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Fund Blamed For Gold Sell Off, Salida Capital, Tumbles 37% In September, 49% YTD

Tyler Durden's picture


Last week, a fund rumored to be on deathwatch, was Toronto-based, gold and energy-focused hedge fund Salida Capital (whose gold exposure, in addition to Paulson's, were both factors in the rapid drop in the price of gold last week, following concerns that it was being liquidated in the open market - for more on Salida's gold exposure, read the attached letter). The fund promptly came out and refuted said rumors, however upon review of its monthly P&L, we are somewhat skeptical about its survival chances, even if, in principle, we agree with the fund's investment philosophy. The reason for our skepticism is that Salida was down a whopping 37.2% in September, and 49.4% YTD, a collapse which only compares to that of Paulson's Advantage Plus, and demonstrates vividly just how much of a misnomer the name "hedge" can be when applied to members of the asset management industry. What is worse, however, is that the reason attributed for this epic collapse is amateur hour 101, and any LPs should be far more concerned by the explanation provided for this underperformance than the actual underperformance itself.

Salida says: "September was an extremely difficult month for the Salida Strategic Growth Fund, which fell 37.17% in the month and 49.44% year-to-date. On the back of August's market selloff, we felt that our core gold, energy, and other resource names were trading at very attractive levels, particularly in light of prevailing commodity prices. We further felt that the Fed was moving ever closer to a QE3 announcement, and even more importantly, U.S. money supply had been growing extremely strongly through the summer months even without a QE program. U.S. money supply growth in recent years has proven to be very reliable leading indicator of risk asset markets. So far, however, it appears that this newly printed money has this time flooded into U.S. treasuries offering record low yields." In other words, it's all M2's fault. The problem with this simplistic observation is that as we pointed out two months ago, the move in M2 has nothing to do with the Fed, and everything to do with asset reallocation, when investors scrambled out of equities and into the "safety" of their bank accounts. Furthermore, the unwind of Regulation Q was also a main driver for this surge in the broad monetary aggregate. Alas, Salida made the most fundamental rookie mistake in finance and assumed correlation to be causation (as did Art Cashin, Dennis Gartman and Andy Lees) of Fed stimulus. The irony is, as we said, that we agree with Salida's underlying premise: "With an election year looming, a sputtering economy, and a Fed Chairman who has in the past touted the ability of unconventional monetary policy to cure such economic woes, we believe the [QE3 Large Scale Asset Purchases] announcement will come." Alas, the question is when. And as Salida just found out the very hard way, in finance you may be 100% right eventually, but if your timing is off, well, as Salida itself says, "True money–printing QE3 will come — timing is the question." In that, at least, they are 100% correct.

As for the reason why gold sold off so precipitously two weeks ago, a lot of it has to do with feedback loop concerns that Salida (as well as Paulson and other long-heavy funds) may be liquidating. From the fund's letter:

On the back of this surge in money supply, we made two mid–August investment calls:


1. We continued boosting our exposure to gold, believing it to be a relative safe haven, and that it would continue to attract inflows as QE3 speculation grew in the face of a renewed U.S. recession. While bullion performed well in 2011 through August, it was hit hard in September, falling a dramatic US$200/oz in only a 3–day span. Margin hikes by the CME and the Shanghai Gold Exchange, disappointment from the Fed, and rumours of redemption/margin call–driven fund liquidations and European central bank selling took their toll. These factors tend to be temporary in nature. In fact, with much of the developed world now in or close to recession, European sovereign debt concerns intensifying, and Chinese growth appearing to slow, the fundamental backdrop for gold has rarely been more compelling. A bet on bullion is a bet that central banks are about to ramp up money printing — a logical bet in our view. In fact, we feel safer in gold than anywhere else in today’s market.


2. We felt that a money growth–fuelled market rally would provide a good bounce to beaten–up energy stocks given the relative resilience of the oil price. Not only did the bounce not occur, but the sector has continued to sell off. Sell off is an understatement — it’s been decimated, with the WCAT ETF (a basket of mid–cap energy stocks) falling almost 40% over August and September alone. Our impression is that the sell–off is at least partially driven by forced fund liquidations (i.e. selling to meet margin calls or redemptions). While these factors tend to be temporary in nature and unsupported by fundamentals, we admittedly have less confidence in the short term outlook for the price of oil than we do in gold. It’s not $80 WTI (or $100 Brent) that has investors spooked — it’s the potential for oil to head lower in the near term. And with recessionary conditions spreading, we can’t totally dismiss such a scenario. Accordingly, we’ve now raised our level of hedging in both the energy sector and the broad market.


These two calls have been costly, as the market has moved against us. We still believe that the reasoning was logical, but arguably ill–timed. In hindsight, we underestimated the short term impact of forced selling.

Considering that the letter was written October 3, it is probably safe to assume that Salida was not the source of gold liquidation. At least not yet.

Salida's Monthly Performance Letter (pdf)


And Salida's October Commentary - worth a read (pdf)



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Sat, 10/08/2011 - 10:18 | 1752671 ??
??'s picture

Courtenay Wolfe CEO of Salida  bought lunch with Buffett in 2009 for $2million LOL

Salida Q3 2011 Quarterly Webcast 2011-10-05
Hear from Courtenay Wolfe and the Salida Capital Investment Team as they discuss the quarter in review and their market outlook.

Courtney and Bill Clinton

Sat, 10/08/2011 - 10:32 | 1752744 disabledvet
disabledvet's picture

Is that all she bought? Her nose seemed a little out of joint when she walked on stage.

Sat, 10/08/2011 - 20:46 | 1753702 prophet
prophet's picture

She apparently buys butter in Bangladesh.

Sat, 10/08/2011 - 20:39 | 1753690 philipat
philipat's picture

Having a bath with Buffett would also have resulted in nothing more than a rubber ducky?

Sat, 10/08/2011 - 09:57 | 1752674 Global Hunter
Global Hunter's picture

Hey they blew up in 2007 or 08 as well.  Not bad 2 times in 4 years although they call themselves a hedge fund, hedged as in highly leveraged small and mid cap mining positions.

About 2 years ago they made front page news in Canada when they paid half a million or so to have lunch with Warren Buffet.  

"First we lose your money then we use the rest to have a six figure lunch with a greedy evil lying geriatic."

Go Salida...

Sat, 10/08/2011 - 11:32 | 1752869 A Man without Q...
A Man without Qualities's picture

 "hedged as in highly leveraged small and mid cap mining positions"

It's funny how many funds call themselves hedge funds, when there is no fucking hedge, but rather one single leveraged punt.  Don't they realize they would be better off simply buying AUD vs JPY or EUR vs USD, as it would be far easier to unwind the damn thing?  The worst of these is Paulson - a pure bet that the Fed can generate the exact sort of inflation they want.  Actually, thinking about it, they posted the JAT portfolio here the other day and that was simply the worst pile of crap I had ever seen...

Sat, 10/08/2011 - 17:31 | 1753422 GeoffreyT
GeoffreyT's picture

lol - yep... "hedge" no longer means "hedge" - it has meant 'leveraged punter' for years.


I bleated about this back in June 2006 - see ), to wit:

"A hedge fund (at least one) just died and went to Hedge Fund Heaven. There is not other way to explain the massive downdraught in Gold and Silver, and the tendency of equities to experience "Don’t care about the price" selling late in a given session – despite the fact that timing is right for a bounce, the price level was right, and there was a valid divergence. It was an ohbvious candidate for a contrarian low – what, I have to be a ‘contrarian contrarian’ now?.

Now when I say "Hedge Fund", I actually mean that sort of fund that takes people’s money and punts in a highly leveraged way. Technically, that’s not a ‘hedge fund’ – it’s a leveraged punting vehicle: I don’t have a problem with such vehicles, so long as clients don’t think that the term ‘hedge’ in the name means that there’s actually any hedging going on. Anyone who thinks that will eventually do their balls.

Thing is, it’s relatively easy to perform in a stellar fashion if you’re trading with leverage and relatively small amounts of money (say, less than $100 million – although I would reckon that even $50 million is hard enough to place on a day to day trading basis). But when the thng goes well and attracts larger pools of money, the traders (they are NOT ‘hedge fund managers’) start enjoying growth in FUM (Funds Under Management). They have an incentive to grow FUM due to their performance pay scales (a 1% performance bonus on $10 million is a nice bonus, but what if FUM was a billion?…) and their ‘standard’ management fees. (What – you thought these guys would go ‘no win, no fee’? Are you out of your fucking mind?). (Ooopsie… sorry about the lingo – I have been watching Season 6 of "The Sopranos"… great stuff).

So anyway – you can bet your last twenty cents that the traders runnning the fund aren’t broke… but the fund sure as hell is."

Sat, 10/08/2011 - 18:30 | 1753506 Zero Govt
Zero Govt's picture

" can bet your last twenty cents that the traders runnning the fund aren’t broke… but the fund sure as hell is."

Clearly the financial community has some kind of immunity from losing your shirt as i thought all else in the private sector could due to recent legislation on Directors responsibilities?!!

Ho Hum.

As Global Hunter posted above this is the 2nd time in 3 years no less Salida has blown up. What do you need on your CV to get a job at these Hedge Funds, "Loser" ?

Sat, 10/08/2011 - 11:59 | 1752923 upWising
upWising's picture

"still logical, but arguably ill-timed."

I think that's what you say when you pull the pin on a grenade and forget to throw it.

Sat, 10/08/2011 - 18:23 | 1753495 Zero Govt
Zero Govt's picture

and same result, blown up (fast) in a puff of smoke  ;)

Sat, 10/08/2011 - 09:57 | 1752676 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Implosion bitchez!!! I had to say it.

Sat, 10/08/2011 - 10:09 | 1752704 upWising
upWising's picture

SALIDA = "EXIT" in Spanish

Time to head for the EXIT on this sketch fund.

SALIDA, BITCHEZ!!!  I had to say it.

(¿ What were they THINKING when they named this one ?)

Sat, 10/08/2011 - 10:23 | 1752727 Snidley Whipsnae
Snidley Whipsnae's picture

Exit = Egress ... but since few seem to know what egress means, they could have named it Egress Fund.

The market can remain irrational longer than Egress Fund can remain solvent.

Too bad they didn't invest their initial capital into physical PMs... Their hair wouldn't be on fire.

Sun, 10/09/2011 - 01:01 | 1754095 Spitzer
Spitzer's picture

I am not totally buying this redemption shit. When people redeem, the money has to go somewhere. The liquidation reasoning only covers half of the equation.

I guess people are liquidating and buying more treasuries then gold.

Sun, 10/09/2011 - 04:27 | 1754249 Christophe2
Christophe2's picture

I think people are entirely ignoring the 'win' in Libya.  Gaddafi had twice as much gold as the UK, and god knows how many tons of silver, as he was planning on releasing gold and silver-backed money for the entire region...


It was about a week or two after the Libyan capital and surrounding area was under NATO control that we saw the prices of gold and silver crash-fall, which allowed the paper pukes to unwind their 'unwise' shorts at a relatively low cost...  Coincidence?  I think not.

Sat, 10/08/2011 - 10:41 | 1752760 disabledvet
disabledvet's picture Tango dancing...the "salida" means "the beginning of the dance."
that's a tango you don't see everyday.

Sat, 10/08/2011 - 10:10 | 1752678 X.inf.capt
X.inf.capt's picture

well, i know alot of ZH'ers who want to lncrease thier phyiscal PM pile, so i hope they drive the price lower, short term at least....

keep up the the good work...

alot of holders are counting on you...

Sat, 10/08/2011 - 10:22 | 1752724 DosZap
DosZap's picture


well, i know alot of ZH'ers who want to lncrease thier phyiscal PM pile,


The DIP is happening NOW.

If Europe doesn't pull thru PM's will be thru the roof.

If they fix their problems, PM's will go UP.

You buy now, or lose/lose.

Sat, 10/08/2011 - 10:29 | 1752740 X.inf.capt
X.inf.capt's picture

oh yeah, brother, im still buying,

i do'nt think we have much time left at these prices....

though  low $20's would be nice

Sat, 10/08/2011 - 10:45 | 1752755 DosZap
DosZap's picture

though  low $20's would be nice

In OUR Dreams...........................

My ususal 100% dead on supplier had nothing but 1oz rectangles(junk), and 100oz Ohio bars..................

So, I settled for the bars.

Folks, need to be loading up on Plat at these prices.

Production cost is within a few bucks of $1,500.00 an oz.And since 3/4ths rhwe worls supply comes from Africa,and new mines cost over a billion and take a few years to bring online, as soon as their is a shortage(mine strike),plus theirs not a lot lying around,it's usually mined w/rhodium,and palladium,they will take off.( all hard to find, and costly to get to).

Sat, 10/08/2011 - 10:46 | 1752773 X.inf.capt
X.inf.capt's picture

yep, ive been buyin' on the way down,

even took coins out of my type set, per your suggestion, but...

IM NOT SELLIN' MY 1916-D dime in IN VF-20....


Sat, 10/08/2011 - 11:16 | 1752835 Motley Fool
Motley Fool's picture

Platinum? Eww.

Sat, 10/08/2011 - 10:58 | 1752791 Ranger4564
Ranger4564's picture

The thing about Plat / Pall is that you need an economy to actually use the metals industrially, to deplete supply / increase demand.  In fact, I'm of the opinion that Plat / Pall will continue to decline and G / S will continue to increase, as the economies globaly collapse.  Just my humble opinions.  I own G / S.  Actually, most of my assets, 90% are in G / S I am that sure.  I own the other 10%  in USAGX which I'm thinking of liquidating to be 100% in G / S.  OK, I do have cash and household items, but I'm referring to investments.

Sat, 10/08/2011 - 11:01 | 1752801 totem
totem's picture

I agree that a DIP (and possibly the DIP) is underway.

Question is, do you think the Salida liquidation means that we're nearing the end of the PM liquidation phase or it's just starting?  If the latter, then biting the bullet and hanging out in paper for a while longer may be advisable.

I think there's still a grand liquidation event headed our way, so then based on your recommendation, I'm a "lose/lose."  Oh well.

Patience peeps!

Sat, 10/08/2011 - 10:00 | 1752681 americanspirit
americanspirit's picture

The Tyler Durden Detective Agency doing some of its finest work! This just reinforces the argument that the markets for gold ( and silver) are so thin that the actions of one player of significant size can cause significant moves. It doesn't take a global conspiracy of cloaked manipulators - just one small set of idiots can make waves.

Buy physical and hold on to it. When prices drop, buy more if you can. Take a 3-5-10 year view and you will win.

Sat, 10/08/2011 - 10:27 | 1752712 BlackSea
BlackSea's picture

As the adage goes: the best time to buy physical is when you have extra cash.

Sat, 10/08/2011 - 10:23 | 1752728 junkyardjack
junkyardjack's picture

Well Salida proved the point for the Gold bugs.  Yes the Fed will print eventually but when will that be?  How far down will prices collapse before it happens?  Gold is a great long term investment just like a house can be but if prices are collapsing you might want to let them go down for a while before you hop on in.  Gold doesn't lose its value in theory but that doesn't mean its price has to go up, when the price of everything else goes down so will the price of gold.

Sat, 10/08/2011 - 15:22 | 1753252 DosZap
DosZap's picture


Rational thoughts......................however.

While we DIDDLE ourselves,the Chinese/Indians/Asians, are SCARFING up physical by the tons.

IF what you say did happen, you have to ask yourself(prices bottom),East buys ALL they can get.

WILL there be any phys left for you, if you decided to purchase.

We are short now,Silver is almost impossible to get,(6-12wk deliveries,on anything but 100oz bars, and prems are up on both.

And this is at the low in the mkt.

Where do they go if it turns?.

Sat, 10/08/2011 - 10:32 | 1752736 Snidley Whipsnae
Snidley Whipsnae's picture

Excellent advice AmericanSpirit. Take the long view... Let these dip shit fund managers that think they are going to time the Fed moves get their asses handed to them.

How can they time the Fed when the Fed can't time the Fed?

Sat, 10/08/2011 - 10:00 | 1752682 slewie the pi-rat
slewie the pi-rat's picture

QEIII - LSAP + Reg. Q = deflation?


Sat, 10/08/2011 - 10:00 | 1752684 Mike2756
Mike2756's picture

How many more are out there? Seems too many are still betting on a dollar collapse.

Sat, 10/08/2011 - 10:02 | 1752692 bigwavedave
bigwavedave's picture

If GLD doesnt hold the 150 line they are toast. If not already.

Sat, 10/08/2011 - 10:06 | 1752696 sgorem
sgorem's picture

+1 for your post. +100 for your avatar Dave......

Sat, 10/08/2011 - 10:09 | 1752703 Rynak
Rynak's picture

It's kinda cute when the puppets talk to each other.

Sat, 10/08/2011 - 10:07 | 1752700 FoieGras
FoieGras's picture

These guys are tiny, managing about $900m total over a wide number of funds. That's a drop in the bucket in the gold equity, bullion and energy equity world.

Whatever happened to the gold stock/bullion and resource stock markets, this insignificant fund had little if anything to do with it.

Sat, 10/08/2011 - 10:20 | 1752717 Global Hunter
Global Hunter's picture

900mm leveraged up 10x is signifigant when you consider precious metals and pm mining stocks account for about 0.15% of mutual fund holdings in the US (read the 0.15% figure here on ZH about a month ago).

Sat, 10/08/2011 - 10:32 | 1752743 bob_dabolina
bob_dabolina's picture


Look at the first SCRIBD that Tyler wrote above. 

Gross Long: 144.05%

Gross Short: 9.89%

And it's a gold and energy centric fund so they had some levered gold positions for sure.


Sat, 10/08/2011 - 17:55 | 1753459 A Man without Q...
A Man without Qualities's picture

gross long = 1.44 x 900mm, so about $1.3 bn.  Gives an idea what impact Paulson unwind would have...

I think the smart move might be long physical, short futures... any collapse is going to cause a short term scramble for cash... 


Sat, 10/08/2011 - 18:56 | 1753525 bob_dabolina
bob_dabolina's picture

If you read the last sentance of Tylers article he(they) posit that Salida hasn't unwound yet.

I'm not sure about going long physical and shorting futures, that kinda' sounds like 'selling short against the box' which is really only used for tax purposes pre 1997.


any collapse is going to cause a short term scramble for cash... 

So you wouldn't want to be in gold, you would want to be in cash. If margin calls sweep through during a crisis you could see gold hit $1,000 (maybe lower). If you think I'm being hyperbolic gold fell what....$200 in two days? Almost $400 in a month. I'm not saying it's going to happen but should a crisis materialize I wouldn't take it off the table. Paulson liquidating GLD could cause gold to correct 20% ALONE which at these levels would bring gold to around 1,300.

Sat, 10/08/2011 - 20:53 | 1753721 prophet
prophet's picture

When a Paulson gold class LP goes into the fund and when they come out of the fund do they pay in / redeem in gold or cash?  If redemption is in gold then does the fund hold gold for gold class LPs and borrow against it or will the fund have to buy gold to pay out in gold?

Sun, 10/09/2011 - 01:05 | 1754104 Spitzer
Spitzer's picture

Redeemed money has to go somewhere.

I dont think a jump from a hedge fund-to cash-to gold all in 5 minutes will produce a rally in the cash.

Sat, 10/08/2011 - 10:07 | 1752702 Fips_OnTheSpot
Fips_OnTheSpot's picture

Shocking - hehe.

Sat, 10/08/2011 - 10:14 | 1752707 Atomizer
Atomizer's picture

I can only imagine that Pet Rocks will be used as leverage to recapitalize the European Banks.

Sat, 10/08/2011 - 10:18 | 1752708 DormRoom
DormRoom's picture

There will not be QE3, unless CPI becomes deflationary.


Bernanke is a Freidmanite.  If you increase the money supply in an an environment of non-negative CPI, you increase inflation in the long run, and risk stagflation.


look @ Britain for Christ sake.  consumer inflation is 4.5%, and very high unemployment.   That country is in the grips of stagflation.  And yet they applied more QE. Jesus.


So ZH is correct, before you get QE3, the US needs to be in a deflationary environment.  But by that time, you would have lost 50%, or worse in equities.

Sat, 10/08/2011 - 10:26 | 1752735 Atomizer
Atomizer's picture

I beg to differ, Burnanke has no other choice but to come up with another unconventional scheme to inject monies into economy. He needs to get to .82-.84 DXY, then the debasement cycle can begin and equities will soar.

The O'Messiah will praise himself in saving the economy.

Sat, 10/08/2011 - 10:34 | 1752745 DormRoom
DormRoom's picture

DXY is only one factor.  The 3 board dissenter have already suggested QE to be stagflationary in their recent speeches.  Volcker alluded to  it in his recent NYTimes opinion piece.


Daytraders want QE so it can juice the market, because hedgefunds can apply more leverage, and push up equity prices short term. 


But by itself, QE does not solve unemployment.


It's like getting more free chips @ the casino, while the building is about to collapse in on itself.

Sat, 10/08/2011 - 10:45 | 1752768 Rynak
Rynak's picture

Are you suggesting that fed desicions are based on sanity, reason and efficiency, regarding the economy?

If yes, please feel yourself be laughed off the stage.

Sat, 10/08/2011 - 11:20 | 1752841 Motley Fool
Motley Fool's picture

Amusing as that is, their decisions are sane. They are just based on a different set of assumptions.

Sat, 10/08/2011 - 14:02 | 1753118 Rynak
Rynak's picture

I suspect "i won't be there, you won't be there" is part of those assumptions?

Sat, 10/08/2011 - 14:24 | 1753150 Motley Fool
Motley Fool's picture

Nope, they are not. I'll tell you this much, gold is, and ft knox aint empty or full of tungsten.

Sat, 10/08/2011 - 15:29 | 1753262 Rynak
Rynak's picture

Interesting possibility. I wouldn't bet on it, but regardless... interesting scenario.

Sat, 10/08/2011 - 15:39 | 1753276 Motley Fool
Motley Fool's picture

That would depend on what betting on it implies. ;)

Sat, 10/08/2011 - 10:45 | 1752769 Atomizer
Atomizer's picture

Well said. Regarding unemployment. Keeping the kids addicted to crack government checks is meant to sponsor desent by raising taxes (on the rich) to support the jobs that have been shipped oversea's. Oh the irony.

Sat, 10/08/2011 - 10:42 | 1752762 dwdollar
dwdollar's picture

NO!!!  How many times must we go through this???  Central banks print money to save "private" banks. They don't care about inflation, employment, or law. That's all BS meant to keep the people pacified and politicians thinking they set the agenda. QE3 isn't here because the banking system doesn't need it bad enough, yet.

Sat, 10/08/2011 - 12:13 | 1752955 artinlight
artinlight's picture

Makes the most sense - as it makes all the non-sense in money sensible.

So what is the sensor Bennie boy Ben will use to open the flood gate - Timmay pointing a gun to his head or someone at the IMF? 

Sat, 10/08/2011 - 13:41 | 1753081 anonnn
anonnn's picture

" That's all BS meant to keep the people pacified and politicians thinking they set the agenda. "

...arguably, the working defnition of 'government'

Sat, 10/08/2011 - 10:54 | 1752784 disabledvet
disabledvet's picture

And Salada is also correct...they just forgot to add "over there" to their strategy.
that's right folks..."flavor!" know it, love it, own it.

Sat, 10/08/2011 - 10:20 | 1752718 flyonmywall
flyonmywall's picture

So they bet on a full blown QE3 and lost. No surprise there. Wonder how many other doomsayers got caught with long gold stocks. Classic pump and dump scheme. Physical is where it's at. Even if it corrects, you have it in your hot little hand.

Sat, 10/08/2011 - 11:00 | 1752797 disabledvet
disabledvet's picture

so the problem is with LEVERAGE.....Ahhhh, I see now. Tell me more....I've just levered up the entire...State of bathroom fixtures. They're quite nice. Would you like to see?:
some say i overpaid. but i like them very much!

Sat, 10/08/2011 - 11:20 | 1752839 i-dog
i-dog's picture

Nice house! I like what you did with the staircase.

Sat, 10/08/2011 - 17:00 | 1753385 RockyRacoon
RockyRacoon's picture

Nice guest house.  When will you show us the main residence?

Sat, 10/08/2011 - 10:25 | 1752733 swissaustrian
swissaustrian's picture

That letter reads like it was written by a retail investor...

Sat, 10/08/2011 - 10:26 | 1752734 swissaustrian
swissaustrian's picture


Sat, 10/08/2011 - 10:34 | 1752749 SpeakerFTD
SpeakerFTD's picture

I'm sorry, but what the hell kind of investor wants to be in a fund that swings up or down > 50% returns on an average year.   That's not investing, that's gambling.

Sat, 10/08/2011 - 10:46 | 1752771 Ranger4564
Ranger4564's picture

Average year?

Sat, 10/08/2011 - 10:35 | 1752752 DosZap
DosZap's picture

Fund Blamed For Gold Sell Off, Salida Capital


Thank YOU Salida Capital!!!!!!!!!!!!!!!!!!!!!!

Sat, 10/08/2011 - 10:45 | 1752770 bob_dabolina
bob_dabolina's picture

Considering that the letter was written October 3, it is probably safe to assume that Salida was not the source of gold liquidation. At least not yet.

Sat, 10/08/2011 - 10:37 | 1752754 mantrid
mantrid's picture

for weeks ZH has been ranting any plunges in gold and silver were mainly caused by CME margin hikes. a possibility that someone was liquidating their winners wasn't much welcome here, was it? "after all, it's all CME's fault, move along".

Sat, 10/08/2011 - 10:56 | 1752789 Tyler Durden
Sat, 10/08/2011 - 11:03 | 1752808 disabledvet
disabledvet's picture


Sat, 10/08/2011 - 11:50 | 1752904 Going Loco
Going Loco's picture

Exactly. Well done the Tylers. A pity some of the ZH readers only read what they want to hear (and don't read that very carefully I would guess). 

Sat, 10/08/2011 - 12:06 | 1752943 FranSix
FranSix's picture

Something that aught to support the opinion that CME margin hikes are the fundamental is the weakness of gold lease rates.  Normally in a price infarcus like we've seen in the last month would be accompanied with aggressive rises in lease rates.

None of that occurred, so any leveraged position with no inention of taking delivery would not affect lease rates b/c there would be no physical gold per se in transaction.


Sat, 10/08/2011 - 12:16 | 1752960 artinlight
artinlight's picture

We believe you - no need to unzip your pants and show us how big it is.

Sat, 10/08/2011 - 12:21 | 1752973 artinlight
artinlight's picture

btw - Gold will get to under $25 before it gets to over $35-40 again.

I know this cause I printed out the chart and put a ruler over it and drew some lines on said Gold chart. 

Can I now be an investment advisor now too?

I wanna be a niggerslave to $ at the highest order - just like everyone here.  Working for a living is for real men and I am sick of it cause niggerslaves do WAY better.


Sat, 10/08/2011 - 14:16 | 1753134 Bastiat
Bastiat's picture

You can be anything you want as far as I'm concerned.  But please, I'll take all the gold you can find me at $40 an ounce or even 10X that.

Sat, 10/08/2011 - 18:15 | 1753484 Solid
Solid's picture

Do you have to use that language?
If you had a brain, you would find another, perhaps more articulate, way of making your point.

Sat, 10/08/2011 - 15:20 | 1753245 RobertMugabe
RobertMugabe's picture

How about Debt Deflation, bitchez? The concept isn't hard to grasp. Does anyone here still think that silver is behaving like "money"? Has it not become painfully obvious to you all that it is a levered up commodity plaything? No deneying that it is a traders wet dream due to the volatility, but seriously, some of the comments on this fantastic site are just inane. 

for example

" Don't worry about the price, just keep stacking!"

"The price is in fiat, just stack and don't ever think critically about your investment decision"

"Silver and gold aren't in a bubble, the last time they were was over 20 years ago, no way are they in one again!"

"Don't be a sheep! Sheep use fiat. Only real money is gold and silver!"

Its sad really. As the credit crontraction continues all of you who bought gold over 1,200 and silver over 9 are going to see who the lemmings really were...

Sat, 10/08/2011 - 17:29 | 1753419 kaiserhoff
kaiserhoff's picture

That is one spooky mug shot, RM.  Guess you're all set for Halloween;)

Sun, 10/09/2011 - 01:01 | 1754096 RobertMugabe
RobertMugabe's picture

Its my actual face. Seriously just google me

Sun, 10/09/2011 - 01:12 | 1754116 Spitzer
Spitzer's picture

Read this

Deflation is the biggest myth out there. Never in history has a debtor nations currency risen in value as its economy imploded.

I am guessing you dont live in Iceland.

Sun, 10/09/2011 - 19:54 | 1755876 RobertMugabe
RobertMugabe's picture

"Deflation is the biggest myth out there. Never in history has a debtor nations currency risen in value as its economy imploded."

Is this statement serious? Do you have short term memory? What happened to the U.S. economy in 1987? Do you know what happened to the dollar at that time? How about again in '08? Market goes down, dollar goes up. As the deleveraging continues, credit supply contracts, less credit chasing a supply of goods. Irving Fisher's Debt deflation is a good introduction to morons who do not understand this concept. The fact that the author of the aforementioned article refers to Mish Shedlock as "Mish the idiot" tells you all you need to know about the authors understand of credit contraction.

Mon, 10/10/2011 - 15:30 | 1758706 mantrid
mantrid's picture

providing a post that merely states the obvious (hikes -> plunge) isn't any answer to my rant, Tyler, and you know this. the point is, CME hikes are only a trigger encouraging the sell off that would happen anyway for reasons other than CME manipulation fetish. you do a great job but oftentimes you concentrate on simplistic explanations risking to miss important conclusions. and that's exactly what Salida did - simplistic expectations. let it be a lesson we all draw from.

Sat, 10/08/2011 - 10:43 | 1752756 PulauHantu29
PulauHantu29's picture

This might very well explain why the barbaric metal has been steady recently after a tumble. I knew the Goldbugs were not really eating it.....and I know many otherwise intelligent and honorable people at work, etc. who have been buying even greater amounts of the yellow metal then usual.

A major fund in trouble needing to sell makes sense.

GL to all of them!

Sat, 10/08/2011 - 10:40 | 1752759 jekyll island
jekyll island's picture

PM's are held for different reasons than mining stocks.  One is for insurance, the other is for upside potential.  The key to both is buying at the right time.  Mining stocks are risky, leveraged mining stocks is suicidal.  You will hit some homeruns, you will strike out.  I think this fund may have shorted US Treasuries as part of their bet against the dollar, probably don't have much scalp left now if they did.  '



Sat, 10/08/2011 - 18:11 | 1752763 Hansel
Hansel's picture

LOL 37% in a month.  37% is just a wiggle right?  Hold the wiggle.

Sat, 10/08/2011 - 10:43 | 1752764 Ranger4564
Ranger4564's picture

They may have mistimed both, but they are 100% correct in both calls. Gold / Silver will be the best investment in the near - far future, and Energy (including solar / wind / alternatives) will be the second best investment in the long term.  For the short term, G / S are the only play.  Energy consumption will decline with the collapse of the economy as people will not be able to buy energy, corporations / municipalities will not be able to deliver energy.  Expect blackouts as the economy falls.  In the resurgence, restoration of civilization after the great devastation that's coming, the energy play will be robust.  Will there be a stock market left?  Who knows.  That's why you want Bullion, physical.

Sat, 10/08/2011 - 11:02 | 1752782 bob_dabolina
bob_dabolina's picture

 the collapse of the economy as people will not be able to buy energy]

That's a funny thing.

At my local gas station a 1.5L bottle of water is $1.50 (so $1 a liter) and there are 3.78 liters in a gallon. So $3.78 cents for a gallon of water when buying 1.5L bottles (I see a lot of people drinking bottled water) and gas at that same station is $3.10. So pound-for-pound (or gallon-for-gallon as it was) some people are paying more for water than they are for gas, and water is free out of the tap. Figure that one out.

Sat, 10/08/2011 - 11:10 | 1752806 Ranger4564
Ranger4564's picture

I always forget other commodities in my posts... I know water and food will also rise dramatically, but I'm unwilling to invest in resources necessary for human survival.  It's my own ethical stance.  I will not ever invest in water, and I will not invest in food.  I want those to be available at a fair price to all who will need them.  And I won't invest in Oil anymore as I know that affects all prices dramatically.  I will invest in alternative energy and G / S.  I lost recently in energy and got out because I know the economy is unwinding.  I was in FSLR at 135 and NALFX at 45 SPWRA ad YGE but got out of them before they plummeted.  FSLR is around 60 now.  I was also in industrials, CAT / CMI but they also dropped and I got out before they went lower.


Sat, 10/08/2011 - 11:08 | 1752820 disabledvet
disabledvet's picture

so much for the "use value" theory of pricing. "they can get water for free but they still pay for it." yet another reason for gold to be 30,000 an ounce. of course if it falls to 1000 an ounce then it's straight to Madison Avenue so we can "brand our gold." Mine's called "puppy dog's gold." what about all of you?

Sat, 10/08/2011 - 13:17 | 1753048 FeralSerf
FeralSerf's picture

I think I'll get Big Dick's Gold if the trademark is still available.

Sat, 10/08/2011 - 10:47 | 1752775 props2009
props2009's picture

Gold has far too many unknowns to say that one fund did the damage.


Gold and Intermarket Insights:

Sat, 10/08/2011 - 11:02 | 1752805 jcaz
jcaz's picture

Actually, gold is about the most simple, hence it's value.....  And yes, two hedges CAN screw up a market- has happened throughout history, this is the oldest story.

Sat, 10/08/2011 - 14:17 | 1753136 slewie the pi-rat
slewie the pi-rat's picture


and wrong, again!

Sat, 10/08/2011 - 11:13 | 1752788 thunderchief
thunderchief's picture

All these take downs are Comex induced.  This last is a short covering orgy for JPM and Co.    I hope they try one or two more knockdowns and drive out more speculators and cover more.  Good for long term. 

Just keep this in your head.  All this is one big paper pushing game, which is why you should be buying the physical, as boring and cumbersome as it is, with open arms. 

A few things to look foward to in the coming months.  All the speculators have been crushed and killed in this takedown.  Most of the big short positions are either covered or being used as a spread trade. 

There are not to many standing in this last takedown except physical buyers and JPM, which I think will go long.  Max Kieser needs to change his slogan to "buy silver, make JPM a killing".  I hope someone sends him the message.

The question now, after a few more rapings in the coming weeks are:

How much Silver and gold did you buy on sale?

When will the funds come back in and go long?

Do we see shorts come in on a price rise?

Do we get enough physical delivery to squeeze the comex (silver).

Last one...The Pan Asian exchange opens in June 2012...Game over Comex.  Who positions themselves early?

Remember, as grandpa and dad warned you... "Silver and gold take the escalator up and the elevator down"

Here's another one for spite...

"There's two kinds of liers in this world, those that say they never jerked off, and those that say they quit".. Another one from Gramps...No Joke...

Sat, 10/08/2011 - 15:14 | 1753234 Chicken_Little
Chicken_Little's picture

You sound like Stewart Thomson. Chill out dude. If you like one line quotes, go into politics.

Sat, 10/08/2011 - 12:56 | 1752882 devo
devo's picture

I believe the Fed is hoping the super committee/congress enact stimulus/policy, so they will probably refrain from printing until that sorts itself out.

Sat, 10/08/2011 - 12:00 | 1752926 buzzsaw99
buzzsaw99's picture

fundamental demand, what a laffer! those guys **are** fundamental demand. they buy up everything in sight with borrowed money, and with zero intention of ever taking delivery on any of it. Then they cry like a bitch when no-one wants to pay their jacked up prices to let them out with a profit. die bitchez!

Sat, 10/08/2011 - 13:15 | 1753045 FranSix
FranSix's picture

I can see that one being played out repetitively in the gold bull, as it had since day 1.

One detail in the mix might have been that contract prices were probably denominated in U.S. dollars while the $CDN fell precipitously, giving some added impetus with fluctuations in the forex between the two currencies.

The $CDN gold price is above $1700/oz. CDN, while the $U.S. dollar gold price is just above $1600/oz. U.S.  I think this might mean that the dollar might continue to appreciate for a time, setting in the delay for gold price advances in that currency.

Forex values in asset pricing models are not thought to change, being the paragons of spittle-flecked price stabilité.  So here we see how it played out in this latest round.

Sat, 10/08/2011 - 12:33 | 1752985 earleflorida
earleflorida's picture

fwiw dept:

there are eight [8] market makers remaining in the "London Gold Fix (*twice daily/ weekly)" that set the price for the PM ,... whereas notably, five [5] actually fix/set price with the remaining three[3] non-fixing market makers doing the grunt work

*Note: N M Rothschild Bank [ one [1] of five [5] fix market makers] withdrawal in mid/2004, and was replaced by Barclay's Capital, whom by the way purchased Lehman Brother N.A.  Trading/Brokerage house 9/15/08. 

**Note: AIG [one [1] of three [3] non-fixing market makers also withdraws  shortly after NM Rothschild's Bank's departure?

#1/5 -8  "Bank of Nova Scotia"

#2/5 -8  "Deutsche Bank AG"

#3/5 -8  "HSBC Bank"

#4/5 -8  "Societe Generale"

#5/5 -8  "Barclay's Capital"

*#6/8    "J. Aron/ Unit GS's

*#7/8    "JP Morgan Chase Bank"

*#8/8    "UBS Bank"

PS. N.M. Rothschild Bank & Assoc.[?] purchase the banking half of Lehman Brother's ~ Nov/08,... with Nomura Holdings purchasing LB's Hong Kong Unit.

PS2. The correlation pertaining to the departure of two behemoths at said time and the cost of PM's thereof, stimulates, and excites my grey matter with more questions than answers? JMHO     

thankyou Tyler

Sat, 10/08/2011 - 13:09 | 1753037 buyingsterling
buyingsterling's picture

CAN ANYONE TELL ME the status of the $16 trillion lent to banks by the fed? This figure was recently revealed in the fed audit, and at least some of the stories say little of it has been paid back. Perhaps this is to be the ongoing QE. The banks stay in a state of quasi crisis, unable to repay the loans, but in the meantime are exchanging the dollars for new treasuries, while the fed's official balance sheet stays the same. Can someone who understands this please explain if this is possible?

Sat, 10/08/2011 - 13:21 | 1753053 earleflorida
earleflorida's picture


Sat, 10/08/2011 - 13:28 | 1753062 Piranhanoia
Piranhanoia's picture

Your offshore accounts are not subject to scrutiny if you own the government, so I am guessing the answer is no.

Sat, 10/08/2011 - 19:52 | 1753609 unununium
unununium's picture

Link please.

Sun, 10/09/2011 - 20:00 | 1755893 Goner
Goner's picture

Unununium, I think this is the story in question

Sat, 10/08/2011 - 13:26 | 1753060 dumpster
dumpster's picture

so hedge funds in trouble .. selll gold .. and do it at 3. in the morning ,, sell into weakness

that does it every time .. no use selling when the gold market is stronger .. the hedge funds would get a little more for the sales

the strange of it all.. these gold sales always happen when the gold market is asleep.

waterfall effects .. sure and bridges to sell here to the pavlovians


Sat, 10/08/2011 - 13:26 | 1753061 Piranhanoia
Piranhanoia's picture

I am getting a picture of someone that operates their business on rumor.  That is great for Rupert Merde or the NewOld York Times, they make up rumor and call it news.  They learned a lot from the Enquirer and Hearst.  It's only right that  Salida Capital or "Exit your Money" (loosely translated name of the company) would believe yellow journalism as true, and bank on it.  down is up.  We have always been at trade war with Oceania. (you idiot, we are Oceania)  

The rumors are going to get far better.  Woe the luck for anyone playing them.

Sat, 10/08/2011 - 14:26 | 1753156 Nate H
Nate H's picture

Yet another sucker who bought the QE is printing and QE is inevitable memes. Gold will eventually go up but not from FED "printing"...

Sat, 10/08/2011 - 14:51 | 1753204 LeonardoFibonacci
LeonardoFibonacci's picture

These fuckers at Salida manage the "hedging funds" for some Canadian banks.  Looks like they are gonna get fired

Sat, 10/08/2011 - 15:30 | 1753264 Zola
Zola's picture

Well they can blame it on the ESF ... Considering the takedown of Gold in September, the trade was correct. As i have said before , the intervention + lemming investors + cluless capital managers pouring into treasuries = GREAT BUYING OPPORTUNITY FOR GOLD & STOCKS. Moreover if as i suspect the bonds have peaked , all the bagholders will soon realize that holding treasuries is as Faber said a suicidal investment ...

Sat, 10/08/2011 - 17:59 | 1753466 Diablo
Diablo's picture

so can we expect another big selloff in PM's come december as year-end redemptions start rolling in?


Sun, 10/09/2011 - 09:30 | 1754408 SRALtd
SRALtd's picture

Salida of course means "exit" in spanish.

Sun, 10/09/2011 - 19:54 | 1755877 Sheriff Douchen...
Sheriff Douchenik from AZ's picture

Isn't this fund being run by a mid 20's associate? Didn't the founders all take off to parts unknown? I wish I was this smart.

By buying lunch with Buffett...they deserve everything coming to them.


Mon, 10/10/2011 - 13:34 | 1758130 rex-lacrymarum
rex-lacrymarum's picture

You err a little when you reference 'M2'. M2 is not a good measure of the money supply. The best measure of US money supply is the true money supply TMS-2 - and THAT was growing at an unprecedented 27.8% annualized rate in August-September this year (15.8% year-on-year, the highest rate of growth since the quarter following the Lehman collapse).

The mistake Salida made when looking at these money supply growth data was that they failed to properly consider the sources of the sudden surge in US TMS - after all, 'QE 2' was already over, so one needed to wonder where the money actually came from. The main sources were in fact the euro area banking system (which bled dollar deposits) and US banks themselves, due to a new FDIC rule that made overnight swaps of funds into overseas subsidiaries uneconomic for US banks. So partly the strong growth rate in TMS-2 validated money supply growth that had already occurred in the past, while another part was simply deposit money fleeing euro-land.

Obviously, this type of money supply growth is not equal in quality to what happens when either the commercial banking system is extending inflationary credit or when the Fed is actively pumping and monetizing debt. it hasn't much to do with M2 though, which is a measure that is very much distorted by its non-money components. I recommend familiarizing yourself with Austrian monetary theory, it will be time well spent.

Wed, 11/09/2011 - 11:31 | 1860854 karmete
karmete's picture

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