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Enron Mail |
John,
I think that diversification here is key. Provided that the correlation between power and gas or between different regions is less than 1 (which is almost always the case), simply spreading the investment over other commodities/regions will increase portfolio returns (i.e. same nominal P&L, less volatility). More specifically, I would suggest the following: 1. ratchet up West "Bets" - I think that Tim is playing defense as of late ($7 MM P&L this month vs $600 MM in the last four months), yet he is one of the best traders and has the highest return on VaR for the past couple of years - Q4 Palo at $140 looks cheap as compared to MidC at $240, Q2-02 prices in the $80s look cheap as well - I will get more specific strategies on Friday after my return from Portland - Cash trading - spot prices in the West were up ~$100 today 2. East desk has taken risk down in the last few days after making $122 MM this month alone. They need to reassess where they stand today and act appropriately. Some ideas are: - Long NY power - I would assess getting long SE/SERC this summer at prices below $100 3. NG Desk - NE: Long NY and Florida in anticipation of tight power and transmission/transportation constraints this summer - What is Tom Martin's secret - consistently high return on VaR and consistently positive P&L. Can it be replicated on other desks? 4. SA - get long power in Brazil by all means: close the Petrobras deal, any other prospects? In general, I would challenge every region head to come up and describe profitable strategies (other than Nymex), based on their expertise, fundamentals, weather, etc. Other wild ideas: 5. Buy aluminum and steel - since a lot of smelters have been closed because of high electricity prices, aluminum and steel should get expensive 6. I am in Vegas the weekend of July 12th. Vlady.
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