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Meet The Man Behind The Liquidating Hedge Fund That Blew Up The Gold Market

Tyler Durden's picture





 

Over the past several weeks there had been rumors that the reason for the precipitous drop in gold was primarily driven by a hedge fund liquidating its futures positions. This has now been confirmed: "Yeah, that was just me liquidating my spread position," Mr. Daniel Shak, [of SHK Asset Management] 51
years old, said in an interview. "I had a significant, fully margined
position. The dollar amount of the gold liquidation was very small, it
was just a lot of contracts." Of course in the extremely jittery gold market, the kind of persistent marginal gross selling of contracts was all that was needed to spook weak hands into a consistent dump of the precious metal, which as we pointed out was beyond overdone. Judging by this morning's jump in the PM complex, SHK's liquidation is now not only over but about to promptly reverse as daytrading momos realize they were duped by one single guy. Look for gold to resume its upward advance as investors realize that the gold dump was nothing more than an ongoing futures position liquidation.

More from the WSJ:

A huge trade by a tiny hedge fund has sent shudders through the gold market.

Thanks to the nature of futures trading, Daniel Shak's $10 million hedge fund held gold contracts valued at more than $850 million, more than 10% of the main U.S. futures market, and the equivalent of South Africa's annual gold production.

But as gold prices started falling this year, the trade, which was a combination of being long and short gold contracts—bets that prices will both rise and fall—started going bad. Monday, he liquidated his position, and is returning money to clients.

As a result, the number of gold contracts on CME Group Inc.'s Comex division plunged more than 81,000, to about 500,000, the biggest single reduction ever. While his trade didn't account for all of the contracts, an average daily move is about 3,000 to 5,000 contracts.

That Mr. Shak and his firm, SHK Asset Management, could control one of the largest positions in the gold market underscores how leverage can enable investors to control huge positions in many commodity markets.

We wonder how authors Carloyn Cui and Greg Zuckerman would feel if they knew just how big JPM's positions are. On the other hand, there is nothing to worry about: after all the corrupt muppets at the CFTC have just made sure that Jamie Dimon's criminal syndicate will be allowed to toy with the gold market at will in perpetuity.

As for SHK Asset Management, RIP:

Mr. Shak said he quit the trade when he was 70% down. People close to the firm confirmed the loss was about $7 million.

Just over a week ago, he put his apartment on Manhattan's Fifth
Avenue up for sale with a price tag of $7.5 million. He said the sale
wasn't related to his losses.

And as we prdicted previously, the weak hands in gold's recentless surge saw this one-off liquidation event as something far more profound, and translated the sell off as a fundamental weakness in gold, despite attempts to disabuse them of this lunacy.

While the drop in contracts didn't appear to hurt gold prices, it caused
some panic in the market. Brokers said they fielded calls from clients
worried that a big trader may be dumping holdings. Monday, gold futures
rose slightly to $1,344.50 a troy ounce and settled at $1,318.40
Thursday. The front-month contract is down 7.3% from its record close on
Jan. 3.

And some more on the gold trade gone horribly wrong:

Mr. Shak's positions were extended as far as December 2015, according to exchange data.

"He just had too much position on," said a person who is familiar with his trades. "He didn't think he was flying naked the whole way."

A CME spokesman said he couldn't comment on specific trades.

Mr. Shak said the trade had been profitable for him for years, but it stopped working and the exchange kept raising his margin requirements, forcing him to put up more money. Mr. Shak said that when the exchange raised it by 25% Monday, he decided to cut his losses and end the trade.

Some Wall Street banks and gold producers were on the other side of the trade, according to people close to the matter.

"It was David against Goliath," Mr. Shak said, referring to his position in the market in relation to banks and the commodity exchange. "I just decided to get out; down 70% is better than down 100%."

He had worked as a floor trader at Comex for years before he set up his own fund in 2002. The firm suffered losses of about 12% in 2008, before rising 20% in 2009 and 100% last year, Mr. Shak said.

Mr. Shak, who lives in Las Vegas and also owns a home in the Hamptons on New York's Long Island, also is a competitive poker player and says he has won more than $2 million, including a $1 million win at the Aussie Millions in Melbourne, Australia, last year.

Mr. Shak said his decision to close his position wasn't related to the faulty trade, but rather was a "lifestyle decision."

"I just chose to close, I didn't like my positions so I chose to liquidate, I wasn't forced," he said. "I was in the process of closing anyway."

Mr. Shak said he will return to trading in a few weeks, though perhaps not manage money for others.

"This is not career ending," he said. "I'm not stopping trading."

Oh yes you are.

Bottom line, M2 just surged by the highest amount ever, Bernake will never stop monetizing, and fiat is contiuing the race to the bottom. Most importantly for those with a trigger finger response time, the liquidation is now over. Keep a close eye out on the price of gold.

Note below what happens when a key selling catalyst is removed... or at least made apparent.

 


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Fri, 01/28/2011 - 11:34 | Link to Comment DonnieD
DonnieD's picture

Is that Don Cheadle?

Fri, 01/28/2011 - 11:39 | Link to Comment Warrior 25 Million
Warrior 25 Million's picture

looks like it to me

Fri, 01/28/2011 - 11:41 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Cute wife/girl friend.  I bet she kept some physical position.

Fri, 01/28/2011 - 12:02 | Link to Comment dark pools of soros
dark pools of soros's picture

and she probably liquidates often....

Fri, 01/28/2011 - 12:10 | Link to Comment OnTheFelt
OnTheFelt's picture

That's not his girlfriend....that's Annie Duke.  She is a professional poker player.  That picture was taken at the Aussie Millions poker tournament.

BTW - Annie Duke was was just recently exposed to be involved in a massive insider cheating scheme with Poker Stars.

Fri, 01/28/2011 - 12:13 | Link to Comment KidDynamite
KidDynamite's picture

I think you mean UltimateBet, not PokerStars, right?

 

Shak's wife  (perhaps Ex-wife, actually, I think) is Beth Shak  - she's google-able I'm sure.

Fri, 01/28/2011 - 14:06 | Link to Comment OnTheFelt
OnTheFelt's picture

Yeah you're right, Ultimate Bet, my bad

Fri, 01/28/2011 - 11:50 | Link to Comment Dismal Scientist
Dismal Scientist's picture

Yep. Thats what happens when you star in a sequel, rather than the original. Iron Man 2 was a mistake...

Fri, 01/28/2011 - 12:10 | Link to Comment Pladizow
Pladizow's picture

Year      Month of Gold low

2001         March/April

2002        Jan

2003       April

2004       May

2005       Feb

2006       March

2007       Jan

2008       Nov

2009       Jan

2010     Feb

 

So 9 out of the last 10 years gold hits its low by May.

And 7 out of the last 10 years it hits its low in the first quarter.

IGNORE THE NOISE!

Fri, 01/28/2011 - 12:01 | Link to Comment Fish Gone Bad
Fish Gone Bad's picture

Straight out of Hotel Rwanda.

Fri, 01/28/2011 - 21:57 | Link to Comment Pegasus Muse
Pegasus Muse's picture

Reading Adrian Douglas' comments over at LeMet tonight.  He believes this story concocted by WSJ is BS.

==============

Everyone is happily touting this story to explain the 81,000 OI (Open Interest) cratering on Monday which was the biggest one day drop of OI in history. http://www.gata.org/node/9540 . NOT SO FAST. This is baloney in my opinion.

The last COT (Commitment of Traders) report shows total spreads in managed money were 63,507 contracts. This "Shak" dude is a money manager so how did he liquidate 81,000 contracts? The total reported spreads were 103,947…are we meant to believe that this one dufus from Las Vegas had 80% of all spread contracts!!??

The WSJ article just stinks. For example people don't say things like "Yeah, that was just me liquidating my spread position," Mr. Shak, 51, said in an interview. In the article it says he was down 70% but quotes him as follows: "I just chose to close, I didn't like my positions so I chose to liquidate, I wasn't forced. I was in the process of closing anyway."...You have to be kidding me!...70% down "he didn’t like his positions"!! That’s just the sort of thing an average Joe will say!

The Commodity Exchange Act provides anonymity for traders …we are still waiting for the investigation from 2008 in what happened in silver and who did what yet WSJ in a matter of days gets the name and all the trading info about the "Shak Attack". This is an early April Fool’s spoof and very conveniently put out to kill everyone’s curiosity…move along nothing to see here just one guy liquidating 81,000 spread contracts!

Let’s hear it for the CFTC and the gold cartel and Obama’s goal of more transparency!

Cheers
Adrian

Fri, 01/28/2011 - 11:34 | Link to Comment youngman
youngman's picture

What is scary to me is...here is a 10 million dollar fund...having a 850 million position in futures.....wow if something happens...could he cover....

Fri, 01/28/2011 - 11:39 | Link to Comment HamyWanger
HamyWanger's picture

Are you suggesting we should forbid this kind of leverage???

The cost to the global economy would be astronomical.

Levies are healthy and useful for the global economy and jobs creation.

Read Dr. Keynes or Dr. Krugman on this subject.

Fri, 01/28/2011 - 11:43 | Link to Comment H. Perowne
H. Perowne's picture

Almost got me, Hamy. Well played. The answer is print moar . . . what was the question again?

Fri, 01/28/2011 - 12:26 | Link to Comment SheepDog-One
SheepDog-One's picture

Print more, as each new bundle of worthless FRN's means another country falls into riots and escaped leaders. Party on, Ben!

Fri, 01/28/2011 - 11:45 | Link to Comment lizzy36
lizzy36's picture

Why no Harry, lets encourage this kind of leverage.

One $10m fund controlling 12% of the gold market. Yeah, that is going to end well.

See 2008 when the banks were levered on average 40x-50x. What the hell could go wrong indeed?

Fri, 01/28/2011 - 12:05 | Link to Comment dark pools of soros
dark pools of soros's picture

yeah but it is all backed by 300 million future taxpayer payments..  that's some serious reserve

Fri, 01/28/2011 - 12:10 | Link to Comment JW n FL
JW n FL's picture

+++++++++++++++++++++++++++++++++++++++++++++++++

Fri, 01/28/2011 - 16:27 | Link to Comment i.knoknot
i.knoknot's picture

yup, and i'm *certainly* teaching my kids how to bend-over and passively take it.

aren't you guys?

Mon, 04/11/2011 - 17:04 | Link to Comment Manthong
Manthong's picture

you mean 300 million future chop suey chefs.

Fri, 01/28/2011 - 12:50 | Link to Comment Freddie
Freddie's picture

+1

Fri, 01/28/2011 - 11:46 | Link to Comment Sean7k
Sean7k's picture

Leverage is a two edged sword: too little and price discovery is hampered, too much and markets can collapse on expectations and sell-offs.

When you referred to Dr. Keynes and Dr. Krugman, you forgot Dr. Pepper- they're a matching set.

Fri, 01/28/2011 - 12:07 | Link to Comment firstdivision
firstdivision's picture

I would actually equate it to a single ended dildo.  You're either getting screwed, or doing the screwing.

Fri, 01/28/2011 - 13:47 | Link to Comment Canuckistan Al
Canuckistan Al's picture

More like Dr. Suess if you ask me.

Fri, 01/28/2011 - 16:32 | Link to Comment i.knoknot
i.knoknot's picture

you injure the good name of dr suess. i challenge you to a duel.

seriously, dr seuss will likely go down as one of the more prescient writers/communicators of our era.

  horton hears a who
  star-bellied sneeches
  lorax
  etc.

if only the above-mentioned drs had a tenth of his sense.

Fri, 01/28/2011 - 12:53 | Link to Comment Common_Cents22
Common_Cents22's picture

30-40-150x leverage should only be left up to the pro's, like those phd's at JP, GS, LTCM etc...

Fri, 01/28/2011 - 14:10 | Link to Comment shortus cynicus
shortus cynicus's picture

Just one explanation for new users.

Question: Dr. Wanger's answer was very, very, very funny, but notwithstanding got junked to death, why?

Answer: because he meant it seriously. We know, he or hes new reincarnation, doesn't understand his own jokes.

Fri, 01/28/2011 - 11:42 | Link to Comment gold mining ceo...
gold mining ceos are idiots's picture

It was a calendar spread. His position was not large net. He was probably short front, long back.

Fri, 01/28/2011 - 11:43 | Link to Comment gold mining ceo...
gold mining ceos are idiots's picture

It was a calendar spread. His position was not large net. He was probably short front, long back.

Fri, 01/28/2011 - 11:59 | Link to Comment Ratscam
Ratscam's picture

any idea how an 85x leverage is possible with a 6% margin rate?

Fri, 01/28/2011 - 12:16 | Link to Comment BearOfNH
BearOfNH's picture

Spread margins are frequently lower than net position margins.

 

Fri, 01/28/2011 - 12:26 | Link to Comment Ratscam
Ratscam's picture

trade example please

Fri, 01/28/2011 - 13:26 | Link to Comment BearOfNH
BearOfNH's picture

If you snoop around the CMEgroup website you'll see their exchange minimum 100 oz. gold contract has a $6700 initial margin, while a long-dated gold spread (say, 4/11 to 12/13) has a $338 initial margin.

So you can go long or short one GCJ1 by putting up maybe $7500. Or you can trade the GCJ1/GCZ3 spread for perhaps $400.

Your broker can demand more than exchange minimum and most do. But if they go apeshit on their customers, their customers will go elsewhere.

(The same is true of exchanges, as well. Hence regardless of what US laws you quote or wish for, the truth is that margins are ultimately set by the free market.)

Fri, 01/28/2011 - 12:20 | Link to Comment emsolý
emsolý's picture

borrowed funds in addition to the fund's capital and then use that as margin

edit: now that i see the response above, with lower margin requirement on spread bets,  i guess that answer is more plausible (but does not invalidate mine)

Fri, 01/28/2011 - 13:06 | Link to Comment Math Man
Math Man's picture

Left out of the Zerohedge article:  (from the WSJ article)

What Mr. Shak took on was a "spread trade," in which he was long and short gold contracts of various maturities.

It isn't an outright bet on gold prices, but rather on the degree of movement among different contracts. The fact that the sale came from a spread trader, rather than a gold holder, could put some investors' minds at ease.

The spread trade is irrelevant.  He was long AND short.

The REAL liquation has been coming from the ETFs.

Holdings at GLD have declined to levels not seen since last June.

54 tons out of GLD alone.  THIS MONTH.

That is 15% of all the gold bought by all the ETFs COMBINED last year.

Gold longs are lucky there is unrest in Egypt.

It's the only thing that can mop up the excess ETF supply.

 

Fri, 01/28/2011 - 13:25 | Link to Comment HoofHearted
HoofHearted's picture

Bullshit. People sold when they saw massive selling from one guy. This led to prices dropping, people getting nervous that it might be done for gold. People got out of their paper, the ETFs. Seems like a wall of worry to me....

Fri, 01/28/2011 - 16:51 | Link to Comment i.knoknot
i.knoknot's picture

it feels a little bit like the 'fat finger' excuse on that last flash-crash. i guess we've gotta have a reason, and 'there it is'...

hmmm. *both* long and short and losing 7 million? not very symmetrical, eh? i think he picked a team, even with his hedges. wrong team...

FWIW, if you read the GLD prospectus, you can pretty safely assume that there is no real gold at GLD, so the question becomes more along the lines of:

  why are they creating the appearance that they are dumping
  the (non-existent) metal, unless there's a big effort going on
  to tease the analysts and tank the market.

these numbers are merely a part of the game. "escher finance" (constant back-revision) is the other biggie.

GLD/SLV etc are brilliant mechanisms created for no other reason than to defer real demand with paper promises. pure counterfeit. and now there's a platinum ETF. surprised? take delivery, friends. take delivery.

BTW, your point about egypt's serendipitous timing is spot on.

as per lizzie, i also find it unsettling that a leveraged $10mm fund can knock the gold market that hard. imagine of a day's worth of the FED printing were worked in the same manner...

crazy!

Fri, 01/28/2011 - 13:08 | Link to Comment knukles
knukles's picture

"The dollar amount of the gold liquidation was very small, it was just a lot of contracts."

LOL

Fri, 01/28/2011 - 15:43 | Link to Comment mogul rider
mogul rider's picture

I'd like to personally thank this idiot, I got the Precious cheaper, much cheaper. Who is the next idiot to step up?

C'mon shitheads leverage it , leverage it. c'mon!!!!

Brang it on!!!!

Jesus - there can't be a global conspiracy to rule over us, these shitheads are too stupid

Fri, 01/28/2011 - 16:54 | Link to Comment i.knoknot
i.knoknot's picture

re: the shitheads...

they've got tenacity (and congress :^). impressive bastards.

Fri, 01/28/2011 - 11:35 | Link to Comment lsbumblebee
lsbumblebee's picture

Greg. Any relation to Mort? Gotta be.

Fri, 01/28/2011 - 11:37 | Link to Comment bernorange
bernorange's picture

Political instability spreading in the middle east... bullish for PMs?

Fri, 01/28/2011 - 11:46 | Link to Comment william the bastard
william the bastard's picture

Is Paulson trapped? HeHe

Fri, 01/28/2011 - 12:54 | Link to Comment Common_Cents22
Common_Cents22's picture

yeah, trapped with his $5billion return in 2010.

Fri, 01/28/2011 - 11:41 | Link to Comment gold mining ceo...
gold mining ceos are idiots's picture

So let's say he was 70k of the liquidation. What does that do to the over owned theory?

This one clown controlled 12% of the open interest?

That strike anyone as odd? 

Fri, 01/28/2011 - 11:44 | Link to Comment NOTW777
NOTW777's picture

not believable. part of the story is missing.

remember blame waddell and reed

Fri, 01/28/2011 - 12:17 | Link to Comment Ratscam
Ratscam's picture

sounds fishy. Any 1% down move would have caused a margin call.

Strange.

Fri, 01/28/2011 - 16:35 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

I call complete BS on the story.  Some two-bit gambler in the corner of the globe can crash the gold market?  I think that someone out there would like PM investors to believe that the gold market is that unstable.  BS.

Fri, 01/28/2011 - 11:43 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Crazy. 10 Mil and such an impact. 

Only in these times.

 

ORI

http://aadivaahan.wordpress.com/2011/01/26/a-ha-ahahaha/

Fri, 01/28/2011 - 11:44 | Link to Comment slow_roast
slow_roast's picture

This is the most interesting ZH article I've seen in a long time...and that says a lot because they're all amazing.  I can't believe the leverage allowed by suh a small firm.  Did the markets learn nothing from LTCM?

Fri, 01/28/2011 - 11:45 | Link to Comment Bastiat
Bastiat's picture

The physical dog will catch the paper tail one day.   http://goo.gl/GXxKs

Fri, 01/28/2011 - 11:45 | Link to Comment snowball777
snowball777's picture

Let's have three cheers for this moronic asshat and his fold after the turn.

 

Fri, 01/28/2011 - 11:47 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

SILV? not complaining, just sayin it might be a typo.

Fri, 01/28/2011 - 11:47 | Link to Comment Jason T
Jason T's picture

own it Bitchez : )

Fri, 01/28/2011 - 11:47 | Link to Comment Arius
Arius's picture

so, if 10 million can do that damage, what about GS and the rest of the crew which has unlimited access to Fed window....as always smt fishy...

Fri, 01/28/2011 - 11:48 | Link to Comment BlackSea
BlackSea's picture

Everytime the market hickups, gold does too as margin calls on overleveraged funds come in and the most liquid assets/hedges get sold to cover.

That would be gold.

It will go on until at least SPX 1257 - then we see...

Fri, 01/28/2011 - 11:49 | Link to Comment gaoptimize
gaoptimize's picture

If one single guy can do this to the gold market, imagine what one of the largest banks can do to the much smaller silver market ;)

Fri, 01/28/2011 - 11:49 | Link to Comment M31Capital
M31Capital's picture

lets do the math with gold at 1400.  1400*100=$114,000 per contract.  850,000,000/114,000= 7,456.10 contracts.  7,456.10*current initial margin of 6,751=$50,336,403.5

It is not possible to have that much initial margin in a 10mm account.  Maybe i m missing something.  

Even so, dumping 7000 contracts in a day shouldnt be that big of a deal since gold typically trades 300,000 +  

 

IDK

 

 

Fri, 01/28/2011 - 12:01 | Link to Comment Arius
Arius's picture

"shouldnt be that big of a deal since"

it depends on what the definition of "big of a deal" is....if WSJ says so then it is.

i dont think thats convinceble either - your math proves it...doesnt make any sense that w/ few million you can control 12% of the market...then who needs GS and JPM we all can do it.... 

Fri, 01/28/2011 - 12:07 | Link to Comment oh_bama
oh_bama's picture

are you seriously saying

"1400*100=$114,000"?

Are you a typical american? you shouldn't manage you own money if you allow me to be direct.

 

Fri, 01/28/2011 - 13:15 | Link to Comment flacon
flacon's picture

First letters of sentences are usually capitalized, and so are proper nouns. 

I'm just saying that sometimes people get sloppy.

Fri, 01/28/2011 - 12:14 | Link to Comment Founders Keeper
Founders Keeper's picture

[Even so, dumping 7000 contracts in a day shouldnt be that big of a deal since gold typically trades 300,000 +]---M31Capital

Thanks for your post, M31.

I agree, this small fish---regardless of his big fish leverage---would have minor impact acting alone. However, considering hedge fund managers have many contacts, partners, and personal relationships with other players in the investment community, I assume this manager was alerting "friends" to his intentions. Momentum selling ensued.

More importantly, may be the question of why close those contracts now.

 

Fri, 01/28/2011 - 12:43 | Link to Comment nope-1004
nope-1004's picture

This clown was collateral damage due to the margin rule change and the Chinese demanding physical, putting pressure on the system.  He simply had to unwind because he couldn't finance his leveraged holdings.

But, no, he is not responsible for the drop we saw since early Jan.  He alone is chump change.  He is the convenient excuse by Blythe to explain to the media why such a fierce correction occurred.  This is another round of MSM control and propaganda fed to the sheeple.

Lies, lies, and more lies.  I don't buy it one bit.  COMEX is facing default and the raids will continue.

 

Fri, 01/28/2011 - 12:55 | Link to Comment Arius
Arius's picture

"He is the convenient excuse by THE CARTEL to explain to the media why such a fierce correction occurred."

i think that about covers it - sorry, but had to edit Blythe w/ CARTEL...i just dont think is fair to GS and the rest of the crew to give all credit to blythe for all PM manipulations - hope you agree!

:-)

Fri, 01/28/2011 - 12:54 | Link to Comment DarkMath
DarkMath's picture

I'm just guessing how they got the $850,000,000 number.

You could do this:

Change your 1400 gold price to 1000 (he started the position when Gold was trading lower).

That changes the number of contracts to 8500 since

850,000,000/100,000= 8,500 contracts.

Assuming 8500 contracts * $6,751 == $57,383,500

For one contract he used $6,751 to control $100,000 worth of Gold.

So he could multiply his position by a factor of 14.8 or $100,000/$6,751 ($6,751 * leverage = $100,000 = 14.8)

$850,000,000 = 14.8 * $57,383,500

But that doesn't make sense to me either. He only had $10,000,000 to start with. Maybe he put in some of his own money.

Fri, 01/28/2011 - 13:52 | Link to Comment DarkMath
DarkMath's picture

I think I found the answer. Spread trades allow more margin so the $6,751 doesn't apply:

"with as little as $135, a trader can control a spread trade, which is nominally valued at more than $260,000 at today's price.

In comparison, traders need to put up $6,751 to invest in one futures contract. Mr. Shak's positions were extended as far as December 2015, according to exchange data."

Fri, 01/28/2011 - 11:51 | Link to Comment earnyermoney
earnyermoney's picture

producers and banks (JPM and HSBC) were on the other side of the trade.

Fri, 01/28/2011 - 11:52 | Link to Comment DeadFred
DeadFred's picture

Sorry I don't believe it.  More disinformation being shoveled out.  I like gold and silver but we haven't hit the bottom yet.  This afternoon or Monday prices start down again, at least my puts on SLV hope so.

Fri, 01/28/2011 - 12:00 | Link to Comment tmosley
tmosley's picture

Highly unlikely.  Now that OPEX is over, we will see an uptrend start on Tuesday at the latest, more likely on Monday, or even today (sure looks like it, but it looked like my prediction had short circuited on Wednesday too).

Fri, 01/28/2011 - 11:52 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

that annie d. holding his hand is a heluva poker

playa.

nelson b. hunt wasn't overly fazed, either, when the exchange busted his ass:  "i was just havin' a little fun," he allegedly told his sister when she queried what on earth he had been thinking.

yep. same deal. margin rule change. also they only permitted liquidation, not acquisition, when they took down the hunts.

zero hedge not a mal idee.

Fri, 01/28/2011 - 11:53 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

Thank you for the entry point Mr Shak. And an advance thank you to anyone else who drives the price down another 100.

Fri, 01/28/2011 - 11:54 | Link to Comment Hammer Time
Hammer Time's picture

Thanks Danial, I did some physical shopping this morning, just before the corner...

Fri, 01/28/2011 - 11:54 | Link to Comment haskelslocal
haskelslocal's picture

There's no doubt this story is bogus. Fall guy W&R style. The woman's not his wife, that's poker pro Annie Duke (and Don Cheadle) holding the bozo's hand high after he won a poker tourney. Fitting, right? A poker tourney?

Note how gapped his story is out of his own mouth. "The trade was working well for years....and then suddenly it was down 70% so I got out". WTF?

What he meant to say was "the theiving SCHEME was working fine, then the Big Dogs of Wall Street stuck a fork in my eye those bastards!"

Fri, 01/28/2011 - 11:55 | Link to Comment n2dark
n2dark's picture

this story doesn't make sense ...read it again, carefully this time

Fri, 01/28/2011 - 12:09 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

you don't say why, n2.  why doesn't it make sense?

i don't trade crimex, so, fill me in.

ok, i re-read the whole thingy.  i don't see a problem.  b/c he hedged everything or almost everything, he was able to keep re-loading and building his spread positions.

then, they raised the margin, 2X.  sounds like the 2nd margin upskie caused him to "unwind", rather than raise/deposit momoney to the acct.

when you build, you can often use diff. types of orders, from when you unwind, which often requires market orders.  it can get expensive, eh? 

Fri, 01/28/2011 - 11:57 | Link to Comment Elmer Fudd
Elmer Fudd's picture

thanks for the sale price!

Fri, 01/28/2011 - 11:57 | Link to Comment tmosley
tmosley's picture

Infinite volatility is well on its way.  For those trading paper, you might want to bite the bullet and move to physical at this point.  This is probably as cheap as it is going to be for a while.  Physical markets are getting tighter and tighter, and the premiums are increasing.  You can still get generic 1 oz rounds in some bulk and fairly cheaply.  I would suggest starting there.

Also, avoid anything larger than 5 oz.  As time goes on, more and more fakes will find their way into the market, and when you look to spend your silver, you may have to sacrifice some to assay fees.  Smaller denominations are much harder to hollow and fill.  Rounds are nice because they allow you to determine the silver content with a simple flip.  Just listen for the distinct ring of silver.

Fri, 01/28/2011 - 12:02 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

Actually I have seen gold premiums come down slightly in the last month.

Fri, 01/28/2011 - 12:15 | Link to Comment tmosley
tmosley's picture

I was talking about silver, where premiums are definitely increasing.  

Fri, 01/28/2011 - 12:12 | Link to Comment snowball777
snowball777's picture

T'would seem odd to target the bigger bars, since they'd invite more scrutiny; better to fold the fakes into a roll of 20.

Fri, 01/28/2011 - 12:18 | Link to Comment tmosley
tmosley's picture

Easier to buy a real bar, hollow it out and fill it with junk.  Not everyone owns a mint, and even fewer have access to realistic looking dies, which are very hard to fake convincingly.

Fri, 01/28/2011 - 12:40 | Link to Comment Sean7k
Sean7k's picture

Spam alert

Fri, 01/28/2011 - 12:21 | Link to Comment kentfinance
kentfinance's picture

you think he is out of his silver spread position yet too?

Fri, 01/28/2011 - 12:00 | Link to Comment Kaiser Sousa
Kaiser Sousa's picture

that fucking cock sucker..man i hate these wall street mother fuckers...all sociopaths not giving a fuck about what their slimy ass antics r doing to the holders of real money...

anbody wathcing the movement n Silver...its bizarre...

 

 

Fri, 01/28/2011 - 12:38 | Link to Comment Founders Keeper
Founders Keeper's picture

[that fucking cock sucker..man i hate these wall street mother fuckers...all sociopaths not giving a fuck about what their slimy ass antics r doing to the holders of real money...]---Kaiser Sousa

Don't sweat the volatility, Kaiser. If you are holding physical PMs today, you've already won the game. You won! You already beat those SOBs; their greedy destructive shenanigans cannot touch you directly anymore.

Good. You're done with that game.

Now move on to preparing for the next game: surviving social unrest, including food and fuel distribution disruptions.

 

Fri, 01/28/2011 - 12:02 | Link to Comment MountainMan
MountainMan's picture

You got to know when to hold them, know when to fold them, know when to walk away, know when to run....

Fri, 01/28/2011 - 12:03 | Link to Comment PaperWillBurn
PaperWillBurn's picture

Yet another reason why paper will burn. It's absolutely insane that one man with $10 Million and a computer can have so much influence over the price of gold. It's about time for physical and paper to part ways

Fri, 01/28/2011 - 12:03 | Link to Comment daybyday
daybyday's picture

sold sold and sold...worthless POS....sold at 29 and more at 39 will cover 200 lower...ho hum on to the next.

Fri, 01/28/2011 - 12:04 | Link to Comment Segestan
Fri, 01/28/2011 - 12:04 | Link to Comment RobotTrader
RobotTrader's picture

I knew it.

It was only a matter of time before some stupid CIGA idiot who was looking for General Jim's $1,650 gold target based on the predictions of:

- Alf the Sesame Street character

- Martin Armstrong, a convicted felon with mental problems

- Bill Murphy, a recovering alcoholic with delusions of grandeur

- Buzz Lightyear

- E.T.

and other assorted Space Aliens......

Heh, those guys all got taken to the cleaners....

"Thanks for nothing, General Jim.  You wiped me out!"

LOL....

Fri, 01/28/2011 - 12:08 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

Do you have a daily quota of clicks you are required to register?

Fri, 01/28/2011 - 12:46 | Link to Comment JonNadler
JonNadler's picture

leave Robot alone, he's sitting in his prison cell typing nonsense hoping to ingratiate himself with the authoroties by bashing gold. Maybe Jamie will let you out of jail if you come up with some originality in your gold bashing.

Post some more nudies, please, not Jamie's daughter though, I heard she's hot

Fri, 01/28/2011 - 12:16 | Link to Comment Pladizow
Pladizow's picture

Wow your DUMB!

Fri, 01/28/2011 - 13:48 | Link to Comment Chupacabra
Chupacabra's picture

+1rony

Fri, 01/28/2011 - 12:23 | Link to Comment tmosley
tmosley's picture

This as opposed to you who claims that gold is going to fall.  Who made more money off of their predictions?  Here's a hint, no-one was buying options for $1650 in January.  Everyone was long the real thing, in hand.  We have ALL made HUGE amounts of money, while you have screwed around and gone bankrupt 5 times in the last 7 years, and are now living with your mother taking the city bus to the food stamp office.

Seriously, go fuck yourself.

Fri, 01/28/2011 - 13:12 | Link to Comment ILikeBoats
ILikeBoats's picture

ALF was a separate TV show, ALF is the father of The Bernank, or did you not notice the family resemblance?

Fri, 01/28/2011 - 13:42 | Link to Comment lieutenantjohnchard
lieutenantjohnchard's picture

and the funny thing is that old catfish mouth robo uber bull wanna be believes the poster was really wiped out on a 7-10% drop rather than simply venting.

as mentioned earlier, give gentleman jim a call, catfish mouth. school him on the way of the world from your apartment in los angeles. jim's back from inspecting his gold mine. i'm sure gentleman jim would indulge a man of such experience as you to get a fresh perspective.

btw: how's that zlc, goog and aapl bear taunt going?

once i get back from buying a few more gold eagles from the coin shop i'll check in for your charts.

adios, yoga boy.

Fri, 01/28/2011 - 12:04 | Link to Comment PaperWillBurn
PaperWillBurn's picture

Yet another reason why paper will burn. It's absolutely insane that one man with $10 Million and a computer can have so much influence over the price of gold. It's about time for physical and paper to part ways

Fri, 01/28/2011 - 12:05 | Link to Comment economists_do_i...
economists_do_it_with_models's picture

Avg = 3,000-5,000.

81,000 traded.

Isn't anyone curious who took the OTHER side of the trade??

Fri, 01/28/2011 - 12:06 | Link to Comment Thunder Dome
Thunder Dome's picture

Don Cheedle has a hedge fund?

Fri, 01/28/2011 - 12:14 | Link to Comment snowball777
snowball777's picture

Cheedle is a HNW mark.

Fri, 01/28/2011 - 12:06 | Link to Comment CB
CB's picture

what an asshat.

Fri, 01/28/2011 - 12:06 | Link to Comment Xibalba
Xibalba's picture

Thanks for the update. 

Fri, 01/28/2011 - 12:08 | Link to Comment FranSix
FranSix's picture

A convenient scapegoat.  All it takes is one yob, eh? A 10X leverage position declines 7%.  Makes sense.

What should be considered instead is how copper contracts bundled into silver contracts, which are then passed off as gold-based derivatives are literally being thrown at the markets in one last ditch attempt to stave off a short covering rally.

 

Fri, 01/28/2011 - 12:10 | Link to Comment BlackSea
BlackSea's picture

The Wadell and Reed of Gold. Funny!

Fri, 01/28/2011 - 13:03 | Link to Comment Founders Keeper
Founders Keeper's picture

[What should be considered instead is how copper contracts bundled into silver contracts, which are then passed off as gold-based derivatives...]---FranSix

That's news to me. How does that work?

 

Fri, 01/28/2011 - 12:09 | Link to Comment andrew123
andrew123's picture

He had a bunch of spreads on.  The total net selling was minuiscule.  We know this because he only lost $7 million.  Tyler, am I worng?

Fri, 01/28/2011 - 12:11 | Link to Comment Thunder Dome
Thunder Dome's picture

No way is this story true.

Fri, 01/28/2011 - 12:12 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

Looks like Brent Crude is breaking out of its small consolidation and looking to gun through $100 shortly.

Fri, 01/28/2011 - 12:12 | Link to Comment oh_bama
oh_bama's picture

away hearing he had some call spread and flys on his book.. hehe

Fri, 01/28/2011 - 12:14 | Link to Comment Gunther
Gunther's picture

The story does not make sense. Such sell-offs have happened before and no Hedgie blew up.
The market moves in 2008 were a bit wilder than since start of the year and he lost 20% in '08 and died on this little correction?
Moreover, on the LBMA the daily trading volume is ~20 billion US$ and a change in a position of 850 million $ has such an influence?
Tis is a side story and not the real reason.

Fri, 01/28/2011 - 12:39 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

he didn't die, he folded!

they raised the margin requirement.

so, he liquidated.

the dip didn't cause him to go broke;

his unwinding caused the dip.

 

i think...

Fri, 01/28/2011 - 12:16 | Link to Comment campag
campag's picture

sounds like a spoof to me.

on a serious note the trouble in Yemen/ Egypt has caused recovery in gold.  oil has spiked , totally ignoring stocks . seems some countries could have new leaders come monday morning.

Fri, 01/28/2011 - 12:17 | Link to Comment sbenard
sbenard's picture

So who is the man behind  the hedge fund that is blowing up the stock market today?

Fri, 01/28/2011 - 16:12 | Link to Comment StychoKiller
StychoKiller's picture

Appears to be a crowd of Egyptian divestors, trying to liquidate a dictatorship...

Fri, 01/28/2011 - 12:22 | Link to Comment Seasmoke
Seasmoke's picture

i never liked that Annie Duke

Fri, 01/28/2011 - 12:23 | Link to Comment campag
campag's picture

if countries do wobble, brent crude goes +20% ,this kills western stock prices . 

Fri, 01/28/2011 - 12:25 | Link to Comment Future Jim
Future Jim's picture

So ... would a gold mining stock like Yamana be a good way to play this?

Fri, 01/28/2011 - 12:34 | Link to Comment pazmaker
pazmaker's picture

Jim I bought AUY back in October at 10.73..... I think it still has more upside potential.

Fri, 01/28/2011 - 12:25 | Link to Comment Sofa King
Sofa King's picture

This story makes no sense but I'll buy it, if it helps my holdings go back up.  Just rememebr folks, when the price of gold goes up the B.E.T. holdings of the Shadow gov go up, too.  I follow the folks who actually run things.

Fri, 01/28/2011 - 12:30 | Link to Comment SheepDog-One
SheepDog-One's picture

Always just 1 guy...yea I really dont believe this fr a minute 1 dude clearing his futures trades cause a gold world decline of 8% ? So who will they point out as the reason for equities selling off today, some housewife in DesMoines selling 5 SPY futures?

Fri, 01/28/2011 - 12:33 | Link to Comment Grand Supercycle
Grand Supercycle's picture

GOLD and SILVER gave a sell signal a while back and CRUDE and COPPER did so this week.

http://stockmarket618.wordpress.com

Fri, 01/28/2011 - 12:36 | Link to Comment MikeNYC
MikeNYC's picture

Aren't the HFT guys now trading the commodity markets? Thought I saw something about it in the news.

Isn't it possible the guy dumped his positions and the robots took over?

Fri, 01/28/2011 - 12:39 | Link to Comment Voodoo-economist
Voodoo-economist's picture

this smells, we probably havent seen the low yet

Fri, 01/28/2011 - 12:39 | Link to Comment ak_khanna
ak_khanna's picture

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss. It is similar to rounding up maximum sheep before shutting the doors of the slaughter house.

http://www.marketoracle.co.uk/Article24581.html

Fri, 01/28/2011 - 12:42 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

I just don't buy this story - then again I do not understand the influence such a small player can have on this "market"

Then again almost everything mystifies me now - must be getting senile in my middle age.

For what its worth I will wait some more before I buy more.

Fri, 01/28/2011 - 12:44 | Link to Comment glenlloyd
glenlloyd's picture

I wonder if some external 'catalyst' paid him to terminate his positions?

Anyway, glad that's over, and actually it was prolly a good thing to have that happen, it may happen more frequently in the future and this 'test case' was a learning experience.

It was also a good buy in point.

Fri, 01/28/2011 - 12:49 | Link to Comment JonNadler
JonNadler's picture

options expiry hoes

Fri, 01/28/2011 - 13:24 | Link to Comment Threeggg
Threeggg's picture

Love ZH here but I think that TD just ate a "sheep shit sandwich"

this is the biggest bunch of bullshit ever posted here.............................

"a 10 million dollar hedge fund crashes the Gold/Silver market more than $120.00" 

you are fucking kidding right ?

BTFD !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 

LOL !

You know why the SHTF for sure this year ?

When all of these countries that purchased "HUGE" grain and food futures opt for delivery find out that all they have been sold is "A PIECE OF PAPER"

but you cant eat Gold !!

Fri, 01/28/2011 - 13:42 | Link to Comment tmosley
tmosley's picture

http://en.wikipedia.org/wiki/Catalyst

One guy selling started all the weak hands to selling, because they are afraid of a gold bubble.  Sadly, they are deaf, dumb, blind, and numb, and so wouldn't know a bubble if their life depended on it.

Fri, 01/28/2011 - 13:45 | Link to Comment vamsy
vamsy's picture

I too think this is more boasting stuff going on for this guy than reality

Fri, 01/28/2011 - 13:04 | Link to Comment cocoablini
cocoablini's picture

Maybe he works for China dumping the paper for them while they collect physical at near 200 bucks cheaper.
If a small guy like him could lever up to the market size, then its possible:
- the CFTC knew it and wanted him out of the game to help JP. Raise margin and force out each weak hand.
- this is part of moving all contracts into the big player hands for a massive killing

Fri, 01/28/2011 - 13:07 | Link to Comment cocoablini
cocoablini's picture

A fully levered position in a small market could start a mini panic because nobody knew what happened. The gold market and silver market is MICROSCOPIC

Fri, 01/28/2011 - 13:49 | Link to Comment Flakmeister
Flakmeister's picture

 I looked in Clifton.... looks interesting, thx for the heads up.

Check out SRU.TO

Fri, 01/28/2011 - 13:11 | Link to Comment cocoablini
cocoablini's picture

A fully levered position in a small market could start a mini panic because nobody knew what happened. The gold market and silver market is MICROSCOPIC

Fri, 01/28/2011 - 13:17 | Link to Comment Downtoolong
Downtoolong's picture

Position limits, POSITION LIMITS! We don't need no stinking POSITION LIMITS!

Gary Gensler, Chairman CFTC.

Fri, 01/28/2011 - 13:42 | Link to Comment gwar5
gwar5's picture

BTFD in PMs. Men with tits wimp out first and don't get layed.

Nothing has changed for PM, except more chaos and more uncertainty spreading across the world over food riots.

What part of that is not scary and bullish for PMs, just two weeks after the Chinese premier said the dollar is over?

 

Fri, 01/28/2011 - 13:51 | Link to Comment Jesse
Jesse's picture

Is that his girlfriend?  I thought it was his wife Beth who I thought he was still together with when he beat Phil Ivey in the Ozzie tourney.

http://www.kidrock.nl/News/?p=798

He must have had a good hand in this picture above, or perhaps she was just glad to be there.  

Beth was kind of hot.  but she split with Danny and started dating Kid Rock.  Can't make this stuff up dept?

 

Fri, 01/28/2011 - 15:49 | Link to Comment Freddie
Freddie's picture

Hopefully Kid Rock gave the whore his STDs and that she "re-gifted" them back to Danny the douche.

 

Fri, 01/28/2011 - 14:09 | Link to Comment Silversinner
Silversinner's picture

If this minor pull back is all they can do

after increasing the margin rate and not

imposing any position limits,I'm more

bullish then ever before.Do not really

understand the paper market fully,so I just

buy the physical.Just use the price as

buy indicator to accumulate when it

drops.Simpel and save.

Fri, 01/28/2011 - 14:42 | Link to Comment tanerlorn
tanerlorn's picture

That picture was actually taken at the World Series of Poker in Las Vegas, after a charity poker tournament called Ante up for Africa. And yes, Dan Shak is TERRIBLE at poker.

Fri, 01/28/2011 - 15:45 | Link to Comment Freddie
Freddie's picture

He looks like a real POS.   Hopefully the people's money he lost were bottomfeeder scumbags like him.

 

Fri, 01/28/2011 - 15:38 | Link to Comment mogul rider
mogul rider's picture

I'd like to personally thank this idiot, I got the Precious cheaper, much cheaper. Who is the next idiot to step up?

C'mon shitheads leverage it , leverage it. c'mon!!!!

Brang it on!!!!

Jesus - there can't be a global conspiracy to rule over us, these fuckheads are too stupid

Fri, 01/28/2011 - 15:57 | Link to Comment Harry Paratestes
Harry Paratestes's picture

This was a simple carry spread, the cost of holding Gold (storage and interest) In a zero interest rate environment there is no interest cost, so to carry Gold the only cost is storage. Since the beginning of Nov 2010 the Feb April Spread has traded between -2.3 and -1.0 A range of $130 per contract. This is the cost of holding 100 oz of Gold in Storage for 2 months. I dont know the Spreads he held but I am certain his liquidation did not cause the Gold market to break $100 this month. While it no doubt took a huge effort to lose 70 % of $10 million this spread absolutely did not cause the break. PERIOD !!!! If you look at the Gold Chart you notice that the first day of trading for 2011 we made the high and have been trading lower since. It seems to me that some entity is taking profit after last years run up. Or some corrupt middle eastern leaders are cashing in some of the peoples gold before making haste to a picturesque villa somewhere in Europe.

Fri, 01/28/2011 - 16:26 | Link to Comment colonial
colonial's picture

hey tyler:

i'm not trading oppies/futures and other derivatives like many other zero's but it seems to me that if this market could be moved by a single trader we've got some serious structural problems. 

If I understand how  most hot money is deployed, which is a high percentage of hedge fund assets plus multiple brokerages/banks, sovereigns and a who knows how many central bankers, what are we to conclude?

I see a flock of black swans just waiting to fly over the horizon and be spotted by Taleb or Roubini

Fri, 01/28/2011 - 16:30 | Link to Comment andyupnorth
andyupnorth's picture

They had to think of something other than "fat fingers".

Fri, 01/28/2011 - 23:08 | Link to Comment fswalker
fswalker's picture

Sure lets just ignore the fact there has been major profit taking in Gold since October last year.Lets also ignore general market forces which dictate a 0-sum game for most paper holders. Lets pay no attention to the overall market, the bottoming dollar or the topping of US Equity Indexes.

Looking for some chumps to keep buying into this heavily overbought market? Why not use this hedgie as a prime story to restore confidence in your shiny metal as we could really use some dumb money for the short-medium term while we actually find a bottom in this intra-day downtrend.

This previously high-flying geezer with a 10-mil account managed to put in a top in the most highly traded commodity in the world due to his overleveraged greediness. Ok, im sure with a bit of spin the sheep will buy into this and follow it blindly.

Fear and greed my friends, are your worst enemies.

I know this blip wont affect many of you hoarders especially the compulsive ones, however if you do dabble a bit in the markets for short-medium term gains than make sure you pay close attention to the signs.

 

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