Best of the Week
Most Popular
1.Gold Price Crash Through Key Support, Crude Oil in Freefall - Clive_Maund
2.Marc Faber Warns Japan's Bond-Buying Program is a Ponzi Scheme - Bloomberg
3.Silver Price and Powerful Forces - DeviantInvestor
4.Stocks Bear Market Catastrophe as Stocks Flash Crash to New All Time Highs - Nadeem_Walayat
5.Marc Faber Warns Not to Hold Any Gold in the U.S. - GoldCore
6.U.S. Housing Market San Francisco at Critical Mass - Harry_Dent
7.Global Scramble For Silver - Coins “Hard To Get,” “Premiums Likely To Jump” - GoldCore
8.Major World Stock Market Indices Analysis: SPY, QQQ, DAX, FTSE, CAC, HSI - Michael_Noonan
9.Japan's kaput?! - Axel_Merk
10.Tesco Empire Strikes Back, £5 off £40 Discount Voucher Spend Explained, Exclusions Warning! - Nadeem_Walayat
Last 5 days
Currency Wars, the Ruble and Keynes - 21st Nov 14
Stock Market Investor Sentiment in The Balance - 21st Nov 14
Two Biotech Stocks Set to Double on One Powerful Catalyst - 21st Nov 14
Swiss Gold Poll Likely Tighter Than Polls Suggest - 21st Nov 14
Gold's Volatility and Other Things to Watch - 21st Nov 14
Australia Stock Market and AUD Dollar Analysis (ASX200 and AUDUSD) - 21st Nov 14
New Algae Research May Have Uncovered an “Energy Forest” Under the Sea - 21st Nov 14
The Cultural and Political Consequences of Fiat Money - 20th Nov 14
United States Social Crisis - No One Told You When to Run, You Missed the Starting Gun! - 20th Nov 14
Euro-Zone Tooth Fairy Economics, Spain Needs to leave the Euro - 20th Nov 14
Ebola Threat Remains a Risk - New Deaths in Nebraska and New York - 20th Nov 14
Stock Market and the Jaws of Life or Death? - 20th Nov 14
Putin’s World: Why Russia’s Showdown with the West Will Worsen - 20th Nov 14
Making Money While The World Burns - 20th Nov 14
Why This "Quiet Zone" Is Now Tech Stocks Biggest Profit Sector - 20th Nov 14
My Favorite Stock McDonalds Just Got Kicked Off My “Buy” List - 19th Nov 14
European Economies in Perpetual State of Shock, What's Scarier Than Deflation? - 19th Nov 14
Breakfast with a Lord of War and Nuclear Weapons - 19th Nov 14
The U.S. Economy’s Ebb and Flow - 19th Nov 14
What You Need to Know Before Investing in Alibaba - 19th Nov 14
Forget About Crude Oil Price Testing 2009 Low - 19th Nov 14
What Blows Up First? Part 5: Shale Oil Junk Bonds - 19th Nov 14
Bitcoin Price Did We Just See an Important Slump? - 18th Nov 14
How to Profit From Oversold Crude Oil Price - 18th Nov 14
Stock Valuations Outrunning Profits Growth - And the Band Played On - 18th Nov 14
ECB Buy Gold Bullion? Japan's Monetary Policy Dubbed "Ponzi Scheme" - 18th Nov 14
Gold, Silver, Crude and S&P Ending Wedge Patterns - 18th Nov 14
How High Could USD/JPY Go? - 18th Nov 14
On Obama and the Nature of Failed Presidencies - 18th Nov 14
Globalism Free Trade Immigration Connection - 18th Nov 14
An Epiphany From Hell - Buy Gold and Silver - 18th Nov 14
Too Difficult to Get a U.S. Home Loan - 18th Nov 14
Has the Gold Bear Trap Been Set - 18th Nov 14
Gold Price and Miners Soar on Huge Volume - 17th Nov 14
Cameron Says Second Global Economic Crash is Loomin, Japan in Recession - 17th Nov 14
How to Play the Stock Market 2014 Year-End Rally - 17th Nov 14
What The Fed Has Wrought, Who Needs Wage Earners Anyway? - 17th Nov 14
Stock Market Indexes Fluctuate Along Record Levels - Will Uptrend Continue? - 17th Nov 14
Stock Market Trend Deceleration Tends To Precede Corrections - 17th Nov 14
Stocks Bull Market Set to Continue After Consolidation - 17th Nov 14
The World Is Run By Fools, And We Let Them - 17th Nov 14
Gold Price Golden Bottom? - 17th Nov 14
Gold Dragons Grand Strategy - 16th Nov 14
Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - 16th Nov 14
Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - 16th Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

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.


© 2005-2014 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

Free Report - Financial Markets 2014