BlackRock Inc., the world’s largest asset manager, is winding down a global macro hedge fund after losses and investor redemptions eroded assets. The reason for the liquidation: losses of 9.4% this year, cited by Bloomberg according to an October investor document, leading to the worst year for the asset manager since inception in 2003. The fund, which had $4.6 billion in assets just two years ago, has shrunk to less than $1 billion as of Nov. 1.
“As you know, the environment for global macro fundamentals-based trading continues to be challenging. That factor, combined with the lack of certainty over when a recovery will take hold, led us to conclude that the time was right to return capital to you.”
– Ben Bernanke To Join World’s Most Levered Hedge Fund: HFT Powerhouse Citadel (ZeroHedge, April 16, 2015):
Several years ago, Zero Hedge first, and to our knowledge only, reported that when it comes to unofficially executing trades in the equity market the NY Fed – through a slightly more than arms-length arrangement – does so using Chicago HFT powerhouse Citadel. In other words, while Citadel was instrumental in preserving the smooth, diagonal ramp in stocks since 2009 and igniting upward momentum just as everyone else stared to sell when the Markets Group of the NY Fed called, it was also paid handsomely: after all, nobody checks the Fed’s broker commission statement. In fact according to some, indirect Fed compensation to what is the world’s most leveraged hedge fund has been in the billions over the past decade.
Well, now it’s payback time, and as the NYT reported overnight, the Brookings Institution’s favorite blogger, former Fed Chairman Ben Bernanke, has joined none other than Citadel as an advisor. Continue reading »
– And The Worst Performing Strategy In 2014 Is… (ZeroHedge, May 25, 2014):
Hedge fund performance continues to be weak so far in 2014 and this week was no different as long/short funds found to their dismay that trading on rational thought and fundamental analysis was for losers. However, global macro strategies are doing the worst of all as carry trades unwind, sanctions create inflows, and geopolitical chaos creates nonsense from sense. The best performing hedge fund strategy… buying-the-most-shorted is beaten only by Bonds.. and in first place of all assets – Gold.
As Goldman explains… Continue reading »
– Making $400,000 Per Hour, The Best Paid Hedge Fund Manager In 2013 Was… (ZeroHedge, May 6, 2014):
When it comes to returns, 2013 will be best remembered as the fifth consecutive year in which the S&P 500, lead by Chief Risk Officer and Portfolio Manager Ben Bernanke (replaced by Janet Yellen in 2014 following a bumper 30%+ year), outperformed over 90% of all hedge funds, which as the recent beta blow up has shown, have virtually no original “alpha” ideas, and all merely piggyback on the same high beta “greater fool”, hedge fund hotel trades and/or lever on beta as much as their Prime Broker will allow them (in many cases quite a lot).
And yet, hedge fund investors were perfectly happy to keep handing over 20% of their upside and paying a 2% management fee when they could have generated the same returns for free by simply buying the SPY ETF.
According to a just released ranking by Institutional Investor magazine, The 25 top earners of 2013 raked in a total of $21.15 billion. That’s roughly 50 percent more than the 25 best-paid managers reaped in each of the previous two years. Four managers earned more than $1 billion, while a fifth just missed that distinction. To qualify for the list, a manager needed to have earned at least $300 million in 2013, or 50 percent more than the 2013 cutoff.
– White House Former Chief Of Staff Joins Hedge Fund Launched By Former JPM Prop Traders (ZeroHedge, April 24, 2014):
“The amount of experience he has is ridiculous,” says former JPM prop trader Galuti, adding “- in a positive way,” as he explains why former Clinton Commerce secretary (and Obama chief of staff) Bill Daley has joined the small Swiss-based hedge fund. The revolving door of favors continues as Daley, who The FT reports will be based in Chicago and oversee US expansion (as well as provide macroeconomic and political advice), joins an ever-growing number of former Obama administration officials to have taken jobs in the financial sector.
As The FT reports, Bill Daley, the former White House chief of staff, is to join the hedge fund Argentière Capital, which was founded last year by leaders of JPMorgan’s disbanded proprietary trading division.
Mr Daley, who was also Commerce Secretary under President Bill Clinton, joins a number of former Obama administration officials to have taken jobs in the financial sector.
He will be based in Chicago and help spearhead the fund’s US expansion, as well as provide macroeconomic and political advice.
– 16 Major Firms May Have Received Early Data From Thomson Reuters (Rolling Stone, Sep 5, 2013):
Readers may recall an ugly story that broke earlier this summer, when New York State Attorney General Eric Schneiderman rebuked the news/business information firm Thomson Reuters for selling access to key economic survey data two seconds early to high-frequency algorithmic traders. The story strongly suggested that some Thomson Reuters customers were using their two-second head start (an eternity in the modern world of computerized trading) to front-run the markets.
“The early release of market-moving survey data undermines fair play in the markets,” Schneiderman said, back in the second week of July. Thomson Reuters suspended the practice of selling two-second head starts after Schneiderman insisted upon a change. Still, the firm defiantly refused to declare the change permanent and insisted that it had the right to “legally distribute non-governmental data” to “fee-paying subscribers.”
It turns out that there’s more to the story.
– Stunning Volume On Gold & Silver Smash In Suspect Trading (King Wolrd News, June 20, 2013):
“And if you need to sell, why are you selling at the worst time of day? Why are you selling in Asian time, which is always the thinnest section of trading? Why don’t you wait for London and Chicago to take over?
And the answer is very obvious: These markets are clearly and blatantly being manipulated. The people doing it have clear price objectives. My guess is they want to see a print below $1,300 (on gold) before they are done. That will allow people (trading for the bullion banks) to make profits on their shorts.
– John Paulson Loses Over $300 Million On Friday’s Gold Tumble (ZeroHedge, April 13, 2013):
There were many casualties following Friday’s 4% gold rout, but none were hurt more than one-time hedge fund idol John Paulson, who according to estimates, lost more than $300 million of his own money in one day.
Per Bloomberg: “Paulson has roughly $9.5 billion invested across his hedge funds, of which about 85 percent is invested in gold share classes. Gold dropped 4.1 percent today, shaving about $328 million from his net worth on this bet alone.” This is merely the latest insult to what has otherwise been a 3 year-long injury for Paulson and his few remaining investors, whose very inappropriately named Advantage Plus is among the bottom 10 hedge funds for the third year in a row. Yet despite being a one-hit wonder thanks to one lucrative idea (long ABX CDS) generated by one of his former employees (Pelegrini), Paulson still has been lucky enough to somehow amass a $10 billion personal fortune which can have a $300 million downswing in one day, even if it is in an asset class which eventually will go only one way – up. Unless, of course, like so many other fly by night billionaires, Paulson too hasn’t somehow managed to lever up all his equity into numerous other downstream ventures, and where a $300 million blow up leads to margin calls and other terminal liquidity outcomes.
“The recent decline in gold prices has not changed our long-term thesis,” John Reade, a partner and gold strategist at Paulson & Co., said in an e-mailed statement. “We started investing in gold at $900 in April 2009 and while it’s down from its peak to $1500, it’s up considerably from our cost.”
In this interview with investor Kyle Bass from Day 1 at AmeriCatalyst 6th of November 2011, in Austin, Texas, Bass discloses his discussion about the economic crisis with a senior from the Obama Administration. According to Kyle Bass the basic solution coming from this senior was: “We’re Just Going to Kill the Dollar”.
Killing the US Dollar in this context means keep printing more US Dollars in order to weaken the dollar to make exports cheaper through inflation. Massive inflation might be the answer for the Obama Administration, but in the process your purchasing power will be destroyed. And because the US Dollar is the world’s reserve currency the eventual impact of inflation would have an impact that would reach far beyond those holding US Dollar assets.
Thousands of paper currencies has come and gone over the years and there is no question if the dollar, or the euro for that sake, will have its value go to zero; the question is when?
– Friday Farce: 16 Year Old Outperforms 99% Of Hedge Funds: “Oh My Gosh, That’s So Easy, I Have To Do This” (ZeroHedge, Feb 8, 2013):
Forget Ackman, Einhorn, Bass, And Hendry. There is only one name in the world of equity market performance in 2012 – Rachel Fox, of ‘Desperate Housewives’ fame. With a 30%-plus performance, the day-trading debutante has turned from actress to activist as she day-trades her way through the day. The 16-year-old actress who made 338 trades last year, based mostly on technicals, “”…fell in love with the idea and the concept of being able to just buy something, have it go up, or have it go down, depending on which way you bet it and have it make you money. I thought, oh, my, gosh, that’s amazing, and so easy, I have to do this.” If ever there was a sign of the extreme bubble that central planning has re-created for us – it has to be this. Her advice: “you have to really just trade on your own instincts and not just be like, oh, this person says this is great, let me just go for it.” LOL, OMG, IKR ;-( Our advice: next time readers are discussing stock tips with a random employee of Hustler Club, Scores or Spearmint Rhino – don’t just stare, listen! Said ‘random employee’ is almost certainly outpeforming the “smart money”, and the broader market, by a wide margin. Thank you Ben.
– Goldman Sachs And The Big Hedge Funds Are Pushing Leverage To Ridiculous Extremes (Economic Collapse, Jan 14, 2013):
As stocks have risen in recent years, the big hedge funds and the “too big to fail” banks have used borrowed money to make absolutely enormous profits. But when you use debt to potentially multiply your profits, you also create the possibility that your losses will be multiplied if the markets turn against you. When the next stock market crash happens, and the gigantic pyramid of risk, debt and leverage on Wall Street comes tumbling down, will highly leveraged banks such as Goldman Sachs ask the federal government to bail them out? The use of leverage is one of the greatest threats to our financial system, and yet most Americans do not even really understand what it is. The following is a basic definition of leverage from Investopedia: “The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.” Leverage allows firms to make much larger bets in the financial markets than they otherwise would be able to, and at this point Goldman Sachs and the big hedge funds are pushing leverage to ridiculous extremes. When the financial markets go up and they win on those bets, they can win very big. For example, revenues at Goldman Sachs increased by about 30 percent in 2012 and Goldman stock has soared by more than 40 percent over the past 12 months. Those are eye-popping numbers. But leverage is a double-edged sword. When the markets turn, Goldman Sachs and many of these large hedge funds could be facing astronomical losses.
Sadly, it appears that Wall Street did not learn any lessons from the financial crisis of 2008. Hedge funds have ramped up leverage to levels not seen since before the last stock market crash. The following comes from a recent Bloomberg article entitled “Hedge-Fund Leverage Rises to Most Since 2004 in New Year“… Continue reading »
– 88% Of Hedge Funds, 65% Of Mutual Funds Underperform Market In 2012 (ZeroHedge, Jan 5, 2013)
– Paying 2 And 20 For What Again? Hedge Funds Underperform Stocks For Third Year Running (ZeroHedge, Dec 13, 2012)
– Greek Government Bonds Jump 12% As Buyback Means Early Christmas For Hedge Funds (ZeroHedge, Dec 3, 2012):
Greek Government Bonds (GGBs) jumped by over 12% today to over EUR40 – by far the highest post-PSI – as fast money floods the limited size illquid market to front-run the Greek buyback. Every day that goes by means less and less benefit for the Greek people as the discounted price of buying back the debt – with all of the money that Greece doesn’t have, goes up. This is a perfect example of greater-fool-theory at work as everyone knows that if this price gets too high, the Greek government (via Troika) will (should) reneg on the buyback which will cause GGB prices to plunge back towards zero. What many misunderstand is that the buyback crystalizes the losses for banks that currently carry this worthless paper on their books at Par and garner the carry (and accruals) and thus in true European fashion, the unintended consequence of this action lines the pockets of fast-money hedge funds along for the short-ride and drains any pretense of capital from the Greek banking system.
– Kyle Bass: Fallacies Such As MMT Are “Leading The Sheep To Slaughter” And “We Believe War Is Inevitable” (ZeroHedge, Nov 17, 2012):
Below are some of the key highlights from Kyle Bass’ latest, and as usual, must read letter:
On central banks and the final round of global monetary debasement:
Central bankers are feverishly attempting to create their own new world: a utopia in which debts are never restructured, and there are no consequences for fiscal profligacy, i.e. no atonement for prior sins. They have created Potemkin villages on a Jurassic scale. The sum total of the volatility they are attempting to suppress will be less than the eventual volatility encountered when their schemes stop working. Most refer to comments like this as heresy against the orthodoxy of economic thought. We have a hard time understanding how the current situation ends any way other than a massive loss of wealth and purchasing power through default, inflation or both. Continue reading »
Tags: Barack Obama, Ben Bernanke, Bonds, Collapse, Debt, Dollar, Economy, EFSF, ESM, EU, Europe, Fed, Federal Reserve, Global News, Government, Hedge Funds, Japan, Keynesianism, Kyle Bass, Obama administration, OMT, Politics, Quantitative Easing, Society, U.S., War
As far as precious metals go, you need to:
- Own actual Bullion
- Store it yourself (not in a bank)
Only physical gold is real. Do NOT own soon-to-be worthless paper!
– Hugh Hendry: “I Have No Idea Where The Stock Market Is Going To Be”… But “I Am Long Gold And Short The S&P” (ZeroHedge, Oct 25, 2012):
One of the best presentations at this year’s Economist Buttonwood gathering (which is still being live-streamed here), was, as usually happens, Hugh Hendry. The contrarian Scotsman, who describes his style as one where he “positions ourselves outside the accepted belief system”, managed to say in 15 minutes what takes most pundits hours, and that’s without the appendices, charts, long-winded essays, and graphs. Because when it comes to conveying ideas, simplicity always wins, and few are as good at speaking in simple, logical terms, as Hugh Hendry. Continue reading »
Tags: Barack Obama, Bonds, China, Debt, Dollar, Economy, EU, Europe, Fed, Federal Reserve, Germany, Global News, Gold, Hedge Funds, Hugh Hendry, Hyperinflation, Inflation, Obama administration, Politics, S&P 500, Society, Stock Market, U.S., Wall Street
– Apple Disappoints (ZeroHedge, Oct 25, 2012):
And so the behemoth misses… again:
- APPLE 4Q EPS $8.67, EST. $8.75 – miss
- APPLE 4Q SALES $36.0B – slight beat
- APPLE SOLD 14.0 MILLION IPADS DURING QTR, UNIT EST. 15.3M
But the uglyness is in the forecast. And this time it is not a low-ball:
- APPLE SEES 1Q EEPS $11.75, , EST. $15.49
- APPLE SEES 1Q REV. ABOUT $52B, EST. $55.07B
Stock halted so keep an eye on the QQQ as a proxy – QQQs imply AAPL $590 here (200DMA is $587)… AAPL will resume trading at 4:50ET
– 230 Hedge Funds Suddenly Cried Out In Terror And Were Suddenly Silenced (ZeroHedge, Oct 25, 2012):
A week after the second most populous hedge fund hotel, Google, blew up, it is now time for good ole’ Hotel Caaplefornia itself. The HF holders table below is presented without comment (as we have said all there is to say many times). Remember: orderly, cool, calm, collected single file procession through the tight exit: and nobody panic!
– Kyle Bass On The Federal Budget: “I Don’t Know How To Fix This” (ZeroHedge, Oct 3, 2012):
Hayman Capital’s Kyle Bass is back and cutting through the caustic bullshit that surrounds every waking moment in this kick-the-can world. Dispelling the myth of our ‘deleveraging’ virtue, with global debt having grown from $80tn to over $200tn in the last ten years alone (a 10.7% CAGR) and the frightening reality of central bank balance sheet growth of 16% per annum, Bass concludes (rightly) that “you can’t do this for very long” as governments infinitely leverage and central banks have begun the endgame of open-ended money-printing. Addressing the question of timing, Bass notes that while Europe and Japan are ‘perceived’ to be ‘staying together’ there are in fact devastating losses occurring (ask Greek bond-holders) and he firmly believes that “Germany will never go joint-and-several with the rest of Europe.” The world sits at a place it has never been before in peace-time – as far as global debt balances and deficits – and that is why the global investing playbook is so hard. He goes on to address the US fiscal debacle, Japan, hyper-levered economies, delayed inflationary outcomes, and worries that the cost-push (lower GDP, higher CPI) prints are just beginning in Europe.
As a fiduciary, and something all investors should consider – “Given what we see coming, our job is not to lose money!”
On Fiscal Cliff: Won’t happen – politicians won’t fix anything.
On the CBO Budget crisis: As a non-partisan third-party ‘accountant’, “I can’t fix it!”
On Inflation: “It takes time – but it’s coming”
On Housing – he doesn’t believe housing will go up but has stabilized. “Everyone who ever thought of buying a house, has bought a house” and we need to flush the inventory – which wil take a few years.
On Trading The End of the World: Use Convexity – which is grossly concentrated in Japan
Own anything that is nailed down – productive assets!
YouTube Added: 17.09.2012
Tags: 1984, Banking, Barack Obama, Big Brother, Bitcoin, Bonds, Bubble, Collapse, Debt, Dictatorship, Economy, EU, Europe, Fascism, Fed, Federal Reserve, Fluor, Fluoridation, Fluoride, George Orwell, Global News, Gold, Government, Hedge Funds, High Frequency Trading, Iran, Israel, Libor, Max Keiser, Middle Class, New World Order, Obama administration, Police State, Politics, Quantitative Easing, Society, Stock Market, U.S., Unemployment, Vaccination, Vaccine, Wall Street, War
– Friday Funny: Sino Forest Seeks $4 Billion From Muddy Waters In Damages… As It Files For Bankruptcy (ZeroHedge, Mar 30, 2012):
Actually, in retrospect this may well be the funniest pair of headlines in one place ever.
- SINO-FOREST TO FILE FOR BANKRUPTCY, MAY SEEK SALE OF COMPANY
- SINO FOREST SEEKING $4B IN DAMAGES AGAINST MUDDY WATERS
Uh? What? #Ref! #Ref! #Ref! We wonder: if Sino Forest files for bankruptcy in its forest of imaginary trees, did it really file for bankruptcy.
In other news, how many of the following analysts who had a buy on the stock as of the day the Muddy Waters report saved countless other investors the 100% certainty of a full wipe out by putting their money in Sino Forest, have been terminated.
The Following Sino Forest Sell-Side Analysts Should Be Terminated Immediately
As we pointed out the day after we broke the news that Paulson is about to suffer a historic loss on the Sino Forest Chinese fraud (a loss that has now been realized), the Paulson analyst who suggested this humiliating investment for the man who is now best known for hiring Paolo Pellegrini, have long since seen the pink slip. The story however does not end there: below we present again the sell side analysts who had Buy and Outperform ratings on what is now the biggest financial ponzi fraud since Madoff. In order to protect the reputation of such host firms as Raymond James, Dundee Securities, TD Newcrest, Credit Suisse, RBC, BMO and Scotia Capital, we urge the management teams to immediately terminate the following sell-side “analysts” whose work on TRE.TO was nothing but piggybacking on groupthink, doing absolutely no actual due diligence, costing clients billions in losses, and whose names will now forever be enshrined in the pantheon of “most worthless sellside analysts” ever. Continue reading »
– Founder Of $30 Billion Hedge Fund BlueCrest Says Most Euro Banks Are Insolvent; Euro Situation Much “Worse Than 2008” (ZeroHedge, Dec. 16, 2011):
The Founder of one of the world’s largest asset managers, the $30 billion hedge fund BlueCrest, Michael Platt, spoke to Bloomberg TV and cut right to the chase, saying most of the banks in Europe are insolvent and the situation in the region is “completely unstable.” On how he approaches market risk: “”I do not take any exposure to banks at all if I can avoid it. All the money at BlueCrest Capital Management is in Two-Year U.S. government debt, Two-Year German debt, we have segregated accounts with all of our counterparties. We are absolutely concerned about the credit quality of the counterparties.” On investing in illiquid assets, Platt said he “would not touch them with a barge pole” and that “the major opportunities will come post-blowout.” Something tells us Russia and China know this all too well, and realize that the best time to “invest” in Europe is after the single (or multiple) bankruptcy. Which incidentally, as Kyle Bass said yesterday, after the “blowout” is when the ECB will finally step in as well, at which point the entire world will go all in on that now infamous 2-7 offsuit. And his view on how that bluff will end: ‘In my opinion, what’s going on now is significantly worse than 2008.“
Platt on Europe’s sovereign debt crisis:
– Of Imminent Defaults And Self Deception. Kyle Bass Prepares For The Worst (ZeroHedge, Nov. 30, 2011):
In his latest letter to LPs, Kyle Bass of Hayman Capital Management, offers his tell-tale clarity on what may lie ahead for Europe and Japan. With his over-arching thesis of debt saturation becoming more plain to see around every corner, Bass bundles the simple (and somewhat unarguable) facts of quantitative analysis with a qualitative perspective on the cruel self-deception that we all see and read every day about Europe.
Whether it is Kahneman’s “availability heuristic” (wherein participants assess the probability of an event based on whether relevant examples are cognitively “available”), the Pavlovian pro-cyclicality of thought, or the extraordinary delusions of groupthink, investors in today’s sovereign debt markets can’t seem to envision the consequences of a default.
His Japanese scenario is no less convicted, as we have discussed a number of times, with the accelerant of this debt-bomb being the very-same European debacle and his time-frame for this is set to begin in the next few months.
So what is George Soros up to?
Remember that George Soros told the world that gold is a bubble and afterwards invested heavily in gold?
Prepare for collapse! Got gold and silver?
– George Soros Scales Back: He’s Done This Before (Wall Street Journal, July 26, 2011):
As billionaire financier George Soros decides to close his $25 billion hedge fund to outside investors, it may be unwise to think Soros is out of the game for good.
You see, Soros has retrenched from high-stakes investing before — only to make a roaring comeback.
– Hedge Funds Seek a Slice of Japan’s $740 Billion Pension Funds After Quake (Bloomberg, June 28, 2011):
Global hedge funds are vying for allocations from Japan’s corporate pension fund managers, who oversee about $740 billion and are seeking alternatives to stocks following the March earthquake.
Prosperity Capital Management, the largest manager of Russia-focused funds with about $5 billion in assets, plans to open an office in Tokyo in August. Van Biema Value Partners LLC, a New York-based fund of hedge funds with about $800 million in assets, is targeting Japanese pensions by offering funds that buy securities seen as inexpensive relative to the market.
Japanese pension funds are redoubling their quest to offset the world’s lowest bond yield and a falling birthrate, which have curbed contributions, after the March 11 temblor sent the benchmark Nikkei 225 (NKY) Stock Average to its biggest intraday drop since 1987. Thirty-one percent of 135 retirement funds plan to increase alternative investments such as hedge funds from this fiscal year starting April 1, according to a JPMorgan Asset Management (Japan) Ltd. survey in May.
“After the earthquake, there has been strong emphasis on gaining exposure to investments outside Japan, both for pure diversification reasons and to try to achieve higher returns,” said Michael van Biema, a former Columbia Business School professor and the founder of van Biema Value Partners. “The big problem is that most of the large pensions still have about 60 percent of their money in Japanese government bonds. You just can’t earn a reasonable rate of return doing that.” Continue reading »
Here is how those guys ‘bet’:
John Paulson is heavily invested in GOLD!
NEW YORK (By Matthew Goldstein) – The richest 25 hedge fund managers made a bit less money last year.
But don’t cry too hard. Collectively, this privileged class of traders did quite well for itself — raking in some $22 billion in compensation, according to AR Magazine.
Topping the charts in hedge fund pay was John Paulson, who reportedly earned $4.9 billion. Paulson’s name at the top of the “rich list” isn’t too surprising, given that his $36 billion Paulson & Co has emerged as one of the industry’s top performing funds.
AR reports that Paulson’s 2010 earnings even bested the $3.7 billion he made in 2007, when he rocketed to hedge fund fame with his enormously successful wager on the housing market’s collapse.
Other top earning managers were: Bridgewater Associates’ Ray Dalio with $3.1 billion, Renaissance Technologies’ Jim Simons with $2.5 billion, Appaloosa Management’s David Tepper with $2.2 billion and SAC Capital Advisors’ Steve Cohen with $1.3 billion.
Overall, the hedge fund trade publication reports that compensation for the top 25 managers declined by 13 percent from 2009. But 2010 still came in as the third best year for hedge fund pay since AR began estimating industry compensation in 2001.