T. Boone Pickens Investment Funds Down About $1 Billion

Please Don’t Tell Me He Wants A Bailout Too …….

Lately, T. Boone Pickens would get better marks as a policy advocate and author than an energy investor.

The 80-year-old Texas oil magnate has bankrolled a massive public campaign for improved U.S. energy independence, and his new book, “The First Billion is the Hardest,” is a best seller. But the downturn in energy has blindsided the industry veteran, leaving one of his hedge funds that focuses on energy stocks down almost 30% through August. A smaller commodity-focused fund is down 84%.

All in, the funds have lost around $1 billion this year, a figure that includes $270 million of personal losses. “It’s my toughest run in 10 years,” said Mr. Pickens, a former geologist who earned billions by building an oil company and investing in energy. “We missed the turn in the market, there’s nothing fun about it.”

Until lately, money had gushed from Mr. Pickens’s trading desk as energy prices climbed. His energy-stock fund, which started the year at $2 billion, has returned a compounded annual return of 37% over seven years, according to an investor. The commodity fund, which started the year at about $600 million, has had similar strong performance. That fund relies heavily on borrowed money, resulting in the deeper losses.

Mr. Pickens argues that the recent falloff in energy prices in large part is due to dislocations in financial markets, which forced a range of investors to sell holdings to raise cash. “I’m not willing to accept that [the downturn] was due to a global slowdown” reducing energy demand, he says. “When there’s deleveraging in markets it will affect everything.” (What is being said here is that oil prices were not based on demand – but on the amount of cash invested in oil by speculators – that the price dropped when the speculators were forced to sell their “oil bets”).

Unless there’s a deep, global economic downturn, he says, oil prices will head higher because oil demand will outpace supply by at least two million barrels over the next year. “Oil likely will finish the year around $120 or $125 a barrel.” Still, Mr. Pickens says he’s shifted his funds’ portfolios to a more neutral stance, to keep his losses in check. That means he hasn’t fully benefited as oil prices jumped in the past few days to $106.61 a barrel from about $90.

Despite crisscrossing the country to discuss his energy plan, Mr. Pickens says he remains focused on his investment firm, BP Capital LLC. When he’s in Dallas, where he lives, Mr. Pickens starts the day with a workout, and then meets his 10-person investment team for breakfast. He leaves the office around 6:30 p.m.

He’s been getting calls from concerned investors, but many are longtime friends. It also helps that he’s made them a fortune over the years. “He made his [bullish] views well known and we expected volatility,” says John Trammell, president of Cadogan Management LLC, a $7.5 billion firm that invests in hedge funds. “They’re not as exposed to the downward movement in oil as they were” a few months ago.

Mr. Pickens is upbeat about the prospects of the firm. But he acknowledges that the recent losses have an impact. “It’s like mashing all your fingers in the door… This has been a pretty bad period for us,” he says.


Remember this his – when you see a Commercial on TV – someone is trying to sell you something – the trick is to figure out what it is.  

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