May 28, 2010 – This Could Deliver Wall Street’s Next Windfall

Featured Trades: (CARBON TRADING CREDITS)


3) This Could Deliver Wall Street’s Next Windfall. I can tell you right now that cap and trade is going to win the political battle over a carbon tax, hands down. Don’t waste a nanosecond of your time even thinking about it. Obama doesn’t want to be tarred with pushing yet another new tax, and Wall Street is gearing up to make a fortune in the new trading vehicle. Europe has already adopted the system, and a Paris based exchange called Bluenext, partnered with NYSE Euronext, trades Certified Emission Reduction credits (CERS’s). Some 4-6 million CER’s trade each day worth $50-$75 million. After peaking last year at ¬30, CER’s crashed to ¬7.5 in February and then bounced to ¬12.99 today. They are traded in 1,000 unit lots, and are backed up with far month futures contracts. Check out their cool website at http://www.bluenext.eu/. Morgan Stanley and Goldman Sachs have already set up trading operations in the instrument. The EC government grants CER’s to green companies, which then sell them to big polluters, which must buy them to expand their business. The true costs are passed on to consumers. The system contributed to a 3.8% reduction in CO2 emissions in Europe last year. The current world market for carbon credits is $126 billion, but if the US joins the system, that will jump by $1 trillion. I was involved in the creation of the Japanese equity warrant market in the early eighties, and I can tell you from experience that new, poorly understood markets with spreads wide enough to drive a truck through are a license to print money for the early players. Perhaps there is hope after all for the legions of traders, market makers, brokers and analysts left unemployed by last year’s collapse.

Smokestack2.jpg picture by madhedge

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