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World's Largest Commodity Hedge Fund And Andrew Hall Taken To Cleaners On Last Week's Energy Plunge
And once again we get a reminder why the word "hedge" fund is such a misnomer. The FT reports the Clive Capital, the "world's largest commodity hedge fund" as defined by the FT (although we are more than confident various other and much largest "energy-heavy" funds would be much more appropriate for this moniker) lost $400 million out of its (paltry) $5 billion in total AUM during last week's coordinated energy take down, initiated by the forced margin intervention in precious metals. Clive "is the biggest of several big hedge funds believed to be reeling after the unexpected sell-off hit markets late last week." Clive is not alone: "Others, including Astenbeck Capital, the Phibro-owned fund run by Andrew Hall, are thought to have taken double-digit percentage point losses to their portfolios, according to investors." The FT's take: "The scale of the losses demonstrates that even the savviest investors in commodities were wrongfooted by the correction, one of the sharpest one-day falls on record." Our is slightly different: when a trade has enough momentum, and has been working long enough, even the quote unquote "savviest investors" become a momo chasing herd, with nobody hedging, and a massive drop in prices always likely to be the deathknell for some previously vaunted investor, whose only claim to fame was being lucky enough once to be at the right time and the right place, and to put a huge levered bet that worked out. And praying that he or she can recreate those conditions.
More from the FT:
In a letter sent to investors on Friday and seen by the Financial Times, Clive said it was down 8.9 per cent on the week after what it called “extraordinary” price movements on Thursday. Clive’s management said it was at a loss to explain what had caused crude oil markets to be “annihilated”.
“The move in Brent represented about a 5 standard deviation move, while WTI was a 4 standard deviation move,” Clive said in its letter. A five standard deviation daily move is a exceptionally rare event.
“Economic data was soft early in the week though micro news for oil continued to be bullish. Indeed there was news out earlier in the week of further supply disruptions in Yemen and a substantial technical supply outage in the UAE,” the fund said.
While several fund managers had been slowly positioning themselves for a correction, the speed and scale of the event caught most – including Clive – off-guard. At its low of $105.15 a barrel on Friday, benchmark Brent crude oil had dropped more than $16 in two days.
Thursday’s sell-off was started by retail and non-traditional investors taking profits – a move which triggered automatic selling from quantitative funds and precipitated a rout. The correction means Clive is now slightly down on the year, after strong performance over the first four months to April.
And now that the technical blow off has been eliminated, fundamentals - as in scarce supply and relentless demand - can once again return;
Most managers remain bullish, however, and expect commodity prices to continue to rise. “Physical markets are quite strong,” said Clive in its letter. “We remain positioned in a number of markets.”
Commodity hedge funds are used to volatile portfolio moves. In spite of similar historical setbacks, Clive has a record of returning, on average, 27 per cent on investors’ capital a year.
The fund manager was set up in 2007 by Chris Levett, a former trader at Moore Capital, the global-macro hedge fund run by Louis Bacon.
A 27% return with a negative Sharpe ratio. Sounds pretty damn swell. Luckily, for Clive, it was on the border of TBTF. Many other, smaller energy funds were not quite as lucky when the barrage of margin calls flooded their back offices on Wednesday through Friday. We are pretty sure we will learn just who they were over the next 3 days.
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Well he didn't eat shit like the guys running Amaranth (Hall was on the other side of that bollocks of a trade)
I think this guy made a billion dollars for Enron though my history of that fiasco has fogged over time.
You could use a cleaning, ya know? PHEW!
These are the guys that Ben wants to punish most. Most stock funds are cooperating with the FED and playing roulette with the money of the unsuspecting 401k owners
If not, that's an example of what they may do to you.
this is what they did:
http://www.earlyups.com/featured/sled-fail/
Whoa
Very misnamed.
Unhedged funds is more like it.
"Savy", "hedge" and "taken to the cleaners".
Oxymoron
BTW-What's with all the pathetic math? Five-standard deviation move? Time to get new models if anybody believes that would be observed.
If I MAY oblige. What are the margin levels on this FUND!
I hope is was their money? - but of course it is. I don't remember why we need these suits that make nothing, produce nothing and are nothing. Parisites are always deadly to the host.
In today's financial kleptocracy, all money is their money.
Sensational Bantar. Those wanabe Thespians!
I'll bet he's now reading Harvey & Turd. Mumbling under his breath, FUBM.
Oh deary me.
Did the young ones just get taken out.
What a shame.
Still life is long.
They will grow up.
Has silver stablised? Or the correction is not over yet? I'm confused.
Hopefully silver spikes then makes a low near mid June,
http://www.martinarmstrong.org/files/The%20Silver%20Crash%20of%202011%20...
what is Martin Armstrongs track record on calling the precious metals prices?
by geminiRXon Sun, 05/08/2011 - 22:07
#1254379
Hopefully silver spikes then makes a low near mid June,
http://www.martinarmstrong.org/files/The%20Silver%20Crash%20of%202011%20...
It does appear to be attempting it this morning.
Harcourt Fenton Mudd III runs the best fund.
+1 (Original Star Trek character ref for those not following)
Does this call for a: Normalcy bias, bitchezzz?
AUM for those who don't know means 'Assets Under Management'
or in this case is now 'AUW' ..Assets Under Water!
TD regards your comment, "..savviest investors become a momo chasing herd.." it's maybe a bit harsh considering the disgusting sudden (multi-shock!!!!) rule changing CME margin fiasco. I've heard alot of comments regards this correction casually say it's "removing weak hands" from some 'respectable' investors i tune into. That is an insidious statement to make
These were perfectly sound investors investing on an established margin basis who were literally machine gunned by their business floor being shot away from under them in 8 scandalous days. The CME are an utter disgrace of an exchange and i truly hope all who were shot to pieces join and sue the shambolic Crimex into the ground
It is Hedgies job to chase the herd BTW, that's how you make money. Although one US Hedgy on CNBC this week when asked was he 'in' or pulling money off the table replied he was 85% invested as that was his "rules", to be 85% invested at all times
That's fuking scary to have such a stupid (inflexible) rule! I'd withdraw money from any fund that forces a ratio and ties your hand particuarly in bear market times
I have to agree with ZG, this entire takedown (let's call it what it was) was predicated on a change in how the game is played. Nothing fundamental changed, the refs just decided to make up a new rule and threw a flag. Of course the shorts, probably knew beforehand and really cleaned house while the longs had to take it up the you know what and wait for the screaming to die down. The shorts know they don't have the best team on the field and the longs are going to eventually kick their a-- up and down the field, so they get the refs to throw them a flag or two to make it look interesting and so they can breath.
Nothing like a silver team to take one's breath away, especially when they are so physical
there are already a number of experts saying there was zero commercial justification for CME's orgy of vandalism..
...and here we are with powerful reasons (bankruptcies, people losing their jobs, money, some lifetime savings) to counter such foot-loose rule/game changing
CME shot the floor from under the markets feet like some drunken hot-head Chicago gangster ...they should have been more responsible and professional in their rule changes not to increase price volatility and realised the vandalism and carnage they would create with 5 margins in 8 days
at best this was a shambles of business practice at worst it was as you say a 'take down' (deliberate)
watch CME's current advert on CNBC about "helping farmers managing risk" ....how about these Hedgies that have lost jobs, their investors that have lost money and the private investors who've lost savings???
Ever see the ad for Lind Waldock that says investing in commodities is better than investing in the stock market because it just involves supply and demand with no counter party risk? Guess they forgot about the CME, CFTC and the Fed.
Given that a competing exchange is starting to ramp up, I wonder how much of this was "getting while the getting is good." I.E. the window of opportunity to hose people for the bank's benefit may be coming to a close. Akin the Hunt fiasco, one has to wonder where the stakes were in this game.
The next step will probably be something that makes it harder to use an alternate exchange, which amounts to veiled capital controls.
Good points...
I mean really, can't it be argued that the world is on the cusp of the greatest deflationary event/spiral in all economic history? And that, as we all know, is precisely the reason for the Fed and all the other central banks world-wide printing exertions...to avoid aforementioned collapse? And, in the absence of said printing, couldn't all commodity prices, especially oil, go meaningfully lower in price...if the fed ever stops printing or just fail in it's efforts to re-inflate the greatest bubble of all time.
...IF...
Well done from a Yank! FIVE paragraphs above solidify our approach! KEEP up the FINE WORK Tyler.
+10 "If" only has value after we have Zimbabwe dollars and if our economy looks like Japan. Whoops....did I say "if".
My Bad. We are Japan now.
Exactly! And the crux of this is printing MUST end at some point. It becomes pointless to continue. Not to have any soft spot for the guy..but Bernankster has to be totally aware this has a very bad ending no matter which way he goes. So IF is not IF but WHEN!!!! WHEN TSHTF...because it is not even a debate now, hopefully there are enough aware "non fools" deep enough in physical holdings to reconstruct after the carnage. Those with actual physical wealth backing our offers with PM for value investments will be the one's who MAY be able to reconstruct this Republic to something less than but closer to where we are heading now. We must do our part when that time comes. By encouraging all I know to purchase and hold on to at least some Gold and Silver coin to protect themselves...not simply trust this will "all work out"; I hope to help the future younger folks not fall into destitution. Those of you that are aware, it would be well to speak openly now to the younger generations that it is prudent to hold this defense. Even junk 90% silver at whatever few they may afford is a good start. 2 less Latte's a week..one more 64 Kennedy..ect
Did the Thai Baht rise in 1997 ?
Get your head out of your deflationist ass.
(The baht went from 25 to 58 when the printing STOPPED.)
That's because the people store value in dollars and gold.
All it take is a few more people in US diving into gold and silver to explode our currency.
People don't want to do it because they prefer the psycho be out killing people in far off lands. But what they don't understand is people in far off lands are going to mess up the gold and silver markets here anyway. And after the psycho is done hurting everybody it will detach into IMF and hurt everyone anyway.
The USD in 1997 is not the same USD now.
and the Euro or the Franc. People will slowly find out that the myth that even Austrians and keynesians agree on, is bullshit. That myth is that the US dollar is the least worst fiat in the world.
Too true, the USD gold price slowly fell all throughout the Asian Financial Crisis. The UST market was 'rock solid' then, even if built on shakey foundations. The same cannot be said now & since 2008 it has become exponentially worse.
That doesn't stop the odd speculation in government credit however, especially when the sharks sense central bank weakness. Has anyone seen a photo of Masaki 'Easy' Shirakawa? That guy has chump written all over him.
Which is why thailand is the most expensive spot on the planet for gold. Because they USED to hold dollars and gold. Then when holding dollars got them hungry they dumped them.
Did seriously just bring up the Asian currency crisis by brining up the "rise" of the Baht?
I was just showing that using deflatinist logic, the Thai baht should have risen in 1997 but it fell.
I love your recipe for the economy. I know a variation of it that'll knock your socks off.
Just add a couple of spoonfuls of 'peak oil.' Yum yum.
A deflationary spiral coupled with fewer (and harder to extract) natural resources ?
I can see that.
If the bastard wasn't liquidated he'll be up 5 frikkin percent in a couple weeks.
They got their 2 and 20, it was great while it lasted.
That's the beauty. If they make the fund money they get extra paid, if not...well they still get paid quite well.
The beauty is that they get 20% of the paper profits in a good year but share none of the losses in the bad. The 2, as you say, is theirs no matter what.
Maybe their loss is GlenCore's gain?
Some interesting comments by Don Coxe on how the Glencore underwriting affected commodities.
http://goldandsilverlinings.com/?p=925
Liquidy trap? Nothing grows to the sky. Hedge funds go with the momentum but really is only just a shadow your chasing, I wouldn't pay it any mind...hey Mr. Tamborine man play a song for me...when the music stops and all these commodity prices are kited sky high who is really going to pay for all this? No, the conventional wisdom is inflation, sure. And maybe the historical records confirm this but the world economy is already dead, it's just presently on life support. Prices will come crashing down again and further.
21st century Hedge Fund = massively leveraged beta
The thai baht going to 58 would be good for the importers in Thailand but the exporters would suffer.
Quite the other way round, really.
Now that several big funds are reeling...
Uncle Gorilla smells blood and will be raising margins ASAP.
CME sez bra margins are raised from BB to DDD. Now what?
This, too, is bullish for silver.
Ya can't dick-tate physical.
Too much leverage is bad for any market or economy. CDO's, MBS's, etc...
Ya can't leverage BB to DDD without surgery.
With a high enough ethanol concentration the BB can be made to appear DD.
When will they raise margins on OIL. Oh no, this is still how the TBTF rapes Americans. Say, Stupid Sheeple.
Beer goggles, FTW :-)
Lookit that EUR bounce! Yeehah!
Time to exit for this one.
Not yet my Friend. Patience. ( London calling)
Gotta sleep. Have the other 150%, on me.
5 standard deviations is nothing these days.
Leptokurtotic random acts of coordinated bullishness are the new Normal.
Don't parlay dastardly inquistions on the (trade)
In the real world, there are no/few/whathefuckeverhowmany truly Gaussian or Poisson distributions, for most/many/a lot/enough for the sake of this shit, are leptokurtotic.
So, as one meanders merrily out towards the tails, there are new and big bulges that all of a sudden pop up, like when I've been staring at Deta von Teese for too long. But anyhow, these bulges should/could/just stay with me here for a moment, I'm trying to help, be viewed as their very own little special additional non-Gaussian/Poisson but yes, again, leptokurtotic distributions.
And once one gets cast therein, assuming the sticky state of reality, almost as if it were a condition similar to stasis, then experiences tend to remain bounded therein, within their own extremes.
It's as if (And probably is near to the truth, but so far I appear to be the only person working on it at this moment... or at least posting it right here if that makes anybody feel any better. Which it should not.) the fractilius nature of events (naturally occurring in mother nature, no different that pi and a few other constants, limits and associated and randomly but not really assorted givens) takes hold.
So we get stuck therein, so to speak.
Think of it as a Ground Hog Day condition.
Which may not be easy from which to escape. So, now that we are here (not about to enter, but experiencing in actuality, real time, now) in an apparently major/the cluster-fuck of reality, one can assume that within extreme conditions and given the very illogical, ego driven, emotional nature of the human condition (generally piss poor) that we'll be seeing much more of the same.
So, whatever's worked for you recently, will likely persist as we continue to experience a period of significant turmoil. Sorta "the Fourth Turning meets the Book of Revelations and Murphy's Law. (Hereby termed Bozo's Law)
But even more so, think of it as instead of individual events occurring within the leptokurtotic bulge out toward the tails, but as a prolonged period of a series of similarly massively individually and cumulatively negative (or in other periods could be positive) events. In other words, a truly black swan period of time, manifestly feeding upon itself, regaling in the stickiness of the human condition. Indeed, a true black swan experience that takes place over a prolonged period of time comprised of an amalgam of individual events, in the current time/space, disasters.
Now that's leptokurtotsis.
And we just might be there, yet.
Yeah, that.
Now imagine all of that black goose down fluffing up risk models for as long as you care to.
Or.
It's 2021. How much return can I expect from the 5,280% annualized volatility in the money market fund available through my 401k?
The Old School is a bit Jubbly. Keep up the writing, as I'm impresssed.
I believe that you might be looking for a Breit-Wigner or Cauchy-Lorentzian distribution...
The relativistic BW is probably best but since it involves complex numbers that rules out about 99.999% of the population...
Ha ha, Bozo's law, it might/couldmay/should be classic. Hell, I'm gonna use it. But wait, ain't you Zippy? Oh well Bozo's law is funnier/moreamusing/more chuckleraisin.
Cheers knukles. Nice rant :-)
Junked for a repeat on another thread.
They do it to me, too.
Does this mean Andy Hall's bonus will only be $50 million this year, instead of the $100 million he took from bankrupt Citicorp?
Pandit the bandit stole more than that. Old Lane bitchez.
Does this mean Andy Hall's bonus will only be $50 million this year, instead of the $100 million he took from bankrupt Citicorp?
yep fuck him
and screw all the specs that have run oil across $100 USD per barrel in the face of demand destruction & inventory glut
An 8% loss in a commodity based hedge fund last week is a damn good week. However they should make that back by month end, Qadaffy (i know its spelled wrong) will burn more oil fields and gold will rally, Silver will bounce a bit (back to $40?) and all will be right with the world.
Qadaffy (i know its spelled wrong)
Even he doesn't know how to spell it.
qADAFFI. (AKA) MiNi Me.
Qua-duffy the duck
Stay on your STUDDIES Oracle. Sit tight my other friend. Wednesday is your trade.
Q-Daffy works. Even when describing this moron in the US.
What BS.. an investor is not savvy if he can comvince a bank to lend him 50 leverage. TO be savvy you need to know the cycles and the Wyckoffian logic of a chart.
http://www.readtheticker.com/Pages/Blog1.aspx?65tf=202_richard-wyckoff-composite-man-wins-again-with-the-silver-etf-2011-05
http://www.readtheticker.com/Pages/Blog1.aspx?65tf=201_nostradamus-does-not-work-here-but---update-2011-05
Buy...something....anything....it's patriotic!
(Long ODammer beheading futures on Intrade)
I used to serve andrew hall what a doosh!
http://www.youtube.com/watch?v=GzVM6Q4YwAA&feature=related
Bonus hit cuz you are all done.
http://www.youtube.com/watch?v=whXeb7Ohfkk
Best Nancy Wilson out there.
Sprott's flagship fund was down 15.7% on the week.
In April when Silver went up something like 28% the fund posted a 5% return, now when silver pulls back to roughly where it started April the fund loses 15%. Not a great risk/reward profile. (granted it's not a silver fund, it's been a strange year for his fund for anyone following it, I follow it every week).
Christ, I hacked Scandia in 1989, but can't copy a Utoob vid.
Snooze you really lose.
Ann was so cute before she porked:
http://www.youtube.com/watch?v=hpkitLUbeEg
Goldman Snacks/ The JPMorg 500 everybody else 0.
Even back in 86, the Internet was a myth.
and I'm a relic. Byte me, you piss-ant Newbees!
You can't even copy a UBoob vid.
Hard markets to hedge becuase of the over-bid trades on eveything. So hedge funds will start hedging (short) stocks may 2011 seasonal weakness/correction. should be a brutal sell off coming
http://hnn.us/roundup/entries/132360.html
inflation’s running at more than 20%; unemployment at more than 20%; and young, well educated people are fleeing abroad, a major brain drain for that embattled land. And don’t think that’s the end of its litany of problems. It would like to be a full member of the Shanghai Cooperation Organization (SCO)
They got the other side of the nile. You need to wake up that no one has your back, piss and moan all you want about it Citizen. On the other side you just disappear. As for his fund, his head is still attached.
Meanwhile, Albanian Macedonian Bulgarian Oil Corporation, an entity registered in the U.S., is building a $1.1 billion pipeline, aka "the Trans-Balkan," slated to be finished by 2011. It will bring Caspian oil to the West without taking it through either Russia or Iran. You kids need to thank your lucky stars. Stratagem is there will be a time to acount. It will not be to the American people. That light of liberty has been blown out for some time as you were told already. They have countless labor to blow out like matches and they could really care less. The bull shit from fed speak on productivity is real and on the side define ethics, morals, Liberty?
Never had any respect for Andrew Hall and his quasi-insider bets on oil-- I'm sure the losses would have been greater if he didn't have all those 'contacts'.