Part II. The Tuna Trade

Big Tuna Fetches Record $396,000 in Tokyo

TOKYO (AP)—A giant bluefin tuna fetched a record 32.49 million yen, or nearly $396,000, in Tokyo on Wednesday, in the first auction of the year at the world’s largest wholesale fish market. The price for the 754-pound (342-kilogram) tuna beat the previous record set in 2001 when a 445-pound (202-kilogram) fish sold for 20.2 million yen, a spokesman for Tsukiji market said.

Due to several reasons outside the scope of this book, commodities have experienced dramatic growth since 2000. However, it does not take a doctorate in economics to see that a falling U.S. dollar, uncertainty in global economic policy, and increased demand from China and India play a significant role in the story of commodities. It is not the purpose of this book to provide conjecture on global economic events, but rather to highlight opportunities that seem to have very clear supply/demand imbalances. Whereas commodities such as gold, silver, and crude oil have gained wide acceptance in recent years from the general investing public through exchange traded funds (ETFs), exchange traded notes (ETNs), and a host of indices, these commodities have also become increasingly volatile due to the increase in market participants. This overcrowding has created divergence between fundamentals and price movement. One could argue that this increased volatility has also spurred the high-frequency, or black box, trading industry, which focuses more on capturing incremental price movements as opposed to taking long-term value positions.

Although I believe that high-frequency trading (HFT) is the future of the liquid financial markets, opportunities exist for sophisticated investors to make long-term value investments in the commodities markets without the assistance of an off-the-shelf ETF. Seafood, especially tuna, is one such investment.

Although price data for tuna is sparse, approaching the market from a conservative perspective and viewing other indicators for the broader seafood market should be sufficient to make the argument about tuna’s future pricing.

Part II discusses the tuna trade—specifically bluefin tuna, the Tsukiji fish market in Tokyo, and the demand for sushi.