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By Tyler Durden

2016 was a year most hedge funds would be happy to forget. And while the same goes for 2015, 2014, 2013, 2012, 2011, and 2010, in fact virtually every year since the financial crisis in which the vast majority of the two and twenty crowd have failed to generate alpha, in 2016 – a year many said would mark a renaissance for active managers – the “flash hedge fund return” according to a report by BofA’s Paul Ciana from Friday was a paltry 3.34%, which as BofA conveniently calculated meant they “underperforming the S&P500 index by 6.2%” at which point your average underperforming hedge fund manager complains that they shouldn’t be benchmarked against the S&P, even as the redemption notices flood in and the AUM gets ever smaller.

Not everyone did poorly: credit related strategies lead HF performance, including Distressed Credit, Convertible Arbitrage and Event Driven strategies. On the other end, predictably, dedicated Short Bias was down 5.10%

Looking at specific names, the following HSBC table breaks out the best and worst hedge funds as of the last week of December 2016:

In recent weeks there has been a fresh burst of hope that 2017 will be better for the HF community as a result of the recent collapse in cross-asset correlation; it is hoped that the resulting returns dispersion will make it easier for hedge funds to stand out in a world in which due to central bank intervention, correlations had been abnormally high following the financial crisis.

But is that an accurate description of events? To a great extent, the answer is no.

While correlation between diversified HF performance and S&P 500 price return declined from the May 2016 high (Chart 1), the 1-year correlation (83.7%) was slightly above the 3-year correlation (83.0%) as of the end of November. Overall, correlation remained far higher than it has been historically. Which as BofA redundantly explains, means that “when S&P 500 declines, performance of HFs with higher positive correlation is expected to suffer.“

Not all “hedge” funds have such a high correlation, however. The correlation relationship with S&P 500 varies substantially among different HF strategies. Short Bias and Merger Arbitrage offer negative correlation or most diversification effects. Equity focused HF strategies, including Equity Market Neutral and Long/Short, has decreased correlation to the S&P 500 compared to longer term relationship (3-year and 5-year). On the other hand, Distressed Credit, Convertible Arbitrage and Event Driven have increased positive correlation (Chart 2).

Yet, while there are some notable exceptions, the rule generally is that as the market goes, so goes the average hedge fund. Which is why some of the world’s wealthiest billionaires are pleading that Trump does not disappoint and manages to keep pushing the S&P to ever higher records on nothing but hope of a “fiscal stimulus” which may well never come.

* * *

That said, how did hedge fund close out 2016? Here is the answer based on the latest …read more

Source: How Hedge Funds Closed Out 2016, And Why Hopes For A 2017 Rebound May Disappoint

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By BullionStar

BullionStar has recently started a new series of posts highlighting charts relating to some of the most important gold markets, gold exchanges and gold trends around the world. The posts include charts of the Chinese Gold Market, the flow of gold from West to East via the London and Swiss gold markets, and the holdings of gold-backed Exchange Traded Funds (ETFs). This is the second post in the series. Please see the November 2016 chart post article for background about the charts chosen for this series.

All of the charts featured below originate from the excellent GOLD CHARTS R US website run by Nick Laird. For BullionStar's customizable gold and silver price charts, go to BullionStar Charts where, for example, you can measure a wide variety of financial assets in terms of gold and other precious metals.

Shanghai Gold Exchange (SGE) – Gold Withdrawals

Total physical gold withdrawals from the SGE in November 2016 reached a substantial 214.7 tonnes, over 40% higher than gold withdrawals from the Exchange during October. November was also the second highest monthly withdrawal total of the year, only surpassed by January's withdrawal numbers. Year-to-date to November, gold withdrawals from the SGE have reached 1,774 tonnes.

As a reminder, gold withdrawals from the Shanghai Gold Exchange are a suitable proxy for Chinese wholesale gold demand because all non-monetary gold imported into China has to be sold on the SGE, and most Chinese gold mining output as well as most Chinese scrap gold is also sold through the SGE as 'standard' gold.

November's strong Chinese gold demand occurred in an environment of falling international gold prices, which is to be expected since Chinese gold buyers generally buy at lower prices ('buy the dips'), and unlike Western buyers, the Chinese do not chase upward gold price momentum.

Shanghai Gold Exchange – Gold Withdrawals (tonnes), 2008 – end November 2016

Chinese and Indian Gold Demand

A suitable proxy of Chinese and Indian gold demand can be constructed by adding Shanghai Gold Exchange withdrawals to Indian gold imports. Gold import figures into India are an acceptable proxy for Indian gold demand since Indian domestic gold mining is virtually non-existent.

On a combined basis, CHINDIA gold demand for October 2016 totalled 225 tonnes, which incredibly, pushed the cumulative gold demand from these two major gold markets above the 20,000 tonne mark for the nine-year period 2008 – 2016. Note that this latest version of the CHINDIA chart is to the end of October 2016.

Chinese and Indian gold demand combined (tonnes), 2008 – end October 2016

Russian Gold Reserves

The Bank of Russia, Russia's central bank, is one of the most active buyers of gold on the planet, and has been pursuing a massive physical gold accumulation strategy since the early 2000s. In November 2016, the Bank of Russia added another 1 million ounces of gold (31.1 tonnes) to its gold reserve holdings. This follows a 40 tonne gold purchase by the Bank of Russia in October and makes …read more

Source: Gold Market Charts – A Month in Review

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By Tyler Durden

Last weekend, when commenting on China’s public demonstration of its one and only aircraft carrier, which China then proceeded to sail in close proximity to Taiwan to make a clear diplomatic “statement”, we noted something tangentially troubling: ” a quick look at the latest positioning of US aircraft carriers, amphibious ready groups, and other navies around the globe shows a gaping hole in the region of the East or South China Sea, and even in proximity to Japan, a place where the US navy traditionally has maintained at least one carrier group. In fact, according to Stratfor, the only active carrier group is USS Dwight D. Eisenhower CSG, conducting naval operations in the U.S. 6th Fleet area of operations in support of U.S. national security interests in Europe.”

As it turned out, the Eisenhower carrier group was on its way back to dock in Norfolk, VA, which means that for the next several weeks, not only will there be no U.S. Navy aircraft carrier in the Middle East or the South China Sea, but as Fox News reports, “there will be no American aircraft carriers deployed at sea anywhere else in the world, despite a host of worldwide threats facing the United States.”

The absence of a deployed U.S. Navy aircraft carrier, long seen as a symbol of American power projection, is noteworthy. According to Fox, it is believed to be the first time since World War II that at least one U.S. aircraft carrier has not been deployed.

As it further reports, the carrier USS Dwight D. Eisenhower and her strike group returned to Norfolk, Va., Friday following a seven-month deployment. The Ike launched hundreds of airstrikes against ISIS in Iraq and Syria from both the Mediterranean Sea and the Persian Gulf. Two destroyers in the carrier’s strike group also saw combat. The USS Nitze and USS Mason were attacked in the Red Sea when allegedly Iranian-backed Houthi forces in Yemen launched cruise missiles, which were intercepted by the Mason. A retaliatory strike by the Nitze destroyed the radar installations in Yemen in October, even though in the meantime speculation emerged that the attack may have been coordinated by Saudi interests in an attempt to stage another “false flag” attack on US military assets.

The latest summary of US naval forces around the globe as of the last week of December is shown in the map below courtesy of Stratfor. As of this moment, the Eisenhower has crossed the Atlantic and is back at Norfolk base.

The Eisenhower’s replacement carrier, the USS George H.W. Bush, was delayed by more than six months in the shipyards and will not be able to replace the Ike well into 2017, according to Navy officials.

While there is no U.S. aircraft carrier in the Middle East right now, there is a large deck U.S. Navy amphibious assault ship, the LHD-8 Makin Island, with thousands of Marines on board as well as helicopters and some jets to respond to a crisis, according to officials. …read more

Source: For The First Time Since World War II, No US Carriers Are Deployed Anywhere In The World

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By Tyler Durden

Submitted by Kelly Wright via The Foundation for Economic Education,

Every year the number of regulations, dictates, rules, decrees, guidelines, statutes, laws, and bylaws in the United States grows by leaps and bounds. Just look at the growth in the number of final rules contained in the Federal Register:

Government Overreach

Now it seems we can’t go a week without hearing a new story about someone being punished, with fines or even jail time, for activities that would be encouraged in a free society. I’ve taken the liberty (pun intended) of compiling some of the more egregious examples of this trend for your reading pleasure (or displeasure).

1. Single mom faces possible jail time for selling $12 worth of ceviche to an undercover police officer.

Mariza Ruelas had her day in court in early November. Her crime? She sold a $12 plate of ceviche, an authentic Mexican dish, to an undercover cop on Facebook.

I know what you’re thinking: Why are police setting up stings to catch people selling food to willing customers over Facebook? Don’t they have actual crimes to investigate — like ones with actual victims? I wish I knew the answers to those questions.

2. Federal prosecutors threaten Aaron Swartz with a life-crushing sentence for downloading academic articles.

On January 11^th 2013, Aaron Swartz ended his own life, concluding one of the biggest miscarriages of justice in contemporary history.

In the months leading up to his suicide, Swartz had been embroiled in a legal battle with the federal government after prosecutors charged Swartz under the draconian Computer Fraud and Abuse Act. His crime? Downloading thousands of academic articles from the JSTOR database.

The CFAA is a particularly cruel piece of legislation, as it carries severe mandatory minimum sentencing requirements, resulting in Swartz facing up to 35 years in prison for a nonviolent crime.

Many legal observers at the time pointed out that had Swartz robbed a bank, aided al-Qaeda, or produced child pornography he would have faced a more lenient sentence.

Swartz’s story was detailed in great depth in the documentary The Internet’s Own Boy. The documentary was released under the Creative Commons — a nonprofit initiative Aaron Swartz himself was an early architect of — so you can watch it for free on YouTube.

3. Government claims ownership of all water, jails Oregon man for 30 days for collecting rainwater on his own property.

Way back in 2012 the libertarian blogosphere was abuzz over an egregious case of local government tyranny out of Oregon. Gary Harrington was sentenced to spend 30 days in jail for the crime of collecting rainwater using three reservoirs (that’s newspeak for “ponds”) on his property.

Oregon law states that all water is a public resource, to be owned communally by the collective population of Oregon, and as such any attempts to obtain or store water must first begin with applying for the proper permits to do so. Yes, really.

One of the reservoirs on his property had been there for 37 years, Harrington said. …read more

Source: 5 Blood-Boiling Cases Of Government Overreach

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By globalintelhub

2016 was a bad year for hedge funds, pension funds, and university endowments. In fact, the last several years have been horrible. But until now, there haven’t been many alternatives. Hedge Funds became popular for investors who wanted to achieve more than the 4% or 6% offered by traditional managed investments like mutual funds. Although their history evolved from the idea of ‘hedging’ the market (hedge funds could sell AND buy, can you imagine?) this quickly evolved into an asset class where managers employed strategies based on mathematics in order to achieve above than average and above than expected returns. And some private funds such as Renaissance do very well year in and year out – continued to this day. But the majority suffer from strategy fatigue, and failure to bring in a new generation of ‘quants’ that can do anything more than copy, paste, and cold call. If we skip all the Soros bashing about how he manipulates politics (which, on the surface, is not a bad investing strategy if you have the money to do it, and to control both sides – this is a Rothschild invention not a Soros invention) – the Soros family of funds outperformed their peers by a significant multiple. These funds were trading the markets, unlike what some may want us to believe. Some of their policies to ‘influence’ foreign markets (historically, from the 80s) may have been seen as unethical – and it may be. But the returns have always been spectacular. We’ll see soon if Robert can continue the family legacy of great returns – it looks like – yes he can!

But the few examples of extraordinary funds with consistent returns like Renaissance, they’re an anomaly. The industry in general has suffered from poor returns, which when combined with the standard 2/20 fee model – can be disastrous for investors’ confidence. Bloomberg ran a story recently with verbage such as “The year Big Money ditched Hedge Funds:

“There has been a massive blowback from public pension funds and private endowments,’’ said Craig Effron, who co-founded his Scoggin Capital Management nearly 30 years ago. An investor told him recently that many chief investment officers are so fed up that they would prefer to entrust their cash to a trader who charged no management fee, over one who did, even if they expected the latter to make them more money.

Public retirement plans from Kentucky to New York, New Jersey and Rhode Island have decided to pull money from hedge funds. So did a state university in Maryland and other endowments. MetLife Inc. and other insurers followed suit. Money-losing firms were forced to reduce their fees. Client withdrawals ($53 billion in the last four quarters) drove some managers out of business, including veteran Richard Perry, who until recently had managed one of the longest-standing and better-performing firms.

It’s not surprising that investors – especially institutional investors, are abandoning …read more

Source: Slow death of the hedge fund era

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By Tyler Durden

During a brief, informal exchange with reporters on New Year’s Eve at his Mar-a-Lago estate in Palm Beach, Donald Trump questioned the official version of the “Russians hacking the election”, saying it was possible “somebody else” compromised the Democratic campaign’s servers, adding that he will reveal some previously undisclosed facts in the coming days by hinting that “I also know things that other people don’t know, we they cannot be sure of the situation.”

Asked what that information included, the Republican President-elect said, “You will find out on Tuesday or Wednesday.” He did not elaborate.

Trump also reiterated his belief that others might be responsible for the cyberattacks: “I know a lot about hacking. And hacking is a very hard thing to prove. So it could be somebody else. And I also know things that other people don’t know, and so they cannot be sure of the situation.”

“I think it’s unfair if we don’t know. It could be somebody else,” Reuters cited Trump as telling the media.

He also added that computers are a risky form of communication. “It’s very important, if you have something really important, write it out and have it delivered by courier, the old fashioned way because I’ll tell you what, no computer is safe,” Mr. Trump added. “I don’t care what they say, no computer is safe. I have a boy who’s 10 years old, he can do anything with a computer. You want something to really go without detection, write it out and have it sent by courier.”

Trump was responding to questions about his position on the alleged Moscow-backed “hacking” of the Democratic National Committee that resulted in the emergence of leaks unfavorable to Hillary Clinton. While he has consistently shrugged off the accusations, which also claimed he was backed by Russia against Clinton, Trump on Thursday reacted to the new sanctions against Russia and the release of a report by the FBI and the DHS with a promise to attend intelligence briefings to be updated on the matter. Russia at first vowed to retaliate, but on Friday, President Vladimir Putin said his government wouldn’t expel U.S. diplomats in reprisal. That, in turn, prompted Trump to post on his Twitter account: “Great move on delay (by V. Putin). I always knew he was very smart!”

The President-elect said he wanted to press U.S. intelligence agencies to make sure they are correct in asserting that Russia was behind a cyberattack aimed at disrupting the 2016 presidential race, asserting that the US intelligence community has been wrong before. He made reference to a government assessment before the U.S. invasion of Iraq in 2003 that the country’s former leader, Saddam Hussein, possessed weapons of mass destruction.

“And if you look at the weapons of mass destruction, that was a disaster and they were wrong,” Mr. Trump said, according to the press pool report. “And so I want them to be sure. I think it’s unfair if they don’t know.”

As we reported last week, the latest joint report by the …read more

Source: Trump Hints At "Russian Hacking" Revelations In Coming Days: "I Know Things Other People Don’t"

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By Tyler Durden

A manhunt was underway for a gunman who opened fire on people at a packed nightclub on the shores of Istanbul’s Bosphorus waterway on New Year’s morning, killing at least 39 people, including 15 foreigners, then fled the scene.

The suspect escaped the scene by changing clothes at the club after the attack, according to reports on Turkish media. There have also been rumors that there was a second attacker, but officials are now just talking about one terrorist.

While Turkish authorities are starting to uncover evidence about a gun attack on an Istanbul nightclub which killed 39 people on Sunday but there is no clarity yet on who was responsible, Turkish Prime Minister Binali Yildirim said. “Some details have started emerging, but the authorities are working towards a concrete result,” Yildirim told reporters, when asked about who might have been behind the attack.

“Police and security officials will share information as it becomes available during the investigation,” he said.

While no group has yet claimed responsibility for the attack, Metin Gurcan, an Istanbul-based security analyst, told BBC “signs point to the Islamic State.”

Security camera footage obtained by AP from Haberturk newspaper, shows the male assailant dressed in black and carrying a backpack as he shoots down a police officer outside the Reina nightclub. Footage taken by a different camera shows him inside the venue wearing different clothes and a Santa Claus hat.

“A manhunt for the terrorist is underway. Police have launched operations. We hope the attacker will be captured soon,” said Interior Minister Suleyman Soylu adding that 15 or 16 of those killed at Reina were foreigners but only 21 bodies had so far been identified. He told reporters 69 people were in hospital, four of them in critical condition.

Nationals of Saudi Arabia, Morocco, Lebanon, Libya, Israel and Belgium were among those killed, officials said. France said three of its citizens were wounded.

The attacker, armed with a long-barreled weapon, killed a policeman and a civilian outside Istanbul’s popular Reina club at around 1:15 a.m. before entering and firing on people partying inside, Istanbul governor Vasip Sahin said.

“Unfortunately (he) rained bullets in a very cruel and merciless way on innocent people who were there to celebrate New Year’s and have fun,” Sahin told reporters.

A Turkish coast guard boat patrols in front of the Reina nightclub by the Bosphorus

As Reuters notes, the attack shook NATO member Turkey as it tries to recover from a failed July coup and a series of deadly bombings in cities including Istanbul and the capital Ankara, some blamed on Islamic State and others claimed by Kurdish militants. What makes the deadly terrorist attack even worse is that across Europe security services had been on alert for new year celebrations following the mid-December attack on a Christmas market in Berlin that killed 12 people. Only days ago, an online message from a pro-Islamic State group called for attacks …read more

Source: Manhunt Underway For Gunman Who Killed 39 At Istanbul Nightclub

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