John D. Arnold
John Douglas Arnold is a self-made American billionaire. Arnold is currently the second youngest self-made billionaire in the United States.
Centaurus
His firm, Centaurus Advisors, LLC, is a Houston-based hedge fund that specializes in trading energy products. After graduating from Vanderbilt University he began his career as a trader at Enron. After initially working on the Crude Oil desk, Arnold moved over to the Natural Gas Desk upon the departure of Jeff Bussan. Using their new Internet-based trading network, EnronOnline, he is credited with making three quarters of a billion dollars for Enron in 2001 and was rewarded with an $8 million bonus.[1][2]
When Enron collapsed in 2002, he founded Centaurus with his previous year's bonus. His company now has as much as $3 billion in assets under management.[3] His employees include several big name energy traders including ex-Enron CEO Greg Whalley,[2] as well as Bill Perkins, Jeffrey Welch and Conrad Goerl, previously of MotherRock.[4]
According to Arnold, "After Enron collapsed, there was a general revaluation of credit risk among energy companies. The better credits were less willing to take on the lesser credits as counter parties. So the lesser credits found themselves with fewer counter parties willing to trade with them, even though they still needed to hedge the pricing risks in their business. Hedge funds previously had not been involved in the over-the-counter market, except for the very largest, because the other participants were reluctant to grant credit to that type of entity."[5]
During the collapse of Amaranth Advisors, Centaurus is widely credited as being one of the major players on the other side of their position, and returning as much as 150% in 2005.[6]
At a recent energy conference, Arnold stated that he looks "to place bets on a market that he determines is ‘biased’ ... [W]e ask ourselves can we identify what is forcing a market to price a product at an unfair value, and then, what will push it back to fair value." Arnold also referred to the speculative trading that was taking place on the unregulated over-the-counter Intercontinental Exchange (ICE) and NYMEX's Clearport Trading: "Trading never went away ... [W]hat has changed is the non-commercial type of interest ... [B]ecause of this there has never been as much investor interest ... as there is today."[7]
During August 2008, Centaurus acquired around 10% of the shares of National Coal Corporation (NCOC).[8]
John D. Arnold recently made a rare public speech to the CFTC (U.S. Commodity Futures Trading Commission) in which he strongly opposed the idea of imposing limits on trading positions in the energy futures markets. [9] [10]
In Forbes magazine's 2009 list of The 400 Richest Americans, John Arnold ranked 91st, with a net worth of $3.4 billion.
References
- ^ [1] NYT, "CORPORATE CONDUCT: THE TRADER; Enron Trader Had a Year To Boast of, Even If . . .", July 9, 2002
- ^ a b New York Times, "Energy Trading, Post-Enron", January 15, 2006
- ^ [2] Wall Street Journal Online, "Trading on the Enron Mystique", November 16, 2006
- ^ [3]Pittsburgh Post-Gazette, "The energy-trading high wire", March 21, 2006
- ^ [4] "The Tipping Point: OTC Energy Clearing Takes Off", January 18, 2005
- ^ [5], "Smart trades that made this a good year for some", December 20, 2006
- ^ [6], [7], "The Role of Market Speculation in Rising Oil and Gas Prices: A Need To Put The Cop Back On The Beat"
- ^ Houston Business Journal, "Centaurus scoops up National Coal shares" August 29, 2008
- ^ "Energy Trading Mogul Warns on Trading Limits" August 5, 2009
- ^ [8] "John D. Arnold's CFTC (U.S. Commodity Futures Trading Commission) speech"