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How To Lose 75% In One Year

Tyler Durden's picture




 

Whitney Tilson may have met his match. Canadian commodities hedge fund Salida Capital is no stranger to media notoriety: last October none other than Zero Hedge wrote that "Fund Blamed For Gold Sell Off, Salida Capital, Tumbles 37% In September, 49% YTD" after the fund's infamously timed bet on more easing by the Fed backfired and resulted in losses so severe it was enough to warrant liquidation rumors across all commodity classes, which in turn set off follow on liquidations worries in a self reinforcing feedback loop. In retrospect, anyone who read the caveats about the Toronto-based asset manager would have been wise to get the hell out of dodge, because the firm that simply had used massive amount of leverage to generate ridiculous returns such as +35.84%, -66.50%, +188.55%, 44.88%, and -53.39%, is now down 75% in the last 12 months, meaning anyone who invested $100 with the fund, is down to just $25 (and realistically less when management fees are accounted for). It also means that the fund's Sharpe ratio is borderline negative. Finally, it is precisely such fantastically leveraged contraptions on coin toss-based outcomes that even further undermine what little credibility and standing the last vestiges of real, alpha not beta-focused, asset managers remain in this New Normal of ubiquitous central planning.

From Salida:

If there are any silver linings, it is this:

We are our largest investors

 

Partner and employee personal capital represents a significant portion of our assets under management. Collectively, we have a deep belief and financial commitment in the talent of our team.

And this:

Effective June 6, 2012, the investment minimums for the Salida Strategic Growth Fund and Salida Wealth Preservation Fund have been reduced to the following:

 

Initial Investment: CAD $5,000
Subsequent Investment: CAD $1,000

In other words, hopefully it is just the firm's own employees that have had to sit through a dramamine-demanding P&L rollercoaster which despite all the up years looks set for its light out moment. And hopefully any outside investors have lost at most CAD $5,000.

 

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Tue, 07/17/2012 - 19:58 | 2626391 LetThemEatRand
LetThemEatRand's picture

They didn't get the memo that the only way to invest successfully in a manipulated market is to be part of the house (I missed that memo too).

Tue, 07/17/2012 - 19:58 | 2626396 fonzannoon
fonzannoon's picture

yeah no kidding unless you are in the club this is all pissing in the wind. My big mistake...mining stocks ( I was hoping Sprott was in the club)

Tue, 07/17/2012 - 20:08 | 2626412 LetThemEatRand
LetThemEatRand's picture

At some point there is going to be a reset.  It may be 3 months or 3 years, but Sprott is a smart guy and I believe he's right on the money.  As Jim Rogers says, I hope I'm smart enough to buy more PMs when the price goes down.  

Tue, 07/17/2012 - 20:13 | 2626421 CIABS
CIABS's picture

Is there a term by which to state how far down a fund is (or a position, or anything) in terms of the percentage gains that would be needed to get back to unchanged?  If this doesn't exist in the financial world, how about using an "R" prefix, meaning "recovery"?  So if you're down 75%, you're down R-300%.  The DJIA was down R-809% from 1929-32 in nominal terms (down 89%), as I recall.  Those negative double-digit numbers just don't seem dramatic enough.

Tue, 07/17/2012 - 20:13 | 2626422 fonzannoon
fonzannoon's picture

Yeah I hope I am smart enough to have money to buy pm's when the price goes down.

Tue, 07/17/2012 - 20:25 | 2626457 LetThemEatRand
LetThemEatRand's picture

Yeah, easy for a billionaire to average down ad infinitum.

Tue, 07/17/2012 - 20:52 | 2626524 francis_sawyer
francis_sawyer's picture

Assuming a constant 10% return... All they have to do is "let it ride" now for the next 15 years and they'll be back to even... #WINNING

Wed, 07/18/2012 - 05:19 | 2627297 fx
fx's picture

For someone who invested $10.000 right at the start in 2004 , he is only down by 4.6% overall. Volatility of the returns is mindboggling, no doubt. Of course, the later you joined that fund, the worse you are off by now.

Wed, 07/18/2012 - 09:35 | 2627490 ndotken
ndotken's picture

Look ... this isn't complicated ... buy the dip people ... just buy the fucking dip ....

Tue, 07/17/2012 - 20:35 | 2626481 A Nanny Moose
A Nanny Moose's picture

Isn't Salida spanish for exit, or departure?

Tue, 07/17/2012 - 20:45 | 2626508 ACP
ACP's picture

I wouldn't be surprised if this turns out to be a ponzi scheme hiding in plain sight. What better way to fleece investors than to make the worst "trades" possible after the fact, then just pocket the money.

Any way to look into that, Tyler?

Tue, 07/17/2012 - 21:16 | 2626593 Global Hunter
Global Hunter's picture

Not sure about that they've done this before in the past, its pretty easy to lose a lot of dough when you lever up on junior resource cos.

Tue, 07/17/2012 - 22:26 | 2626742 ACP
ACP's picture

I don't doubt that's happened many times, but damn, 75%.

Then again, they did have a bad 2008 also...

Tue, 07/17/2012 - 20:03 | 2626403 Frastric
Frastric's picture

And anyone who invested in the beginning only made a 44% percent return...

Tue, 07/17/2012 - 20:07 | 2626411 Freewheelin Franklin
Freewheelin Franklin's picture

First glance I thought that said "how to lose 75 lbs."

I really gotta root my tablet and install ABP.

Tue, 07/17/2012 - 20:08 | 2626413 famousamos
famousamos's picture

It's a buying opportunity, BITCHEZ!

 

Tue, 07/17/2012 - 20:10 | 2626417 billsykes
billsykes's picture

Salida Capital is the biggest piece of shit out there, anyone even associated with them are idiots.

Tue, 07/17/2012 - 21:06 | 2626563 Global Hunter
Global Hunter's picture

yep

Tue, 07/17/2012 - 20:14 | 2626426 Turin Turambar
Turin Turambar's picture

Only down 75%?  Amateurs.  They've got nothing on TVIX or UVXY.  LOL

Tue, 07/17/2012 - 20:16 | 2626430 Downtoolong
Downtoolong's picture

Leverage kills. Someone should start a non-profit charity to find a cure.

Tue, 07/17/2012 - 20:17 | 2626436 I am a Man I am...
I am a Man I am Forty's picture

"meaning anyone who invested $100 with the fund, is down to just $25"

got it


Tue, 07/17/2012 - 21:33 | 2626633 jez
jez's picture

". . . down 75% in the last 12 months, meaning anyone who invested $100 with the fund, is down to just $25 . . ."

 

Dang, is that right?

I'm looking into this and I promise I'll get back to you on it, everybody, but my preliminary investigations suggest that this may mean that 75 per cent of 100 is 75.

Wed, 07/18/2012 - 03:47 | 2627220 Satan
Satan's picture

Lol. Of all the things I struggle to understand on ZH...Thanks TD!

So a 300% gain(after fees) will bring the happy investor back to break even!

Tue, 07/17/2012 - 20:19 | 2626439 Dr. Engali
Dr. Engali's picture

Broker to client: 75% loss? Remember Mr. Client it's never a loss until you sell. When we talked about this fund we decided we are in it for the long haul.. So hang in there I'm sure it will rebound. Right now might be a good time to dollar cost average.

Tue, 07/17/2012 - 20:24 | 2626452 LetThemEatRand
LetThemEatRand's picture

Here.  Look.  If you had invested the same amount just 12 years earlier and you held, you would be up 60% right now even with the recent correction.  Hold on, I have a hooker calling on the other line.   I'll call you right back.

Tue, 07/17/2012 - 20:53 | 2626527 I should be working
I should be working's picture

It's never a loss until you sell later, for a bigger loss...

Tue, 07/17/2012 - 20:19 | 2626440 Long-John-Silver
Long-John-Silver's picture

I fear a "Boating Accident" is imminent.

Tue, 07/17/2012 - 20:24 | 2626451 element115
element115's picture

I was expecting a list of Cramer's stock picks.

Tue, 07/17/2012 - 20:24 | 2626453 Pancho Villa
Pancho Villa's picture

Customers may be hurting, but with a 2 + 20 fee structure and the +35.84%,  +188.55%, and 44.88% years, the operators are probably very wealthy men. Nothing like gambling with other people's money.

There is a book called "Where are the Customers' yachts?" that is an enjoyable read.

Tue, 07/17/2012 - 20:32 | 2626471 Boilermaker
Boilermaker's picture

meaning anyone who invested $100 with the fund, is down to just $25

 

Wow, really?  People were struggling with the mathematics?

Tue, 07/17/2012 - 20:33 | 2626475 you enjoy myself
you enjoy myself's picture

so i guess they're not following the "strategy" of levering up and BTFD after any single down day? 

to be fair, how are you supposed to invest in a corrupt, centrally planned market?  almost every single equity looks like a straight line up since Fall 2011, in perpetual anticipation of QE - except for gold, silver, and the miners.  a lot of the miners are down literally 50% since the beginning of the year.  its the only sector that hasn't come along for the ride.  even though you'd expect PM's to be actually beating the S&P, given that the reason for the entire market ramp is the expected devaluation of the dollar.  or who knows, maybe there's some stealth entity with unlimited money that's bidding up bluechips and shorting PM's...

Tue, 07/17/2012 - 20:35 | 2626483 TrainWreck1
Tue, 07/17/2012 - 20:47 | 2626512 fuu
fuu's picture

Do they have any segregated accounts held at JPM? If not they should be fine.

Tue, 07/17/2012 - 21:05 | 2626555 Global Hunter
Global Hunter's picture

Par for the course up here in Canada happens to these nice folks every 2 years, if there's one sure trade in the universe its Salida blowing up.  Couldn't have happened to a nicer bunch of folks as they say.

Tue, 07/17/2012 - 21:05 | 2626557 RobotTrader
RobotTrader's picture

Let me guess.

 

The guy was overweight junior gold stocks.

LOL......

Tue, 07/17/2012 - 21:17 | 2626597 TheFourthStooge-ing
TheFourthStooge-ing's picture

Nope. Commercial REITs and lottery tickets.

Tue, 07/17/2012 - 21:08 | 2626569 TraderTimm
TraderTimm's picture

Reminds me of that scene in "Boiler Room":

"What the fuck is this, huh? What the fuck is this?! You think I'm going to sign a sell ticket for you, what did I just say? Huh?! Get him back on the phone and explain the situation to him right now -- get him on the phone!!!  No one is going to unload today, you hear me, no one!"

*rips up sell ticket*

Tue, 07/17/2012 - 21:30 | 2626626 israhole
israhole's picture

-75%? Not bad these days, but certainly not worth 2/20.

Tue, 07/17/2012 - 21:32 | 2626631 patience...
patience...'s picture

"when management fees are accounted for"

Hey, go ahead and kick me when I'm down.

Tue, 07/17/2012 - 22:34 | 2626758 disabledvet
disabledvet's picture

And of course why would our friends North of the Border be interested in being long gold? Like they even have any of it...

Tue, 07/17/2012 - 22:41 | 2626774 samttmfw
samttmfw's picture

So this is what happens when you follow Goldman's advices??

Tue, 07/17/2012 - 22:55 | 2626792 Son of Loki
Son of Loki's picture

"The power of leveraging."

Wed, 07/18/2012 - 01:05 | 2627081 99oakley
99oakley's picture

These guys also stepped in front of the Lehman bus:

http://www.theglobeandmail.com/globe-investor/salida-back-from-the-abyss...

 

Wed, 07/18/2012 - 01:32 | 2627107 Tim Knight from...
Tim Knight from Slope of Hope's picture

Just for the hell of it, I hand-entered all these monthly numbers and figured out what you'd have if you invested $100 at the very beginning of the fund. As of the end of June, you'd have about $147 - - a profit, to be sure - - but not much of one considering the many years of terrifying swings.

And if my hand-entered numbers are right, it was only last May that the balance would have been $600, a far more impressive amount.

http://slopeofhope.typepad.com/0717-salida.jpg

Wed, 07/18/2012 - 02:23 | 2627147 Bastiat009
Bastiat009's picture

"after the fund's infamously timed bet on more easing by the Fed backfired and resulted in losses"

Many readers here must have felt the same. God knows how many times I have read that QE3 was coming ... ironic!

Wed, 07/18/2012 - 04:36 | 2627267 Zola
Zola's picture

@you enjoy. The market action just doesnt make sense on the miners and on S&P. If gold was falling hard, maybe , but now it is ridiculous... I'm trying to keep an open mind about other reasons than blatant manipulation, but given that the top of the move was the swiss franc peg and the massive raid on gold, i can't help but think all the action has not been natural as on that day it was clearly intervention...

Wed, 07/18/2012 - 10:28 | 2627922 Darkness
Darkness's picture

I would rather go long $5k of $BAC

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