Best of the Week
Most Popular
1.China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015? - Nadeem_Walayat
2.Gold Price Awaiting Outcome of Greece Crisis - Clive_Maund
3.Gold Price Peculiar 6 Month Cycles - Rambus_Chartology
4.Gold Price Just a Little Bit More - Bob_Loukas
5.8 Unprecedented Extremes Indicate a Stock Market Bubble in Trouble - EWI
6.Gold And Silver – Without Either, You Will Be Greeced - Michael_Noonan
7.Lies, Damned Lies and Statistics - James_Quinn
8.China Crash, Greece Crisis Harbingers of Stocks Bear Market? Video - Nadeem_Walayat
9.Gold and Silver Record Shorting - Zeal_LLC
10.Markets Big Deflationary Downwave Quick Reference Guide... - Clive_Maund
Last 5 days
Stock Market Pullback at Hand, Gold About to Rally? - 3rd Aug 15
Gold – The More Hate, The More Bullish We Become - 3rd Aug 15
Stock Market Critical Week Ahead - 3rd Aug 15
Gold Price Near Intermediate Bottom - 3rd Aug 15
Stock Market Reluctant Primary Wave IV? - 2nd Aug 15
Power and Compassion - 2nd Aug 15
Preparing for The Stock Market Crash - Inverse ETFs and Puts Timing... - 2nd Aug 15
Commodity Prices Slump Signals Slow Economic Growth Outlook - 2nd Aug 15
BSE Sensex Stocks Bear Market Underway - 2nd Aug 15
What Microsoft’s Dismal Earnings Report Really Tells You - 2nd Aug 15
Gold And Silver Charts Are The Compelling Story. Fundamentals Do Not Apply - 2nd Aug 15
The Fed Can't Stop the Commodity Bear Market - 1st Aug 15
Meet the Leader Who Turned Google Into a “Buy” - 1st Aug 15
The Greek Coup: Liquidity as a Weapon of Coercion - 1st Aug 15
Gold’s Amazing Resiliency - 31st July 15
Silver – A Century of Prices - 31st July 15
Demand for Gold Bullion Surges – Perth Mint, and U.S. Mint Cannot Meet Demand - 31st July 15
Reasons Why the Greek Crisis Will Only Get Worse - 30th July 15
The War On Cash: Why Now? - 30th July 15
Greece - The IMF Experts Flunk, Again - 30th July 15
Threat Of Cyber Warfare the “Other Reason To Own Physical Gold” Warns Rickards - 30th July 15
The 5 Biggest Myths and Lies about the Middle East - 30th July 15
Greece, Diversion, and the New World Order - 30th July 15
Ibuprofen Warning - The Pain Killer that can Kill You! - 29th July 15
More Ritholtz on Gold, and Another Response - 29th July 15
Crude Oil Price Is Lower – and You’re Richer - 29th July 15
U.S. Home Sales Market Is Dead – This Chart Proves It - 29th July 15
Greece- What Happens When Economists Talk Politics - 29th July 15
The Gold - U.S. House Prices Ratio As A Valuation Indicator - 29th July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stock Market Bubble in Trouble

Hedge Fund Titan John Paulson Bullish on Bonds and Equities, Inflation Concerns Remain

Stock-Markets / Investing 2010 Dec 09, 2009 - 09:59 AM GMT

By: Trader_Mark

Stock-Markets

Best Financial Markets Analysis ArticleJohn Paulson... super bull? Goodness.  To some degree I find "whale watching" a bit overrated, but after being the most obvious winner of the mortgage meltdown, and then piling into gold ahead of a huge run ... Paulson's moves are watched by the investment world very closely.


One of the hottest investors on the planet is now chock full of bonds - especially the moral hazard kind (i.e. backstopped by US government).  And has his highest net long exposure in "a long time".  No one will be correct forever, but it does make you stand notice...especially since his success is based on actually making big macro calls rather than building an army of computers co-located as close as possible to a stock exchange, so he can surge ahead of your order by 4/1000ths of a second to make mad money. Via Reuters:

  • Billionaire hedge fund manager John Paulson said on Tuesday he still sees compelling long-term returns in equities even after their sharp run-up this year, while holding no short positions in the credit markets.
  • "Today our net long exposure is perhaps the highest it has ever been in our portfolio," Paulson said during a luncheon presentation at the Japan Society.
  • Paulson, who has run his own hedge fund since 1994, has become a star investor after correctly predicting the sub-prime credit crisis in 2007. That reaped him a $3 billion profit.
Stocks
  • "We still find a lot of compelling long investments on the equity side," he said, citing specifically Bank of America (BAC), U.S. cable-television giant Comcast Corp (CMCSA), and Germany's HeidelbergCement AG (HEIG.DE).
  • Paulson said that at the end of 2008 he viewed the credit correction as having run its course. By April he had poured cash back into the sector.  "That is why we don't have any shorts in credit," he said.
  • Based on his estimates of the company's (BAC) earnings potential and the expectation that loan loss provisions will start to drop in 2010, Paulson remained upbeat on the beleaguered bank.  "I think the worst is behind us in terms of provisioning," Paulson said, adding: "I would expect provisioning expense to be considerably lower in 2010 versus '09 and again much lower in 2011 versus 2010."
Credit
  • Given his prescient bearish call on mortgage credits, Paulson's views are widely watched for what he has in his $33 billion investment portfolio.
  • He highlighted the attractive yields on credit issued by GMAC due in Sept 2011, the former General Motors automotive financing company that the U.S. government propped up at the end of 2008.
  • By Paulson's thinking, the government involvement is equivalent to an explicit guarantee on GMAC's finances.  (you cannot disagree with that)  "So instead of buying (a) Treasury bond which yields 84 basis points, I can buy GMAC which is almost, I consider equivalent to a government bond and I can get 11 percent. That is why we have allocated so much money to this particular security," he said.
Inflation
  • Even as credit and equity markets looked attractive, he did reiterate his concerns that over the long-term inflation will be a problem because the government's mountain of stimulus cash will be difficult, politically, to withdraw from the economy.
  • "Therefore we are concerned about high rates of inflation in the future. As an investor I became very concerned about having my assets denominated in U.S. dollars," he said.
  • "So I looked for another currency in which to denominate my assets in. I feel that gold is the best currency."  "An increase in the monetary base leads to an increase in the money supply, which then leads to inflation." ('output gap' be damned... the return of the late 70s, ealry 80s only this time no Volcker in charge - only ever easy Ben)
  • Paulson's combined gold and gold-related investments made up more than 46 percent of his firm's holdings at the end of the second quarter of this year.  (staggering... just staggering)
Via FT.com
  • "There are lots more long opportunities than short opportunities in the market. Zero interest rates are a huge tonic," he added.
  • "The amount of quantitative easing has stimulated financial markets and will start to appear in the real sector," he said.  This is what the US Federal Reserve hopes will happen: that easy money will lead to asset price reflation, lifting confidence and fueling a recovery in the real economy.
  • ... other large positions are in Heidelberg Cement and Renault, an indirect bet on consumer demand in emerging markets.

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

© 2009 Copyright Fund My Mutual Fund - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History