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Paulson Hit With $2 Billion In Redemption Requests, Likely Source Of Recent Gold Market Liquidations
Absolute Return+Alpha reports that John Paulson's $33 billion hedge fund is now substantially lighter in AUM courtesy of scared investors pulling $2 billion in redemptions by the end of June. Whether this was driven by the disclosures of the fund's participation in the allegedly illegal Abacus transaction, or the fund's deplorable performance in June is unknown and irrelevant. What is relevant is that this confirms our suspicions regarding volatile moves in gold in recent days, are driven primarily by liquidations, most likely those emanating from John Paulson's gold portfolio, which as of the most recent 13F, accounted for 30% of the fund's total assets via ETFs (GLD), miners and other secondary exposure.
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But is that enough selling to move the market?
Ouch! That's gonna leave a mark
already did. looks like they worked to take out Paulson. smart move. they have to get gold down before whatever the horrendous news they are prepping us for comes out.
Coupled w/maybe this?
http://www.24hgold.com/english/news-gold-silver-mystery-around-bis-gold-swaps-impugns-them-as-market-rigging.aspx?article=2997320512G10020&redirect=false&contributor=Chris+Powell
already did. looks like they worked to take out Paulson. smart move. they have to get gold down before whatever the horrendous news they are prepping us for comes out.
That's funny!
Double post - the second one is junked twice as much as the first!
i am amazed that people are willing to pay him 2 & 20 for investing in GLD and GDX and a couple other securities.
I always liked TGLDX, back when I tolerated paper.
http://stockcharts.com/charts/performance/perf.html?$GOLD,TGLDX
2008 would have been a bit painful however.
So true. Because people want to be able to mention at a cocktail party (until now) that they are invested with him.
so Paulson only sells when the Comex is open?
excellent point ++
'Paulson's gold portfolio, which as of the most recent 13F, accounted for 30% of the fund's total assets via ETFs (GLD), miners and other secondary exposure.'
GARBAGE IN = GARBAGE OUT
Some day physical will disconnect from the garbage. I am very patient.
Is there any good fight in ETFs? I mean, don't the longs just provide counter bets, without which, there would be no one betting in ETFs. So even people who are long gold but use ETFs are screwing themselves, no?
thesapien,
folks who participate in ETF's(for 98% part) are simply looking to book a profit........
Get rid of the Fkin ETF's, man up,take physical, price's GO thru the roof, on ALL PM's.............esp G & S.
PLUS, the dagger thru the heart of JPM, and the Squidsters.
You start having to provide REAL metals.............and watch the flames.
So, yes, ETF folks are screwing themselves, and keeping this Seven headed hydra bitch alive, while taking real value from real believers/holders of MONEY.
Let's kill the beast with a silver bullet.
I don't know if I have ever gotten around to mentioning that you are SPOT-ON a lot DosZap.
They took the Gold down, makes me hungry for more, again.
Physical.
Is anyone really surprised at Nadler's view? This is worth a read for no other reason than keeping abreast of the movement in the enemy camp:
Jon Nadler On Gold's Current Highs Not Sustainable
Gold should go down to $800 soon
"We're really looking for an eventual evaporation of the fear and greed premium..."
He owns lot of Kinross, who owns lots of gold reserves.
People are so stupid, Casey Research has been saying all year that buying season for gold and gold miners will be in June/July. It looks like they are right
Paulson should be gaining gold interest right now
Does that mean a lot of people who typically have money to trade aren't able to hold out, so to speak? Gold needs a few big players who can handle the turbulence or a lot of up and coming traders while the old ones fall, no?
Those gold fleas who fall off are only thinking month to month, if that long, because they're only living month to month, if not day to day.
This is why I keep harping that we're overdue for a good gut-check, not necessarily like 2008, but like $100 or $200 over the course of a week, to get rid of people who heard about gold on Mad Money or wherever and free some up for those who actually know why they're in it.
So true. The last thing I want is for people to start thinking that gold is easy money. If it were easy, it wouldn't be gold.
Well it is good to know that greenspan is sticking with his meme that asset values drive fundamentals and consequently a 401Ker doesn't differentiate between a dollar of cap gain and a dollar earned. Of course what he doesn't mention without another asset bubble to creat a liquidity sponge , that dollar will instead of buying less house dor the dollar will buy less bread. Greenspan hinting that the excess reserves and the equity market are two additional stimulus programs. Put 1 +1 together, as if it is not already obvious where crazy Al would be taking policy
If Paulson sold all of his paper holdings in paper GLD it probably would account for less than 1/50th of 1 percent of global gold derivatives trades.
Normal summer consolidation and the pattern of the PPT and affilliated Bullion banks slamming gold just before the jobs report is what took the market down and recent revelation in regard to BIS being blatantly involved in the Bullion manipulation game and now bailing out a massive "commercial" read "bullion" bank are probably an indication that we are seeing some large financial entities that are taking off take of physical metals and there is a consequent commercial signal failure.
BIS will step into put out that flame but given the growing clarifity of the unavoidable defaults in sovereign debt by major western entities that lies ahead and the increasing hunger for real money by the non-allied financial enties and central banks, it seems clear that whatever BIS is planning on dumping on the market will be absorbed quickly and the news is extremely gold bullish.
Silver is the Long Lever on Gold
Physical Silver is a Tiny Market
Physical Silver off take is the Long Lever on Paper Silver
Gold is at around 1/2 its inflation adjusted high
Silver is less than 1/6th of its inflation adjusted high
Someone will eventually put these facts together and do something constructive I would think.
Some of us already have, my friend (friend of a friend (silver)).
Am I the only one who remembers that the old high in silver was the result of a massive short squeeze engineered by the Hunts?
In 1973, the Hunt family of Texas, possibly the richest family in America at the time, decided to buy precious metals as a hedge against inflation. Gold could not be held by private citizens at that time, so the Hunts began to buy silver in enormous quantity.
In 1979 the sons of patriarch H.L. Hunt, Nelson Bunker and William Herbert, together with some wealthy Arabs, formed a silver pool. In a short period of time they had amassed more than 200 million ounces of silver, equivalent to half the world's deliverable supply.
When the Hunt's had begun accumulating silver back in 1973 the price was in the $1.95 / ounce range. Early in '79, the price was about $5. Late '79 / early '80 the price was in the $50's, peaking at $54.
Once the silver market was cornered, outsiders joined the chase but a combination of changed trading rules on the New York Metals Market (COMEX) and the intervention of the Federal Reserve put an end to the game. The price began to slide, culminating in a 50% one-day decline on March 27, 1980 as the price plummeted from $21.62 to $10.80.
The collapse of the silver market meant countless losses for speculators. The Hunt brothers declared bankruptcy. By 1987 their liabilities had grown to nearly $2.5 billion against assets of $1.5 billion. In August of 1988 the Hunts were convicted of conspiring to manipulate the market.
You don't think that slide had something to do with Volker running Fed ?
It's different this time? The Hunt Bros. are not JPM and Scotiabank.
The former being an enemy of the gov't and the latter being friends.
John Paulson sells 2 billion of pretend gold and the pretend price tanks. When the day of reckoning comes I can guarantee you that GLD will not be T.B.T.F!!!
It's quite obvious when someone like Paulson owns the GLD, that he is in on the scam.
There is no reason not to own physical and many not to own the GLD.
Who knows how much physical gold he personally owns? But when you have that much wealth, good luck trying to preserve it all. No one is going to sell you that much physical gold. So he might not have much choice in that he can only buy so much physical and has to use paper in order to gain more exposer to gold.
When David Einhorn and GreenLight Capital went from GLD to Physical, what $ amount was involved?
Right. Paulson strikes me as a one-trick pony, and that "trick" may have had some real "trickery" to it, from what we've heard. Time will tell, too early to judge yet. But behind every great fortune......
Well that worked out for everybody....as if on que and right on some timeline....
At least now we know one of them. Who was the Euro Hedge selling a lot of the rest is what I want to know....
I don't know, looked to be like gold was specifically taken down when it was back at $1260...
People really pay 2k a year to access that site? Seriously?
Beats the hell out of me.
I guess if you're already a billionaire, $2K is cheap to satisfy your need to measure your dick against other billionaires.
Paulson had $32Bn in AUM in March. 2% of 32 is 640mm in annual mgmt fee. Imagine how much he cares about performance
GLD is down 3% in a month and there is some conspiracy? It's just the ebb and flow nothing more.
Aimlow Joe was here.
http://www.aimlow.com
No, 4% in a day, at the same time of day that it very nearly always goes into a waterfall pattern.
tell me again ... why do people buy GOLD?
when they should be buying more iPads.
We don't want to become hobos, however pragmatic they may be.
Is that a rhetorical question? If so, try this one on for size.
Why does a person NOT buy gold?
Tyler, we are in a deflationary suckout. Of course there will be liquidations. There will be hundreds more. Sell gold into this deflationary suckout over the next 6 months, and stop talking up gold which is about to get whacked. WFT !
Phony Paper Gold you mean. Physical is not decreasing but it does get rarer every day. Tick, tick, tick.
Perhaps they've realized its time to get the real physical metal and that there's no sense paying someone a "management fee" when really there is only one place to put your money and you can do it yourself.
Na. It's better to join up with all the hedge fund gangs and go BOOM I"M BROKE.
http://www.youtube.com/watch?v=W0ffzVqh5H4
Good shit right there. House of Pain on roids
So let me get this straight. Every minor downtick in gold in the past four weeks has been met with sharp criticism of "downright manipulation" in ZH articles. Now all of a sudden it's Paulson & Co. gold class redemptions/liquidiation?
That is a hilarious turn of events.
I guess the regulators have been sniffing around. They needed plausible deniability.
I guess you missed the part where Tyler and just about everyone else said this was probably the result of hedge fund liquidations.
Of course, with all the manipulation going on in ALL the markets, you are generally safe to say that any given move in ANY asset is in fact the result of manipulation.
Having allocated to the best hedge funds in the world, I can assure you this has more to do with poor performance than Abacus. Mr. Paulson made a lot of money in 2008, assets mushroomed after, but now people are wondering, maybe he was just lucky and timed it perfectly. In any case, only dummies invest in hedge funds based on one or two outstanding years.
In any case Paulo Pellegrini (I hope I got the name right) was the brains behind his subprime success.
Yes; and if it was for Paulson; Pellegrini would need to sell the CDS before the grand ABX unraveling occurred. Pellegrini was the only thing that was worth 2-20 in that fund.
Reading "The Greatest Trade Ever" I wondered that myself. PSQR, the last time I checked, was doing well, but I could be out of date here.
i hear he is investing in solar energy...i think coupled with yellow fevor thats a good combination...
"only dummies invest in hedge funds based on one or two outstanding years"
Well said. You finally post something that is not totally permabull, and you get junked?
Leo, who are the best performing hedgies?
In my opinion, the best hedge funds are Soros, Brevan Howard, Citadel, SAC Capital, Farallon Capital Management, D.E. Shaw, Bridgewater, and about ten more names. These are all solid funds with long track records. Some got hit in 2008, came back strong as I predicted (eg. Citadel). But if you just go by strategy, distressed debt funds outperformed in 2009. I have been out of the loop for a while, but the top names remain the same.
Thanks Leo, I'm impressed Soros is still among the elite. Got a view on the High Frequency shops?
Yes but with Soros taking a step back, it remains to be seen how long they can keep it up. Made a mistake, Paul Tudor Jones founded Tudor Investment Corporation, not Tudor Capital Management.
Leo any names jump out as young up-and-comers?
Chip,
Like I said, I am out of the loop, but here is an article which may interest you:
Tomorrow's titans: the blue-chip hedge fund managers of the next decade
I like to meet managers, gauge them one on one, ask them tough questions, and see how they performed in bad markets. Most of all, I have zero tolerance for arrogant jerks who think they're God's gift to hedge funds. They can collect 2 & 20 from plenty of other suckers.
Dear John,
In your prospectus you say that 30% of your holdings are in Gold, the precious metal. But yet your actual holdings are in GLD, an ETF. I am very concerned after the recent CFTC hearings in which Gold (as paper) was found to be a financial asset and as such commonly leveraged 100:1 (paper:specie). That lends much creedence to the notion that all gold promises are not backed by the metal. I am also concerned because the language of the GLD prospectus does not lend confidence to the fact that it actually holds the metal, in fact its language of "unallocated accounts" and similar language exposes it to skepticism, rather than acts as an iron-clad promise. In this light, would you please provide your due diligence in this matter, so I can put my mind at ease?
Regards,
An Investor
Le Bal,
Bottom ,line,98% of Gold & Slvr,ETF's are the exact same as FRAC BANKING..............someday, folks will get it.
He can demand settlement in specie since, as defined in the GLD SPDR prospectus, every holder of 100 000 shares in the Trust can chose between cash and specie/physical settlement.
Maybe the custodian [Barclays if I remember correctly] increased the minimal necessary ownership to have dual settlement option [I haven't read anything about GLD, or the prospectus, in about a month and a half] but that would still mean nothing to Paulson' holdings in GLD re: physical settlement.
GLD is leveraged even above 100:1 you mentioned; and as I have said before relies purely on the power to roll the cash-commodity swaps [implicitly of course; since they refer to entering a cash-commodity swap as "purchase"]. In short if you dont own 100K Trust shares; dont invest into GLD.
I've wondered if some of the bigger hedgies would buy a bunch of GLD because of the prospectus and then redeem to acquire actual PM. Would this knock down GLD, physical or both if they did that? Couldn't they then just scoop up physical on the cheap if that were the case? Or would that be the de-coupling of physical from paper? Interesting. Maybe China won't have to use the nuclear option after all.
It wouldn't knock down GLD since The Trust would just "replenish" the specie underlying the number of shares to bring it up to equal share/oz ration as was on the day of the physical settlement. Also 100 000 shares is like what; 10K oz ie. 12M dollars; not really a big fall in the price of an ETF that has a market cap of 44.77B. Also, the process of unwinding your position via physical settlement is long and most probably "iceberg-ed" in order to maximally smooth the price volatility.
Cheeky,
Would really appreciate your take on PHYS.
- IE
I see no point in it. Just buy the physical stuff yourself. Sure you will pay the premium; but if you are so convinced that the increase in price will be higher than the premium you paid it should be a clear thing to do. I dont really pay much attention to commodity ETFs [meaning gold ETFs as well] so I'm really not informed "to the last detail" about those. Read the prospectus; browse trough some forums and chat with other investors; that is, IMHO, the best way to get all the ins and outs.
Cheeky, don't know if you caught this update at Jesse's Cafe Americain. It is more info on the BIS gold movement but now the BIS is saying the gold went to commercial banks and not to central banks. Where did the BIS get 318 metric tons of gold? Update is from NYTimes and is worth a read...but certainly leaves a lot of questions...
http://jessescrossroadscafe.blogspot.com/2010/07/bis-and-gold-swaps-curiouser-and.html
Cheeky, what physical stuff do you like, gold vs silver? Bars vs coins etc.? Best storage ideas? Thanks
With your avatar we should be asking you those questions.
Buy gold/silver in 60/40% ratio, buy generic/bullion U. S. coins (easier to ID and trade due to recognizability), store according to your imagination (false wall, tin can under shrub), but be sure somebody you trust knows where it is and when to access it. Use a decoy safe with some junk silver and cash in it.
Those are my thumbnail observations and personal needs.
Rocky,
I am always looking for new ideas. Your answer mirrors closely to mine. Great answer....
PHYS gets good reviews even by gold bugs. But one thing I noticed is there is quite a premium above the asset value, depending on how nutty the market is that day. Anywhere from 6% to 20% premium. So you might cash in on the volatility by buying on a dull day and waiting for gold to go nuts.
They have a web site with all the gory details.
The John Paulson story this week is not about gold.
JP became a bull and has (probably) made out this week.
He must know something to which the rest of us are not privileged.
"Paulson Hit With $2 Billion In Redemptions..."
Chump Change for MR. Big Shot
I am sure Paulson has the latest greatest new and improved scam to attract plenty of new investors to replace those LOSERS who redeemed....
I would think that John Paulson would still be doing just fine. Gold has still been up a lot and I think he'll do well on his Harrah's purchase too.
Tyler, Leo or anyone else: when it is said that Paulson was hit with redemptions at the end of June, does that mean that they were given notice at the end of June for a value date in the future (ie. they get the value 30 or 90 days from now, so there would be no rush to sell), or do they get the June 30 valuation?
Somebody blew up July 1st. Nothing else makes sense.
Redemption Notice Periods: Most hedge funds have 45-65 day redemption notice periods. This means investors must notify hedge funds 45-65 days before quarter end.
Might as well call this the Jim Grant fund, chock full of gold & banking stocks and betting on a zip-a-dee-doo-dah recovery.
Not sure I'd consider his performance with respect to Abacus "lucky" unless you consider it lucky that he was able to directly influence the construction the securities that were doomed to fail and then short them. Seems like it would be tough to have this kind of "luck" with respect to gold unless he had a surefire way of ensuring that the price skyrocketed. Hmmm...
"But Jim, you promised!!!!"
LOL....
http://etfdailynews.com/blog/2010/07/07/the-seven-sins-of-the-spdr-gold-...
Interesting recent article here where the prospectus for the Gold ETF (NYSE:GLD) is analyzed for all its sinful Ponzi potential.
Many of the fund’s inherent weaknesses that have been cited on this blog and others are outlined but of particular interest is Paragraph 5 for its discussion on what the author describes as the D-Day when the 7 year term of the fund expires on November 11, 2011.
[snip]:
‘Readers can choose what they want the “D” in “D-Day” to represent, with my own suggestions being “default” or “destruction”. Indeed, the deliberate choice by the Sponsor of such a memorable date for termination seems to indicate that they expect this date to represent a dramatic event in the evolution of this fund.
Given that there is no economic reason for the Trust to incur ever-increasing costs, the fund is essentially being “managed” according to “principles” very similar to those of a Ponzi-scheme. Specifically, only those buyers who get in (and get out) early are able to extract their undiluted gains in this fund, with later buyers receiving less “gold” when they buy in, and even less than that when they subsequently dispose of their units.
Given the deliberate lack of transparency of the fund, the price-gouging fee structure, and the clear warning to unit-holders that “all bets are off” when the 11th day of the 11th month of the 11th year arrives, surely even those unit-holders who have remained oblivious to the many reasons to question this fund won’t be reckless enough to continue to hold those units until “D-Day”?’
RED PILL WARNING:
Anyone wish to comment on the (numerological?) importance of or the 11th day, of the 11th month, of the 11th year?
(Added bonus, Paragraph 6 deals with tungsten...)
Hey sometimes you have to sell what you can not what you'd like to. Maybe someone, or two or three needed some serious cash and liquidating their position in Paulson's fund was the best/least worst way to satisfy that need.
Hey sometimes you have to sell what you can not what you'd like to.
This is one of the principal "gold will suffer in a deflation" arguments, namely, that gold holders will be forced to sell their stashes to retire other debts, thus depressing the metal's price. My gut feeling is that anyone who claims to foretell the future on this one has an ax to grind or is just a BS-er. There is so much manipulation of everything (including information) that all currency-denominated or credit-supported assets are suspect.
$33b in AUM, with 1% fee per annum that's $330m per year, will his MBAs ever be motivated again to make money for his investors? Paulson always had "one hit wonder" written all over since his face became household in 2007. So any investor who invested in his super-mega fund based on 1 data point (and eyes fixed on the rear view mirror) deserves to lose every cent of their money. No tears for them any way, lots of it would have come from soveriegn wealth funds (ie the xIC's) and oil money.
http://www.goldstockbull.com/articles/debt-can-never-be-repaid-by-bankst...
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Normal summer consolidation and the pattern of the PPT and affilliated Bullion banks slamming gold just before the jobs report is what took the market down and recent revelation in regard to BIS being blatantly involved in the Bullion manipulation game and now bailing out a massive "commercial" read "bullion" bank are probably an indication that we are seeing some large financial entities that are taking off take of physical metals and there is a consequent commercial signal failure.
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