Hedge Funds Post Biggest Monthly Losses Since Lehman Aftershock

John Paulson, Louis Bacon and Andreas Halvorsen navigated the global market turmoil of 2008 with little or no damage. They weren’t as successful last month as the Dow Jones Industrial average had its worst May since 1940.

Hedge funds lost an average of 2.7 percent through May 27, according to the HFRX Global Hedge Fund Index, as the sovereign debt crisis in Europe triggered declines in stocks, the euro and commodities, and the gap in yields between U.S. short-term and long-term debt narrowed. It was the biggest decline since November 2008, when hedge funds lost 3 percent in the wake of Lehman Brothers Holdings Inc.’s bankruptcy two months earlier.

Almost every strategy lost money in May, according to Hedge Fund Research Inc. in Chicago, as the Dow index of 30 big stocks sank 7.6 percent including dividends amid speculation that Greece’s debt problems would spread to nations such as Spain and Portugal. Some of the best-known funds saw their gains for this year erased. (more)

GOLD RALLY IN CONTEXT WITH PRIOR SECULAR BULL MARKETS

Investment Guru: Euro and Oil Will Continue to Plunge

The carnage isn’t over for the euro, which has dropped to a four-year low against the dollar, says investment guru Dennis Gartman.

Europe’s financial crisis will continue to drive the common European currency down — below $1.20, says the publisher of The Gartman Letter.

The euro recently traded at $1.2240.

"It’s having a rough month; it's having a rough year. It's probably going to continue to have rough times ahead. Are we going under $1.20? Almost certainly," he told CNBC. (more)

Why commercial real estate will plunge FDIC insured banks into closure

The commercial real estate bust is in full swing. This $3 trillion mortgage market is standing to push hundreds of banks into failure and adding additional strain to the embattled FDIC. Commercial real estate (CRE) is a good indicator of where things are heading economically because it is a reflection of what revenues are being brought in by certain properties. For example, a strip mall owner will lease out space to clients that ideally will earn more money each month to cover their rents. That is typically how CRE deals went down. But for the past decade people invested in CRE with the implied notion that they could always sell the underlying CRE for a higher price irrespective of the actual revenue stream the real estate could produce. For CRE this is sin number one.

Commercial real estate values went on a 91 percent tear from 2001 to 2008: (more)

Chart of the Day

Oil rises above $74 as hurricane season looms

Oil prices moved above $74 a barrel Monday, extending gains from last week as markets prepared for what is forecast to be the worst hurricane season in five years.

By early afternoon in Europe, benchmark crude for December delivery was up 54 cents to $74.51 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 58 cents to settle at $73.97 on Friday.

Trading volume was thin as markets in the U.S. and U.K. were closed for holidays.

The hurricane season officially starts Tuesday. Last week, the National Oceanic and Atmospheric Administration predicted 14 to 23 tropical storms this year, including up to seven major hurricanes. (more)

Guarding Your Money from Government Onslaughts

Grandfather-economic-report.com is famous for presenting whole constellations, in graphic form, of horrors about the mess that fiat money and government, in the hands of incompetent do-gooders, has allowed.

He writes that, in 2009, people worked, “3 times longer per year to pay all taxes more than they pay for food, housing and clothing combined.” Yikes!

This is where I learned that the combined onslaught of government (from local corruption to Congressional corruption) consumes half of all income in the USA! (more)