Input on one of the possible reasons for continued crummy action in the gold shares:
Bill,
The implications of this story is continued pressure on currencies and perhaps precious metals, at least until the liqudation runs its course.
Brian
Hedge funds nurse heavy losses in early December
Fri Dec 10, 2004 05:05 PM ET By Svea Herbst-Bayliss
BOSTON, Dec 10 (Reuters) - December has not been a merry month for hedge funds, say managers who point to heavy losses at many funds caught off guard as the dollar rallied and crude oil prices sagged.
Late on Friday as crude oil futures tumbled nearly 4.3 percent and the dollar gained broadly for the third straight session, investors and managers said they heard talk that some hedge funds had lost so much money they had to shut down.
While the speculation could not be immediately confirmed, investors and managers alike said they were not surprised and braced for more bad news next week.
"Right now any number of hedge funds could be losing big chunks of their capital," said Philippe Bonnefoy, the head of Comas Management, an adviser to the alternative investment unit of Commerzbank Securities.
He said hundreds of funds with energy, currency, or U.S. bond positions might be vulnerable.
Because hedge funds, unlike most mutual funds, often employ borrowed money, their gains -- or losses -- can add up fast.
By week's end, there were no official numbers that might indicate big losses during the first 10 days of the month in the loosely regulated and highly popular $890 billion market.
But individual managers provided anecdotal evidence, saying they had lost about 20 percent, while others said they have given back 50 percent of this year's gains.
"There are a lot of people out there who have been absolutely clobbered since the end of November," said one manager who asked not to be named.
Ironically, December's losses may be linked to the previous month's gains, when hedge funds finally had a strong month after a string of months with paltry performance.
"If you made money in November and you didn't change your positions in early December, you probably lost a lot of money," said Tim Rudderow, whose Mount Lucas Management fund manages $1.5 billion in assets.
Investors finally stormed back into the markets last month after the victory of President George W. Bush in the hotly contested U.S. presidential election.
Long-absent volatility picked up again and the average hedge fund returned 2.75 percent, posting the year's largest gains, data released this week by the Hennessee Group show.
For many funds, the month was far better than the average, managers said.
"In general, November was spectacular and many funds had their best returns ever," Bonnefoy said.
But what worked in November -- the falling dollar, rising crude oil prices and a jump in stocks -- has not worked in December when markets were hit by softer U.S. payroll numbers, the dollar pared losses against the euro and crude oil prices retreated. Also the jump in stock prices slowed.
"We took profits, but we didn't get out of this unscathed," Rudderow said.
Some funds, whose performance had been lackluster all year, may have tried to make too much money back too quickly, getting burned along the way with huge positions, investors and managers said. But they also said it is only the middle of the month and there is still time to make up losses before year's end.
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