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The Best Commodity Traders of All Time

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Want to make money trading in hard assets? These five men showed the world how it's done.

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Warren Buffett, Jesse Livermore, and Peter Lynch are household names around the world, but equity traders aren't the only ones that have amassed fortunes. George Soros is well known for his billion-dollar bet on the devaluation of the British pound, John Arnold made billions trading natural gas, Jay Gould cornered the gold market, and Louis Bacon predicted the Gulf War. In this article, we'll take a look at these and other famous commodity traders that amassed fortunes trading these hard assets.

John Arnold: The King of Natural Gas

John D. Arnold began his career at Enron in 1995, earning the company a reported $750 million in 2001 alone. After the Enron's collapse, Mr. Arnold founded Centaurus Energy in 2002 with $8 million of his own money and three employees. The hedge fund became famous thanks to a single, timely natural gas trade that returned billions in profit.

In 2005, a different hedge fund, Amaranth Advisors LLC, had bet billions on natural gas, anticipating prolonged shortages following Hurricane Katrina. Unfortunately, prices failed to move and the fund was soon sitting on $6.5 billion in losses. At the same time, Mr. Arnold had made around $1 billion betting the opposite, generating 317% returns in 2006 for investors.

After prices had bottomed out towards the end of 2006, Mr. Arnold bought up Amaranth Advisors' losing position in natural gas in a trade that rapidly turned around between 2006 and 2008. Then, in 2008, he foresaw the looming collapse in natural gas prices and nearly doubled his money again by taking a short position in the commodity.

Jay Gould: Cornering the Gold Market

Jay Gould was an American railroad developer and speculator whose success made him the ninth richest American in history. Beginning in 1879, he gained control of four western railroads, including the Union Pacific and the Missouri Pacific Railroad. These holdings were soon expanded to include some 15% of the country's total railroad tracks by 1882.

Before becoming very wealthy from the railroad industry, Mr. Gould devised a commodities scheme that he hoped would make him millions of dollars. The plan was to corner the gold market in order to increase the price of wheat and thereby increase freight business on his railroads, as the gold standard was still in effect at the time.
Mr. Gould began buying gold in August of 1869 in an attempt to drive prices higher and succeeded in raising prices some 30% by September. Unfortunately, the government caught on to what was happening and sold $4 million worth of gold, and prices plummeted within minutes, but not before Gould made out with an estimated $10 million to $11 million in profit.

Louis Bacon: The Best Global Macro Trader

Louis Bacon began his financial career as a runner on the New York Cotton Exchange, but soon worked his way up to the Senior Vice President of futures trading at Shearson Lehman Brothers. In 1986, he founded Remington Trading Partners and made a name for himself by avoiding the market crash of that era and then profiting from the subsequent rebound.

In 1990, Mr. Bacon created More Capital Management LLC and Moore Global Investments, using $25,000 that he inherited from his family. The latter fund became famous after returning 86% during its first year, thanks to a decision to short the Japanese Nikkei just before the market collapsed and purchase oil contracts ahead of Saddam Hussein's invasion of Kuwait.

By 2010, Mr. Bacon was worth an estimated $1.6 billion with Moore Global Investment Fund being worth an estimated $7.4 billion. He bases most of the funds decisions on global trends in inflation, economic growth, central bank policy, and national politics.
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