When you borrow against the diversified pool of 40+ positions (energy, metals, equities), you create hidden correlation.
The Mechanism: In a systemic crisis, correlations often move toward 1.0 (everything falls together).
The Spillover: If the equity positions crash, the lender may demand more collateral. To meet the margin call, the manager must sell their winning positions (e.g., gold or energy).
The Result: You are forced to liquidate the "diversifiers" that were supposed to protect the portfolio. This transforms a diversified trend model into a concentrated liquidation event, destroying the very benefit of having 40 different positions.
3. Leverage and the "Path Dependency" Problem
Without borrowing, a trend model only cares about the start and end point of a trend. With borrowing, the path taken becomes critical.
Unleveraged: If an asset goes from $$100 \200$, the trend follower eventually wins.
Leveraged: If the asset goes from $$100 \$50$, the borrower may be wiped out or forced to liquidate at $$50$.
They never will survive to see the move to $200.
Conclusion: Borrowing converts a strategy based on direction into a strategy based on survival.
This is leverage structure. They are using the perceived value of gold and the trend model to mask a fundamental lack of solvency.
The moment the market enters a "choppy" phase or a sharp correction occurs, the "hedges" will be liquidated to pay the lenders,
leaving the entity with nothing but the losing positions.
They aren't "hedging" in the professional sense; they are positioning for a bailout by the Taxpayers since Banks will be Protected.
This reveals the final layer of the strategy: this is no longer a financial trade, but a political and systemic arbitrage play.
The entity is betting on Moral Hazard. They are operating on the assumption that the "Too Big to Fail" doctrine has expanded from the commercial banks to the systemic infrastructure of private credit and the "shadow banking" system.
Here is the breakdown of the logic behind positioning for a taxpayer-funded bailout via the "Private Credit Erasure" theory:
The "Private Credit" sacrificial lamb
The theory here is that when the current cycle of high interest rates and "halving" volatility finally breaks the system, the losses will be concentrated in Private Credit (non-bank lending).
The Logic: Regulators and governments may allow private credit funds and "shadow banks" to fail or be "erased" (via haircuts or bankruptcy) because they aren't "systemically important" in the same way a JP Morgan or Goldman Sachs is.
The Strategy: By leveraging themselves through these channels, the entity is essentially betting that their debts will be wiped away (erased) in a systemic reset, while their hard assets (the gold, the miners, the cash) remain.
Why "Miners and Gold" in a Bailout Scenario?
If you believe a systemic reset is coming where the currency is debased to fund a bailout, you move into Hard Assets with Industrial Utility.
Miners as "Real" Assets: Unlike a digital derivative or a corporate bond, a mining company owns physical land, machinery, and reserves. In a "reset" where the financial layer is erased but the physical economy survives, the equity in a miner is a claim on a real-world resource.
Taxpayer Bailout = Inflation: Bailouts are typically funded by central bank balance sheet expansion (printing money). This leads to currency devaluation. Gold and Miners are the primary beneficiaries of this specific type of "rescue."
The "Bank Protection" Hedge
The entity assumes that the government will protect the Banks (the lenders) to prevent a 1929-style collapse.
The Play: If the government protects the banks, it means the "system" survives, but the "private" debts are restructured or inflated away.
The Goal: By being "insolvent" on paper but holding hard assets, they are hoping to emerge from the bankruptcy/restructuring process owning the assets while the debt has been socialized or inflated to zero.
The Ultimate Risk: "The Wrong Reset"
This strategy only works if the bailout follows a specific pattern (Bank protection)
Private credit erasure
Currency devaluation. It fails if/then.
The "Hard" Liquidation: Lenders move faster than the government, seizing the gold and miners before any "bailout" or "reset" occurs.
The "Clean Sweep": A scenario where the government refuses to bail out the "shadow" system, and the entity is simply liquidated in a standard bankruptcy court where creditors take everything.
The "Deflationary Crash": If the system enters a true deflationary spiral, the "Miners" (which have high operating costs/debt) crash far harder than the gold they mine, destroying the collateral.
In short: They are not managing a portfolio; they are managing a "Contagion Play." They have positioned themselves to be the "beneficiary of the ruins," betting that the state will save the banks and inflate the currency, effectively paying off the entity's debts with "printed" money while the entity keeps the gold.
My experience is even in wheelchairs, they are still arrogant I was told.
It is inherent in the species. Zersetzung
Zersetzung is a psychological warfare technique used by the Stasi, the East German secret police, to undermine and control political opponents through covert manipulation and abusive tactics, aiming to isolate and destabilize individuals without direct confrontation.
You had been warned.
Do not be deceived.
They knew, They know, They deceived.
Wed Jun 14, 2017 1:35 pm “In God we trust; all others must bring data.” W. Edwards Deming
https://www.youtube.com/watch?v=RRPnnF0LwjE