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Trader death, except in commodities (preferably agricultural)

A new study says 20,000 trading jobs will go by 2012, most of them in the next 12 months. But commodities traders, particularly those who specialise in foodstuffs, should be fat and happy no matter what.

The scary figures come from a research firm which claims to have spoken to hundreds of traders, many of whom expect to lose their jobs some time soon.

“Volatility is good right now, but there’s just not the volume,” says report author Stephen Kimsey. “Past experience suggests we’re in for a lot of redundancies – look back to what happened in 2001.”

Banks like UBS and Merrill have promised to put less capital at risk, and this appears to have fed through to jobs. “Banks are cutting back on traders and trading where risk is high and where the balance sheet is used,” says Shaun Springer, CEO of search firm Napier Scott. “But it’s more about reducing risk than pulling out of trading altogether.”

From credit to commodities

Commodities traders appear relatively immune, however. Last week Credit Suisse announced another 500 job cuts in its investment banking unit, most of which are expected to fall in fixed income and equities trading – at the same time as unveiling 13 hires for its global commodities division, on top of the eight it made last month.

The FT‘s Gillian Tett says the commodities boom is a bubble that will end horribly, but some beg to disagree.

“There was a lot of speculative froth in the commodity market in the first three months of the year,” says Shaun Port, CIO of BDO Stoy Hayward Investment Management. “But we’ve seen a reverse of that. And the rise in the price of oil appears to have been driven by real money rather than speculation.”

Recruiters say CS is now one of the only banks hiring in commodities, but hedge funds and trading houses are taking up the slack.

Port estimates that the number of commodities hedge funds globally has risen from 300 to 500 in the past 12 months. Agricultural products are at the sharp end. “We’ve had a 40-year down-trend in agricultural prices,” he says. “That’s now over.”

Comments (8)

  1. banks hire when the times are good and fire when it turns ugly. commodities is the asset class of the future without doubt due to BRIC. But banks make $$ on volatility. if this subsides, then the commodities guys will be in trouble. make $$ while u can!!

  2. I think the report is overly negative and I question most of the comment i’ve heard recently about ‘crappy volumes’. Equity Derivatives are certainly not experiencing the type of diminished volumes as many ppl report. Investors now more than ever are familiar with the volitile climate of today and are generally taking advatage in their hedging approach. Afterall, 300/400 point intraday swings in the US and 100odd over here are not uncommon. In Jan 08 US equity markets traded 35% more than average monthly vol in 2007. Also look at volumes of equity derivs (both otc and listed) Vol on US echanges: 285m contracts in march 08 vs. 229m in march 07 and typical of the first quarter this year. Also the fragmentated nature of the markets these days means that liquidity is carved up and absorbed my multiple venues making it ultimately harder to get a true view of the picture. Electronic trading desks are booming right now inline with volitility. I think we’ll loose more guys to computers than to any other factor this year and next.

  3. Commodity price can be easyly manipulated by politicians/Lobby. Take the example of the Attack in Nigeria, who is winning on that ? the poor nigerian rebels or BP, Royal Dutch or Total ? This is just a way for them to make quick and easy money… just pay 10 poor africans guy and let them bring you trillions… This world is crazy… I hope I can leave for Mars soon.

  4. Well, financial speculators are running short of things to screw up. They better start working on 40-years down-trend in agricultural prices ASAP.

  5. That’s true. Banks have hire and fire policy as always. Banks and financial institutions will hire on rise and fire on fall. It’s people who are fired suffer the most as they have no immediate option for anything else. Even I have seen some people go crazy and loose their mental balance. Now commodities market is hot so they are hiring so we will see what happens to them…….. Be careful.

  6. Great Bobby…it is true…let us just pay 10 africans to disrupt the pipelines and then let us scalp oil for $$…. christ…


  7. any stock tips?

  8. True, I guess a new way to look for volatility is to go somewhere else like China and emerging Russian commodities trading. Russia is the best in that, since its oil,gas,coal etc resources are underdeveloped and this country is one of the main food producers.

    Roman, Bobylin Reply

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