John Paulson Might Liquidate His Holdings To Meet Redemptions (Reuters)
Gold dropped about 3.5 percent on Wednesday as a technical sell-off, year-end fund liquidation and plunging commodities fueled bullion’s second-worst rout since the 2008 economic crisis. Rampant market talk that possible liquidation by a big hedge fund to meet redemption demand ahead of the year end also weighed heavily on bullion market sentiment. “Some macro hedge funds are liquidating gold holdings and taking profits in a difficult year. As trading volume typically drops toward year-end, we expect increasingly volatile price swings,” said James Steel, chief technical analyst at HSBC. In September, gold prices tumbled sharply from a record partly on speculation of hedge fund sales, which might signal a peak in bullion’s decade-long rally. At that time, there was talk hedge fund manager John Paulson might have liquidated his holdings to meet end-of-year client redemptions.
Death Of Gold Bull Market Seen By Gartman As He Sells Metal (Bloomberg Businessweek)
Gold, which traded at $1,666.30 an ounce at 2:43 p.m. in London, may decline to as low as $1,475, the economist wrote today in his Suffolk, Virginia-based Gartman Letter. He sold the last of his gold yesterday. Bullion has already dropped 13 percent from the record $1,921.15 reached Sept. 6 and $1,475 would extend that to more than 20 percent, the common definition of a bear market. Hedge funds and other money managers boosted bets on higher futures prices for the first time in three weeks. Net-long positions in gold futures and options rose by 3.5 percent to 151,347 contracts in the week ended Dec. 6, U.S. Commodity Futures Trading Commission data show. That’s still down 40 percent since the beginning of August, when positions were at the highest level since at least June 2006, the data show.
European Stocks Get Energy Boost; End Off Highs (Reuters)
The head of investment dealing at a fund company that manages about $80 billion said that there was some hedge fund business on Tuesday and long-term players were almost absent from the market. Richard Hunter, head of equities at Hargreaves Lansdown said that the investment destination of choice for next year would be companies which were internationally diversified, cash generative, stable and having progressive dividend policies.
Commodities and Crude Oil Drop Most Since September (Bloomberg)
Commodities headed for the biggest drop in almost 11 weeks, led by gold and crude oil, as concerns mounted that European leaders are failing to stem the region’s debt crisis, eroding demand for energy, metal and crops. “OPEC agreed on a pretty decent hike in the ceiling, especially given the difficult economic realities in Europe,” said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. “The European debt crisis is nowhere close to resolved, so the euro is taking a hit.”
Investors Reload on Bets Against Euro As Currency Wobbles (WSJ)
For most of the year, the euro has stayed above $1.30, even after repeated sell-offs, as the two-year-old debt crisis afflicting Europe threatened to tear apart the currency zone. That has frustrated hedge funds who suffered losses after repeatedly betting the euro would head to $1.25 or lower. Many hedge funds that bet on global markets and economic trends have been negative on the euro all year–bets that may now start to pay off. However, computer-driven traders, which quickly jump on and off trends in currency rates, largely dumped their anti-euro bets at the end of October as the euro rallied. These same firms are re-loading on negative bets, pushing the euro lower, these traders said.
Ucits Hedge Funds Being Unfairly Targeted For Criticism (COO Connect)
Ucits hedge funds have been unfairly vilified for wrapping complex products in the Ucits framework, it has been argued. “Ucits alternative funds are working within the existing parameters of Ucits. Many of the alternative Ucits are not too dissimilar from what traditional long-only managers are offering their retail clients. For example, many traditional long-only managers run Ucits fixed income strategies which trade credit default swaps (CDS) to gain synthetic short exposures within the portfolio. It is also important to note that complexity does not necessarily equate to risk. A product may be complex but may ultimately deliver what an ordinary retail investor may expect – positive returns with reduced volatility,” said Rhodri Mason, head of Ucits management at Man Investments.
Ex-Moore Trader Leslie to Liquidate $1.6B Hedge Fund (Bloomberg)
James Caird Asset Management LP, the London-based firm run by former Moore Capital Management LLC trader Tim Leslie, plans to liquidate a $1.6 billion credit hedge fund after eight years. Leslie plans to start a smaller hedge fund with a “narrower trading focus.” The new fund will start next year and be managed by Robert Miller, who has worked with Leslie since 2003, according to the letter. Leslie seeks to raise $500 million for the new fund and cap assets at about that level. James Caird also manages two other hedge funds, the $150 million Vintage II fund and the $70 million Mortgage Opportunities fund. The firm will continue running those two funds.
Hedge Funds Are Betting On Declines In Robusta (Bloomberg)
Record robusta harvests in Vietnam and Brazil and potentially the biggest jump in Indonesian output in 16 years are boosting supplies of the coffee used to make espressos just as slowing economic growth threatens demand. Hedge funds and other money managers are betting on further declines in robusta. They held a net-short position of 6,263 contracts in the week ended Dec. 6, and have been bearish since the end of October, data from NYSE Liffe show. Speculators in arabica had a net-long position of 14,157 futures and options in the week ended Dec. 6, and have been bullish since August, data from the Commodity Futures Trading Commission show.
Laszlo Birinyi Pitches Research In Motion As A ‘Long Shot’ Investment Idea (Bloomberg)
Investors should consider buying shares of BlackBerry maker Research In Motion Ltd. (RIM), according to Laszlo Birinyi, who advised clients to buy equities before they bottomed in March 2009. Leon Cooperman’s New York-based hedge-fund operator Omega Advisors Inc. bought 1.43 million RIM shares last quarter and said in November that RIM’s new operating system will “surprise people.” The stock closed at the lowest level since May 2004 yesterday.