The Secret Club That Runs the World

Kate Kelly, a financial reporter, examines the physical commodity trading business and the people who run it, at a point when regulatory pressure was pushing banks out of the activity and independent trading houses were expanding.

Her subjects include the large independent traders, principally Glencore, Vitol and Trafigura, and their business, which combines physical logistics with trading positions informed by what the logistics reveals. She explains how a firm that owns storage, ships and processing capacity knows things about supply and demand that no financial trader can observe, and how that information advantage is the basis of the business. She covers the banks' commodity desks, particularly at Goldman Sachs, Morgan Stanley and JPMorgan, and the regulatory and political pressure that followed the aluminium warehousing controversy and the questions about bank ownership of physical assets.

The book follows individuals, including Blythe Masters at JPMorgan and traders at hedge funds and merchant houses, and covers the Glencore initial public offering and the Xstrata merger. It is journalism rather than analysis of commodity market structure, and readers wanting the economics should go elsewhere. Its value is the description of how physical trading firms convert logistics into information and how that differs from financial speculation, which most commentary on commodity markets conflates.