Andrew Hecht - How to Make Money with Commodities

In loving memory of Barbara Kallins Werner

Copyright 2013 by Andrew T. Hecht. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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CHAPTER 1 A Technomental Approach
FUNDAMENTAL AND TECHNICAL ANALYSIS
IN THE COMMODITIES MARKETS

CHAPTER 2 Commodity Markets
PHYSICAL COMMODITIES, FORWARD/SWAPS,
FUTURES, OPTIONS, AND EXCHANGE-TRADED
FUND MARKETS

CHAPTER 4 Energy
THE FUEL OF SOCIETY

CHAPTER 5 Precious Metals
HARD MONEY, THE BAROMETER OF GLOBAL
FISCAL HEALTH

CHAPTER 6 Base Metals
THE BUILDING BLOCKS OF SOCIETY

CHAPTER 7 Agriculture
FEEDING THE WORLD

CHAPTER 8 Soft Commodities
AGRICULTURAL LUXURY

In writing a book that encompasses so much of ones knowledge base and career, there are many people to recognize and thank. I apologize to anyone I missed.

I would like to start by thanking my dear friend, Marc Fontaine, who introduced me to the world of trading commodities at the tender age of 16. My thanks go also to Sid Gold and Ralph Mizrahi for taking a chance on such a green young man and giving him the opportunity to learn how to trade commodities and commodity options. I would also like to express my gratitude to Andy Hall for sharing his knowledge and for his faith in me during the years I worked for him at Phibro.

I am indebted to Guy Adami for writing the foreword to this book. And I am also grateful to Lynn Johnston, my literary agent, who took me on as an unpublished author. Your advice, guidance, and suggestions have kept me on the right path. Thanks also to Zach Gajewski for giving me the chance to write this book for McGraw-Hill, and thanks for your help and most of all for calmly listening to me rant and rave during the process. I am also grateful to the writer and journalist, Mark S. Smith, who is my friend and editor. I could not have completed this book without him.

Michael and Laura Pisnoy, Mark and Sharon Dershowitz, Steve and Joanne Schofield, Marc and Halina Fontaine, Mindi Bornstein and Craig Werner. We all are more than friends. We are family. You have helped and emotionally supported me over the years. Finally, thanks to my parents, Joan and Jerry Hecht, and my brother, Eric Hecht, and his wife Sue, all of whom have consistently encouraged me to follow my passion for writing. My biggest thank you goes to my sons, Marc and Jason, who are the light of my life.

GUY ADAMI

On October 9, 2009, a headline ran across my computer screen that made me do a double take. It read simply, Occidental Petroleum Announces Acquisition of Phibro. To most market participants, this was just another headline about another merger-and-acquisition (M&A) deal. For me, it was something much more. You see, when I started my career as a professional trader at Drexel Burnham Lambert in the spring of 1986, Phibro was the name in the commodity trading businessit also happened to be where a young commodities trader named Andy Hecht worked in the 1980s and 1990s.

Andy spent much of his career at Phibro, starting as a commodity options trader in the mid1980s, moving up to managing director in charge of precious metals sales and trading a few years later, and eventually becoming the president of Phibro Energy Metals in the 1990s. As an integral part of the company, Andy made a name for himself there, particularly after a series of highly courageous multibillion-dollar precious metals trades that proved Phibro was a company to be reckoned with. In 1993, A Bronx Tale, starring Robert De Niro and Chazz Palminteri famously asked the question, Is it better to be feared or respected? In the case of Phibro there was no question. It was both feared and respected by the entire financial industry. It was the commodity king.