Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
The Precious Metals Bears' Fear of Fridays - 23rd Nov 17
UK Economic Austerity, Bloodletting and Incompetence - 23rd Nov 17
Stocks Are At The End Of The Line – Prepare Yourself Now! - 23rd Nov 17
Some Traders Hit. Some Traders Miss. Here's How to be Part of the 1st Group - 22nd Nov 17
Geopolitical Risk Highest “In Four Decades” – Global Gold Demand to Remain Robust - 22nd Nov 17
Relationship between Crude Oil Price and Oil Stocks - 22nd Nov 17
Harry Dent’s Gold Prediction Invalidated - 22nd Nov 17
Gold Sector is On a Long-term Buy Signal - 21st Nov 17
Saudi Arabia and Israeli Alliance Targets Iran - 21st Nov 17
What History Says for Gold Stocks in 2018-2019 - 21st Nov 17
US Bond Market Operation Twist by Another Name and Method? - 21st Nov 17
Learning from Money Supply of the 1980s: The Power and Irony of “MDuh” - 20th Nov 17
Trump’s Asia Strategy, Goals and Realities - 20th Nov 17
Crude Oil – General Market Link - 20th Nov 17
Bitcoin Price Blasts Through $8,000… In Zimbabwe Tops $13,500 As Mugabe Regime Crumbles - 20th Nov 17
Stock Market More Correction Ahead? - 19th Nov 17
Universal Credits Christmas Scrooge Nightmare for Weekly Pay Recipients - 18th Nov 17
Perspective on the Gold/Oil Ratio, Macro Fundamentals and a Gold Sector Bottom - 18th Nov 17
Facebook Traders: Tech Giant + Technical Analysis = Thumbs Up - 18th Nov 17
Games Betting System For NCAA Basketball Sports Betting - Know Your Betting Limits - 18th Nov 17
Universal Credit Doomsday for Tax Credits Cash ISA Savers, Here's What to Do - 18th Nov 17
Gold Mining Stocks Fundamentals Q3 2017 - 17th Nov 17
The Social Security Inflation Lag Calendar - Partial Indexing - 17th Nov 17
Mystery of Inflation and Gold - 17th Nov 17
Stock Market Ready To Pull The Rug Out From Under You! - 17th Nov 17
Crude Oil – Gold Link in November 2017 - 17th Nov 17
Play Free Online Games and Save Money Free Virtual Online Games - 17th Nov 17
Stock Market Crash Omens & Predictions: Another Day Another Lie - 16th Nov 17
Deepening Crisis In Hyper-inflationary Venezuela and Zimbabwe - 16th Nov 17
Announcing Free Trader's Workshop: Battle-Tested Tools to Boost Your Trading Confidence - 16th Nov 17
Instructions to Stop a Dispossession Home Sale and How to Purchase Astutely at Abandonment Home - 16th Nov 17
Trump’s Asia Tour: From Old Conflicts to New Prospects - 16th Nov 17
Bonds And Stocks Will Crash Together In The Next Crisis (Meanwhile, Bond Yields Are Going Up) - 16th Nov 17
A Generational Reset That Will Redistribute Wealth to the Bottom 60% Is Near - 16th Nov 17
Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - 16th Nov 17
Gold’s Long-term Analogies - 16th Nov 17

Market Oracle FREE Newsletter

Traders Workshop

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.


© 2005-2017 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

Catching a Falling Financial Knife