Why John Paulson Still Believes In His Gold Bet

http://www.forbes.com/sites/steveschaefer/2013/07/17/john-paulson-the-rationale-for-owning-gold-has-not-gone-away/

Gold & Silver Smash & What Soros & Major Players Are Doing

The mainstream headline says George Soros is selling his GLD position.

http://www.bloomberg.com/news/2013-05-19/gold-bear-bets-reach-record-as-soros-cuts-holdings-commodities.html

Yet, underneath the surface, Soros is also doing this.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/5/20_Gold_%26_Silver_Smash_%26_What_Soros_%26_Major_Players_Are_Doing.html

Is he hedging?  Absolutely.  But he's betting, along with fellow heavyweights John Paulson and Stevie Cohen, that the gold miners--and by association, gold--will rise soon.

Paulson Said to Explore Puerto Rico as Home With Low Tax

http://www.bloomberg.com/news/2013-03-11/paulson-said-to-explore-puerto-rico-as-home-with-low-tax.html

Light at the End of the Tunnel for Gold

http://www.usfunds.com/investor-resources/investor-alert/?utm_source=SubscriberMail&utm_medium=email&utm_campaign=IA-12212012&utm_term=USFunds.com%20Logo%20Link&utm_content=dc14275ca902476f96e5f1a8d1df0917#.UNXjknfNmSo

John Paulson quote

Hedge fund manager John Paulson made his name (and a fortune) in 2007 shorting subprime mortgage bonds, but he had a rough 2011 betting on an economic recovery, specifically the housing industry.  Through it all, he's been on the long side of the gold trade.


“We view gold as a currency, not a commodity. Its importance as a currency will continue to increase as the major central banks around the world continue to print money.” He adds that as the market keeps shuddering, demand for gold will stay high, and soon enough all of his depressed gold holdings should shoot up. He also thinks that anyone in Greece, Italy, and France should pull all their money out of the banking system and purchase gold bars before the Continent collapses. –John Paulson, founder of Paulson & Co., in Business Week June 28, 2012

PIMCO, Texas Teacher Retirement System, Soros Buy GLD; Paulson Sells

http://www.goldcore.com/goldcore_blog/pimco-texas-teacher-retirement-system-soros-buy-gld-paulson-sells

Soros and Paulson move in opposite directions as gold declines

http://www.guardian.co.uk/business/2011/may/06/george-soros-john-paulson-gold-commodities-market

WSJ Reports Soros, Burbank Selling Gold, Silver, While Paulson Sees Gold Hitting $4,000 In Three Years

http://www.zerohedge.com/article/wsj-reports-soros-burbank-selling-gold-silver-paulson-sees-gold-hitting-4000-three-years

Goldman Sachs has been long gold for years

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/11/4_KWN_Source_Confirms_Goldman_Sachs_Long_Gold_for_Years.html

This explains why John Paulson, a Goldman Sachs client who profited big-time from the collapse of the subprime mortgage market, also went long gold in 2009. JPMorgan and HSBC have outsized short positions in gold and silver. I'm betting on the vampire squid winning.

See disclaimers in the side bar.

Disclosure: precious metals and precious metals mining shares.

John Paulson: double digit inflation coming

http://blogs.forbes.com/robertlenzner/2010/09/27/john-paulson-sell-bonds-buy-stocks-double-digit-inflation-coming/

Multibillionaire hedge fund operator John Paulson, the investment genius who made a killing going short subprime mortgages a few years ago, told a standing room only crowd at New York’s University Club that double-digit inflation is about to rear its ugly head by 2012, killing the bond market, and restoring strength to equities and gold.

His crystal ball is for 2% GDP growth for 2011 and 2012 and he warns that the Fed’s promise of quantitative easing should contribute to double-digit inflation over the next few years.

As this is the best time in 50 years to buy homes, Paulson advised his listeners, crowded into 3 separate dining rooms, to issue 30 year mortgages to buy a home as “your debt and interest payments get locked in at record lows, while the price of your home will rise.”

See disclaimers in the side bar. The opinions in this article are not necessarily representative of mine, and should not be construed as investment advice. Perform your own due diligence.

Greenspan, the Fed, and gold

http://www.economicpolicyjournal.com/2010/09/alan-greenspan-hedge-against-federal.html

The multi-billion dollar hedge fund run by John Paulson has a huge position in gold. Zero Hedge reprints a portion of a Paulson letter sent to investors. In that letter, Paulson explains who is advising them to buy so much gold :

Lastly, and perhaps most important, from a monetary policy perspective in developing an ability to forecast the timing and future price of gold we believe we have an unparalleled team. Former Federal Reserve Chairman Alan Greenspan has been extremely helpful to us in understanding the relationship between the monetary base, the money supply, inflation and gold prices.

John Paulson's hedge funds made $20 billion in profits betting against the subprime mortgage industry in 2008. He went long gold in 2009. His recent bets on an economic recovery have soured, but his bets on gold and gold-related equities have continued to outperform.

John Paulson: hero or villain?

http://www.nytimes.com/2010/04/17/business/17abacus.html?hp

Eager to increase his bets against subprime mortgages, the investor, John A. Paulson, canvassed firm after firm, looking for new ways to profit from home loans that he was sure would go sour.

Only a few investment banks agreed to help him. One was Deutsche Bank. The other was the mighty Goldman Sachs.

Mr. Paulson struck gold. His prescience made him billions and transformed him from a relative nobody into something of a celebrity on Wall Street and in Washington.

Goldman Sachs shares sell off

This has been brewing for a while, and is busting out.

http://news.yahoo.com/s/ap/20100416/ap_on_bi_ge/us_sec_goldman_sachs_charged

John Paulson's new gold fund

To view this Wall Street Journal article you may need a subscription:

http://online.wsj.com/article/SB10001424052748704533904574543713428787876.html

Highlights, for those who can't read the full article:

One of the biggest investors is placing a huge new bet on gold.

John Paulson, who scored about $20 billion of profits between 2007 and early 2009 wagering against the housing market and financial companies, is launching a hedge fund dedicated to buying up shares of gold miners and other bullion-related investments, according to investors.
...
The affinity for gold represents something of a shift for Mr. Paulson, who gained recent recognition as a contrarian. As the dollar has fallen, investors lately have flocked to gold, which traditionally served as an alternative to paper currencies. As the supply of these currencies has risen lately amid government efforts to stabilize global economies, some investors believe their value will fall, helping gold.
...
Mr. Paulson at Tuesday's investor meeting countered that the bull run was only beginning for gold.

He noted that central banks around the globe have gone from sellers of gold to buyers, and that the global supply of gold is constrained.

While harmful inflation isn't on the horizon, he said, Mr. Paulson argued that there is a risk of a burst of inflation down the road. That's because in the past there's been a lag between a surge in money supply and higher inflation. Gold often does well when inflation rises.

Mr. Paulson told investors that the Federal Reserve will prove reluctant to raise interest rates, given the weakness in the economy, which also could pave the way for higher inflation, at least at some point, another reason for his growing conviction about gold.

Worth about $6 billion, Mr. Paulson said he was starting the new fund in part to give himself more personal exposure to gold, according to an investor at the meeting.

The embrace of gold is relatively new for Mr. Paulson. The hedge-fund manager, who mostly invested in merger deals until detecting a housing bubble in 2006, had done no gold investing as of a year ago.

John Paulson

Most of us know who Warren Buffett is, because he is considered the world's best long-term investor, buying undervalued companies with high cash flow, solid balance sheets, and defensible, moat-like market share in their respective industries. In other words, he buys solid companies when they are cheap and under appreciated by the markets.

But the average person knows little of John Paulson. Paulson has been the most successful trader in recent years, making billions of dollars for his hedge fund by betting against subprime mortgage companies and agencies. He went against the crowd in doing so, making the unpopular bet that home values were artificially set too high, and that subprime borrowers would default en masse. He also bet against the banks that were making these reckless loans, and holding toxic assets.

In hindsight, he was a genius for placing these bets. But when he did make them, he would have been considered a lunatic for betting "against America", as most financial pundits, experts, and economists were predicting clear sailing for the economy, despite the looming subprime iceberg ahead. Most didn't see it coming, but he applied logical reasoning and was prescient enough to place huge bets on his investment thesis. The result was billions in profits for him personally and for his clients.

Flash forward to 2009, and John Paulson made another unpopular bet earlier this year. He gobbled up gold mining shares, the GLD ETF, and physical gold. In all, they represent the largest percentage of his holdings. Why did he do that? In his own words:

http://www.goldnewswire.net/gold-%E2%80%93-not-tomorrow-but-5-years-from-now

Once the Fed began directly buying Treasuries and mortgages, I lost faith in the dollar as a reserve currency for my assets... What I'm looking at is not where gold is going to be tomorrow, one week from now, one month from now, three months from now. What I'm looking at is where is gold going to be vis-a-vis the dollar one year from now, three years from now, five years from now.

And I think with a high probability at each of those points, gold will be higher than it is relative to the dollar today. That probability increases the further out you go, and the magnitude of that difference also increases the further out you go. So when I look at what the risk is, the risk to me is far more staying in dollars than it is in gold at this point. - John Paulson