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Wednesday, 17 August 2011

Hey, I could do that job

2 years ago BarCap hired a team of gold traders from JP Morgan, offering them £30 million in cash and shares.  Now we hear that Todd Edgar and his team of nearly a dozen commodities traders are to leave "as part of a stream of cuts designed to shed overheads and put the UK bank on target to hit profit targets".

Well it's hard to see how anybody lost money while trading in gold for the last 2 years.  At JPM Edgar's team turned in a profit of $250 million in one year on a risk limit of $2 billion, an apparent return of 12.5%. Not bad.

But 2 years ago, I could have bought gold at $900/oz, which today would be worth $1800/oz, which would have been a return of 42% compounded for 2 years.  Is there really more than $30 million of value addded in the team?

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