Jonathon Hoenig - Why Cornering a Market Doesn't Work
December 17, 2010
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Headlines were made around the world this summer amid reports that Armajaro, a commodity fund controlled by British financier Anthony Ward, had taken delivery of 240,000 tons of cocoa, nearly 7% of the world's supply, worth upwards of $1 billion.
Given that speculators had already been blamed for pushing up oil prices and collapsing the economy, many didn't hesitate to scapegoat the trader for making your 100 Grand chocolate bar even more expensive.
Ward had "all but cornered the market in cocoa" and "held a big enough chunk to sway prices," warned the The New York Times. AOLNews.com predicted the "stunning cocoa grab could hike prices" and lead to lower quality, and the British Press dubbed Ward " Choc Finger ," after the James Bond villain Goldfinger. The Huffington Post didn't spare the subtlety with its populist headline: " Armajaro Cocoa Investments Driving Up Already-Rising Chocolate Prices ."
But as The Wall Street Journal points out an in excellent follow-up , the trade likely ended up a failure, with futures prices falling 30% since the summer and the firm now reportedly disposing of its stockpile. (Funny how "Investment Firm Suffers Loss," won't get nearly as much press.)
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