There is no question, commodities are on fire.
Wheat up almost 30 percent, corn and coffee up roughly 40 percent and cotton more than 50 percentso far this year.
For traders, it’s like shooting fish in a barrel. But not all commodities are created equal, especially natural gas.
Independent oil trader Daniel Dicker says, “Natural gas is the only commodity that is down on the year.” In fact, natural gas is down about 30 percent year-to-date, making it a “very interesting counterintuitive play,” according to Dicker.
Natural gas has historically been one of the toughest trades in the commodities group and, once again, funds are losing big betting the wrong way.
Case in point: Peak Ridge Capital, a hedge fun now being sued by Morgan Stanley for $40 million in losses tied to the wild fluctuations in natural gas in June. Then, natural gas soared, only to suddenly collapse. Reports saythis disastrous trade is tied to Brian Hunter, the trader who lost $6.6 billion for Amaranth in 2006, causing the fund to collapse.
CNBC called Peak Ridge Capital to ask about Brian Hunter's involvement, but our calls were not returned.
“This is a guy that isn’t ready to give up, he thinks at some point there is a trade that will continue to make money somewhere and he has moved from fund to fund trying to recapture that great year of 2005,” says Dicker.
The big question that remains: Are commodities easy money, or a disaster waiting to happen? Either way, it looks like the hot money can’t help but pile in.
Dicker puts it this way, “It’s dangerous but it is also human nature, you really want to get involved in that sector that is really hot. It’s hard to resist. Sugar is up almost double, corn is up on the year, coffee is up big time, all the commodities have had tremendous moves this year so it’s hard to resist.”
Justin Solomon contributed to this story.