Brilliant Investor takes a huge new position

Posted by Wall Street Journal via Ricard Russell

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Below, an article of great interest from today’s Wall Street Journal John Paulson is a brilliant investor. He made billions by betting on the housing collapse last year. For those who distrust GLD, I note that Paulson has a big position in GLD. It’s hard to believe that he would have taken this position without thoroughly investigating GLD, the largest of the gold ETFs.  -via Richard Russell

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

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.

Mr. Paulson told his investors he personally would invest between $200 million and $250 million in the new fund, which he said will begin on Jan. 1, according to an investor at the meeting.

Paulson & Co. already is a major holder of gold shares including AngloGold Ashanti Ltd. and Kinross Gold, doing most of its buying early this year. Mr. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.



Because I think this development is so important, I’m running the Financial Time’s article that appeared today. I think that many funds will be copying Paulson on gold — Russell.

Paulson starts gold fund amid record prices
By Gregory Meyer and Henny Sender in New York

Funds run by the company now have more than a tenth of their assets in gold, a person familiar with its investments said. John Paulson, its billionaire founder, is seeding the new fund with $250m of his own money to offer investors a more concentrated exposure to gold. It will focus on shares and derivatives of mining companies rather than the physical commodity, the person said.

Mr Paulson has offered investors an option to have a gold share class for the past year and is a heavy user of gold exchange-traded funds to hedge.

As of September 30, the company was the largest single holder of the $40.6bn SPDR Gold ETF, with 8.6 per cent of outstanding shares, according to Bloomberg data. It also owned shares in the gold miners AngloGold Ashanti and Kinross Gold.

The move comes as central banks have kept interest rates near zero, luring investors into riskier assets such as emerging-market stocks and weakening the dollar. Investors worried about currency risks have bought gold as a stable store of value. Gold hit an all-time high yesterday, above $1,150 an ounce.

Other hedge fund managers attracted to gold have included David Einhorn, founder of the hedge fund Greenlight Capital who came under the spotlight last year for the short-selling of shares in Lehman Brothers after arguing the bank did not have enough capital to offset exposure to falling property prices.

The fund manager Tudor Investment said in a letter last month that a “Great Liquidity Race” could benefit gold. Paul Tudor Jones, its chairman, wrote: “I have never been a gold bug. It is just an asset that, like everything else in life, has its time and place. And now is that time.”

Central banks have also been buying gold as the value of their dollar reserves dwindles. India, Sri Lanka and Mauritius have been purchasing gold. China revealed that its gold reserves had nearly doubled over the past five years.

“The fact that the dollar keeps stumbling, and also, more importantly, that there are concerns about the long-term impact of quantitative easing and a general commodities rally, all paint a picture that is pretty supportive of gold prices,” said James Steel, precious metals analyst at HSBC in New York. “Waiting for a substantial correction in this market is like waiting for Godot.”

The new Paulson fund was first reported by the Wall Street Journal.