What is a man's legacy?

Reuters

Commentary

Many have been made wealthy in the past, as a result of information gap, when the environment changed. Some took the opportunity to create monopolies, such as the Robber Barons of the 19th century. Others took the opportunities to create lasting legacies, such as the many foundations that fund scientific and humanitarian causes. Speculation in financial derivatives can created a lot of wealth for some. George Soros is begining to follow the footstep of Warren Buffet, to return the wealth in the service of fellow humanity. The minor luminary in oil speculation is taking his money, and keeping it in his art collection in a German castle.

Unfortunately, you can't take it with you after leaving behind higher gasoline prices and depleted financial strength in the economy. Speculation in financial derivatives requires independent regulation for the very reason that so much wealth can be skimmed from the top of mutual funds and other institutional investment vehicles. Without safeguards, the information gap can be exploited by the greedy to the detriment of the public good. Regulation acts as a damping element to keep the highs and lows from swinging out of control. The only people who resists regulation are those who profit from the wild rides.

Excerpts

An oil trader who has rocked Wall Street and the White House over his nine-figure salary clings to a low profile, quietly making trades from a former dairy farm in Connecticut and emerging occasionally to satisfy his passion for art.

Andrew Hall, 58, a British-born naturalized American, has been phenomenally successful with the Citigroup (C.N) unit Phibro, earning an estimated $100 million this year while the parent company reported a net loss of $18.7 billion in 2008 and took $45 billion in taxpayer bailouts.

In the previous five years, Hall earned more than $250 million, according to a Wall Street Journal analysis of securities filings and Hall's compensation structure.

That has allowed him to acquire a fabulous art collection including his favorites among the German neoexpressionists and the American Andy Warhol, and he displays his art in his 1,000-year-old castle in Germany.

But his pay packets also have grabbed the attention of Kenneth Feinberg, the White House pay czar who is examining the compensation of the top earners at financial companies that accepted government bailouts.

A source close to the bank told Reuters on Wednesday that Hall's contract will be exempt from review because it was signed before a cut-off date of February 11, 2009. But a separate source familiar with the matter said Feinberg will have flexibility in applying his authority on a case-by-case basis.

To avoid a confrontation, Hall has proposed modifications to his contract, which could include converting some of his cash compensation into equity, the Journal reported on Thursday. Hall declined to be interviewed for this article.

"Andy Hall has had a genius for seeing where the market will be a year or two years out and booking bets that have been inexpensive to put on and hugely profitable," said George Stein, managing director of Commodity Talent LLC, who has been in touch with people who have worked directly with Hall.

"He's done this several times in his career and has attracted a following among oil traders and investors," Stein said. "Other oil traders would love to have his track record."

One friend, an art dealer, said Hall remains grounded despite his wealth.

"He is one of the most humble people I know," said Leo Koenig, a New York gallery owner. "He doesn't cruise around in fancy cars, fly around the world in a private jet or lounge on his fancy yacht. He does appreciate a great work of art though and will pay what he needs to in order to get it."

Koenig called Hall a "headstrong collector" who meticulously researches a piece before buying it, often establishing a personal relationship with the artist.

"We both share an admiration of German neoexpressionism, but it's impossible to nail his tastes down to a specific genre," Koenig said, mentioning Georg Baselitz, Joerg Immendorff and Anselm Kiefer as among those in his collection.

BIG BET ON OIL

Back in 2003, when crude prices hovered around $30 per barrel, Hall foresaw demand from China and went long on oil, betting heavily on long-term futures and options that paid off when oil soared past $100 per barrel in 2008.

Through it all, he exercised the clout and independence that come with success, convincing Citi to increase its risk threshold to go longer on oil and fighting off Citi plans to integrate Phibro into its asset-management arm, the Journal reported.

Rachel Ziemba, lead energy analyst at RGE Monitor in New York, said Hall managed to predict the rally and also position himself for the inevitable retreat from close to $150 per barrel.

While it may seem obvious in hindsight that oil was underpriced in 2003, "There was very much this memory of what the '90s were like in terms of the oil markets," Ziemba said, referring to the depressed prices of that decade.

Phibro, then a huge commodities firm, acquired the investment bank Salomon Brothers in 1981, though the bank would gain control of the merged entity. Salomon was later acquired by Travelers Group which in turn was acquired by Citi.

The New York Times reported on August 2 that Hall was pushing for a "quiet divorce" between Phibro and Citi. In the meantime, Hall continues to trade at Phibro headquarters at a remodeled dairy farm in Westport, Connecticut, trying to stay out of the limelight.