Turk: “There was an interesting news item reported by Bloomberg today, Eric. A $120 million managed-futures fund run by Tudor Investment Corp., which is one of the best fund managers in the business, is closing and returning money to its clients because of three years of losses....
“This report follows closely on the heels of managed futures funds that were closed by John Henry & Co., which up until the years before its closure had a great track record. Also, reported losses are being incurred by one of the largest managed-futures companies, the Man Group and its flagship AHL Fund, which until recently had a successful track record going back to the early 1980s.
There is an interesting story here because there is a similarity to these funds. All of them are managed by ‘black-box’ mathematical models. These models are designed to spot price trends of commodities. So the fund buys futures contracts when trends are rising, and sells the long position (and some aggressive funds, at the same time, even go short) when the price trend reverses.
These models were very successful and generated outsized returns from the time they were first developed in the late 1970s up until the last several years. So they key question is what caused their change in fortune? The answer is simple. It is provided in the Bloomberg article.
“Such funds have posted losses for the past three years as money managers say government intervention in global markets have skewed price trends that their models follow.”
Even though each company's mathematical models are proprietary, there is not any rocket science here. All one has to do is look at a chart to know when a commodity’s price is rising or falling. As a result, these models can easily be reverse engineered, enabling a market manipulator to know when the fund is buying or selling - which the market manipulator can obviously then use to its advantage. The money in the fund provides rich pickings to the market manipulator.
Although gold is not specifically mentioned in the Bloomberg article, these black-box funds traded gold futures. So for example, look at what happened to gold over the last several days: On the way up to $1390, ‘black-box’ funds were buying (and covering short positions) and the gold open interest exploded. Who was selling into this rising price? It was the gold manipulators. They were following government instructions, and sold as the gold price climbed higher, and kept selling as evidenced by the rise in Comex open interest.
The manipulators could sell without regard to risk because they are backed by essentially unlimited government money. Their selling onslaught was enough to turn the market lower, forcing the funds to sell their long positions. The market manipulators bought what the funds were selling as the gold price dropped. So the manipulators covered their shorts with a profit while the funds took a loss. The huge drop in Comex open interest corroborates this outcome..."
at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/3/26_The_Wests_War_On_Gold_Is_Raging_%26_There_Are_New_Casualties.html
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