute.
  • Anonymous on June 04 2010 said:
    Some signs worth following is that ICE has recently bought out the European Climate Exchange (and its subsidiary in the U.S., the Chicago Climate Exchange) for some $7mil. I can't see ICE spending that much money just to provide an honest burial service for these companies. With Morgan and Goldman setting up trading desks shows that some very knowledgeable players believe something is in the works. The crucial facts omitted from this article is how do you play it.
  • Anonymous on June 04 2010 said:
    How do us mere mortals (who ultimately pay for all this) work it to our advantage?Is that even possible...?

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