Manish Damani
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John Paulson Loses Over $300 Million On Friday's Gold Tumble
There were many casualties following Friday's 4% gold rout, but none were hurt more than one-time hedge fund idol John Paulson, who according to estimates, lost more than $300 million of his own money in one day.
Per Bloomberg: "Paulson has roughly $9.5 billion invested across his hedge funds, of which about 85 percent is invested in gold share classes. Gold dropped 4.1 percent today, shaving about $328 million from his net worth on this bet alone." This is merely the latest insult to what has otherwise been a 3 year-long injury for Paulson and his few remaining investors, whose very inappropriately named Advantage Plus is among the bottom 10 hedge funds for the third year in a row. Yet despite being a one-hit wonder thanks to one lucrative idea (long ABX CDS) generated by one of his former employees (Pelegrini), Paulson still has been lucky enough to somehow amass a $10 billion personal fortune which can have a $300 million downswing in one day, even if it is in an asset class which eventually will go only one way - up. Unless, of course, like so many other fly by night billionaires, Paulson too hasn't somehow managed to lever up all his equity into numerous other downstream ventures, and where a $300 million blow up leads to margin calls and other terminal liquidity outcomes.
More:
“The recent decline in gold prices has not changed our long-term thesis,” John Reade, a partner and gold strategist at Paulson & Co., said in an e-mailed statement. “We started investing in gold at $900 in April 2009 and while it’s down from its peak to $1500, it’s up considerably from our cost.”
Paulson investors can choose between dollar-and gold- denominated versions for most of the firm’s funds. In addition losses from bullion’s decline, investors in Paulson & Co. funds, including the firm’s founder, lost about $62 million today on their gold-stock investments, based on holdings as of Dec. 31, 2012. New York-based Paulson & Co.’s biggest wagers in miners include a 7.35 percent stake in AngloGold Ashanti Ltd.
Paulson’s Reade said gold will continue to appreciate in the long run because governments are pumping money into the economy at a rate not seen before.
“Federal governments have been printing money at an unprecedented rate,” said Reade. “We expect the strengthening of the economy and stock market to cause money supply to rise more than real growth and eventually lead to inflation. It is this expectation of paper currency debasement which makes gold an attractive long-term investment for us.”
That said, one doesn't have to be a bull in gold and gold equities to position appropriately for the eventual inflationary outcome, whose arrival is only a matter of time now that not one but two central banks are injecting $80+ billion in fresh liquidity into the global markets every month.
Recall that gold bull Hugh Hendry said in October that while he is long gold, he is short gold equities, a trade which has generated substantial alpha, courtesy of the 40% plunge in GDX and associated gold miners (a pair trade we have supported incidentally), and one which may well continue generating additional returns should Japanese financial institutions be forced to continue selling off the yellow metal on margin concerns, due to the record surge in JGB volatility as we explained yesterday.
As for gold as an inflation hedge, here Paulson is certainly correct. The only question is when will the price suppression scheme of gold as an alternative currency finally end. Since various official organizations (such as the Troika) are currently doing all they can to buy the sovereign gold of insolvent nations at firesale prices, it is likely that the period of artificially suppressed prices may continue.
Which, incidentally, for all those who lament the recent price drop in gold, is a good thing: for those who see gold as an alternative currency to fiat, all the recent sell off (as well as alleged or real downward price manipulation) does is provide a lower cost basis for accumulating hard monetary assets. Which is something to be welcomed and not mourned, especially if one plans on holding on to said gold (or silver) as a currency, instead of merely converting it back into fiat at a higher price point, and thus as an asset (something all those who bought BitCoin at $260 and sold at $50 appear to have completely forgotten).
There were many casualties following Friday's 4% gold rout, but none were hurt more than one-time hedge fund idol John Paulson, who according to estimates, lost more than $300 million of his own money in one day.
Per Bloomberg: "Paulson has roughly $9.5 billion invested across his hedge funds, of which about 85 percent is invested in gold share classes. Gold dropped 4.1 percent today, shaving about $328 million from his net worth on this bet alone." This is merely the latest insult to what has otherwise been a 3 year-long injury for Paulson and his few remaining investors, whose very inappropriately named Advantage Plus is among the bottom 10 hedge funds for the third year in a row. Yet despite being a one-hit wonder thanks to one lucrative idea (long ABX CDS) generated by one of his former employees (Pelegrini), Paulson still has been lucky enough to somehow amass a $10 billion personal fortune which can have a $300 million downswing in one day, even if it is in an asset class which eventually will go only one way - up. Unless, of course, like so many other fly by night billionaires, Paulson too hasn't somehow managed to lever up all his equity into numerous other downstream ventures, and where a $300 million blow up leads to margin calls and other terminal liquidity outcomes.
More:
“The recent decline in gold prices has not changed our long-term thesis,” John Reade, a partner and gold strategist at Paulson & Co., said in an e-mailed statement. “We started investing in gold at $900 in April 2009 and while it’s down from its peak to $1500, it’s up considerably from our cost.”
Paulson investors can choose between dollar-and gold- denominated versions for most of the firm’s funds. In addition losses from bullion’s decline, investors in Paulson & Co. funds, including the firm’s founder, lost about $62 million today on their gold-stock investments, based on holdings as of Dec. 31, 2012. New York-based Paulson & Co.’s biggest wagers in miners include a 7.35 percent stake in AngloGold Ashanti Ltd.
Paulson’s Reade said gold will continue to appreciate in the long run because governments are pumping money into the economy at a rate not seen before.
“Federal governments have been printing money at an unprecedented rate,” said Reade. “We expect the strengthening of the economy and stock market to cause money supply to rise more than real growth and eventually lead to inflation. It is this expectation of paper currency debasement which makes gold an attractive long-term investment for us.”
That said, one doesn't have to be a bull in gold and gold equities to position appropriately for the eventual inflationary outcome, whose arrival is only a matter of time now that not one but two central banks are injecting $80+ billion in fresh liquidity into the global markets every month.
Recall that gold bull Hugh Hendry said in October that while he is long gold, he is short gold equities, a trade which has generated substantial alpha, courtesy of the 40% plunge in GDX and associated gold miners (a pair trade we have supported incidentally), and one which may well continue generating additional returns should Japanese financial institutions be forced to continue selling off the yellow metal on margin concerns, due to the record surge in JGB volatility as we explained yesterday.
As for gold as an inflation hedge, here Paulson is certainly correct. The only question is when will the price suppression scheme of gold as an alternative currency finally end. Since various official organizations (such as the Troika) are currently doing all they can to buy the sovereign gold of insolvent nations at firesale prices, it is likely that the period of artificially suppressed prices may continue.
Which, incidentally, for all those who lament the recent price drop in gold, is a good thing: for those who see gold as an alternative currency to fiat, all the recent sell off (as well as alleged or real downward price manipulation) does is provide a lower cost basis for accumulating hard monetary assets. Which is something to be welcomed and not mourned, especially if one plans on holding on to said gold (or silver) as a currency, instead of merely converting it back into fiat at a higher price point, and thus as an asset (something all those who bought BitCoin at $260 and sold at $50 appear to have completely forgotten).
history of gold reserves.
http://i.imgur.com/K057lMr.png
http://i.imgur.com/K057lMr.png
I got the name achiivers. they are charging rs1000 pm only.In May or June I will shift by putting small amount to check them first.Becuase it would be sucidial for scalping I traded 30-40 lots at time and their trading platform betray that time.They also not charging stamp duty as per info I get. You can talk to them in future I think they are in Ncdex too.
Procon report is not good what I got after surfing.
Procon report is not good what I got after surfing.
You know the hedge fund manager you just posted about! That lost lost 1bil. in the crash. Some guy on my thread on value investing was praising him like anything. His name is cinderblock I think because he left a negative vote on my poll. 
I dont know him personally
I know only one think if some body loose in this market then another one benefited. These incidents proves no body can rule the market for long. Market is like a ocean take few drops and enjoy till then everything ok. But you want entire ocean then God knows how long you will hold.After earning big money people do more mistake as they feel they can sustain as they had money. But that blow them like anything. Well that hedge fund started buying from $ 900 so he is in notional loss means yet in profit of $ 400-450/ ounce or pound what ever.But people think it is very easy to make money. They come do gambling without knowledge and complain against market. Few people thing market go up and up and they loose all profit in one jhatka. So smart investor or trader is as per me is that who book profit time to time and take it at home and cut losses in small. We can expect rise and fall but exactly how much no one can predict.
:thumb:
The hedgefund manager - John Paulson that you are talking about also made US$ 20 Bil. in about a year shorting the CDO (subprime bonds). The US$ 1 Bil. loss is about 5% of his earnings (not wealth).
BTW the tade was made after extensive study of the valuation of the underlying and fundamentals of the housing market, mortgage business, the banking system and the US economy. It was not chartbased!
Do read the book - The greatest trade ever. The trade took over a year to setup, and when it did, it was money flowing out of the barrel. The trade was assymetrical like an option - the loss, if any was limited, the upside 20 times more.
BTW the tade was made after extensive study of the valuation of the underlying and fundamentals of the housing market, mortgage business, the banking system and the US economy. It was not chartbased!
Do read the book - The greatest trade ever. The trade took over a year to setup, and when it did, it was money flowing out of the barrel. The trade was assymetrical like an option - the loss, if any was limited, the upside 20 times more.
You know the hedge fund manager you just posted about! That lost lost 1bil. in the crash. Some guy on my thread on value investing was praising him like anything. His name is cinderblock I think because he left a negative vote on my poll.
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