Tag Archives: John Paulson

Paulson Said to Inform Clients He Won’t Add More to Gold

According to Bloomberg,

Billionaire John Paulson, the best-known gold bull since he started wagering on bullion more than three years ago, is backing away from his bet.

Paulson told clients at his firm’s annual meeting Nov. 20 that he personally wouldn’t invest more money in his gold fund because it’s not clear when inflation will accelerate, according to a person familiar with the matter. The hedge-fund manager, who has been betting that bullion would rally as a hedge against inflation and as recently as last year told clients that gold was his best long-term bet, has lost 63 percent year-to-date in the PFR Gold Fund, said the person, who was briefed on the returns and asked not to be identified because the information is private.

Paulson, 57, started his foray into gold in early 2009, betting that bullion would rise as governments printed money to revive their economies following the 2008 financial crisis. Gold-related securities helped drive losses for the firm in 2012 as mining company stocks fell. Paulson & Co.’s main strategies have gained this year on bets in mergers, defaulted securities, convertible bonds and telecommunications, energy, insurance and asset-management companies.

The fund, which has shrunk to $370 million — with most of that John Paulson’s own money — from $1 billion at the end of 2012, fell 1.2 percent in October, the person said. The hedge-fund firm will maintain the fund’s positions in gold stocks and let options related to bullion expire, Paulson said at the meeting in Paulson & Co.’s New York office, according to the person.

Hedge-fund Manager John Paulson (Bloomberg)

Hedge-fund Manager John Paulson (Bloomberg)

Armel Leslie, a spokesman for $19 billion Paulson & Co. with WalekPeppercomm, declined to comment on the meeting and fund returns.

Bullion’s Slump

Gold is heading for its first annual drop in 13 years as some investors lost faith in the metal as a store of value, fueled by concern that expected reductions in $85 billion of monthly bond buying by the U.S. Federal Reserve will ease the risk of accelerating inflation. Billionaires George Soros and Daniel Loeb sold their entire positions in the SPDR Gold Trust exchange-traded fund in the second quarter, according to regulatory filings. Inflation expectations as measured by the break-even rate for five-year Treasury Inflation Protected Securities fell 12 percent this year.

Bullion has slumped 26 percent this year to $1,246.30 an ounce at 3:21 p.m. in London and reached $1,236.88 yesterday, the lowest since July 9.

Hedge funds and other money managers have cut their net-long positions in gold to 55,456 futures and options as of Nov. 12, according to the latest data from the U.S. Commodity Futures Trading Commission. The holdings are down 48 percent this year.

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Gold Analysts Most Bearish Since June on Fed Taper: Commodities

According to Bloomberg,

Gold analysts are the most bearish since June as the Federal Reserve signaled it may ease stimulus “in coming months” as the economy expands, cooling demand for an investment haven.

Nineteen analysts surveyed by Bloomberg News expect prices to drop next week, nine are bullish and three neutral, the largest proportion of bears since June 21. Gold fell to a four-month low and the dollar strengthened after Fed minutes released Nov. 20 showed U.S. policy makers expected enough improvement in labor markets to warrant slower debt purchases.

The metal is heading for its first annual drop in 13 years as some investors lost faith in gold as a store of value, fueled by concern that reductions in $85 billion of monthly Fed bond buying will ease the risk of accelerating inflation. U.S. unemployment-benefit applications fell to the lowest in two months and October retail sales jumped the most since July, the government said this week. Standard Bank Group Ltd. advised selling gold on rallies amid weaker physical demand in Asia.

“For safe-haven assets, there’s no point because the economy is recovering,” said Andrey Kryuchenkov, a commodity strategist in London at VTB Capital, a unit of Russia’s second-largest lender. “The dollar should remain strong, and that’s what should cap any upside in gold anyway. Consumer demand is slowing down. It will recover, but not at the moment.”

Gold’s Decline

Gold Ingot (Bloomberg)

Gold Ingot (Bloomberg)

Bullion slumped 26 percent this year to $1,244.64 an ounce in London, reaching $1,236.88 yesterday, the lowest since July 9. The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.8 percent since the end of December, while the MSCI All-Country World Index of equities gained 17 percent. The Bloomberg U.S. Treasury Bond Index lost 2.6 percent.

Investors sold 768.9 metric tons from gold-backed exchange-traded products this year through Nov. 20, erasing $67.1 billion from the value of the funds and pushing holdings to the lowest since April 2010, data compiled by Bloomberg show. This year’s sales almost match total purchases in the previous three years.

Billionaire hedge-fund manager John Paulson, the largest holder in the SPDR Gold Trust, the world’s biggest ETP, told clients Nov. 20 that he wouldn’t personally invest more money in his gold fund because it isn’t clear when inflation will accelerate, according to a person familiar with the matter.

Paulson has lost 63 percent this year in the PFR Gold Fund, said the person, who was briefed on the returns and asked not to be identified because the information is private. The fund, which has shrunk to $370 million, with most of that John Paulson’s own money, fell 1.2 percent in October, the person said.

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S.E.C. Tries to Use Trader’s Goldman Colleague to Bolster Case

S.E.C. Tries to Use Trader’s Goldman Colleague to Bolster Case

Jonathan Egol and Fabrice Tourre were close colleagues on Wall Street, a team of traders who worked side by side on a Goldman Sachs mortgage desk in the lead-up to the financial crisis.

On Thursday, that relationship came under the spotlight as Mr. Egol took the witness stand in the civil trial of Mr. Tourre, a 34-year-old Frenchman accused of misleading investors about a mortgage security that ultimately failed.

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Bloomberg Analyst Discusses GURU Hedge Fund’s Potential

Investor fascination with hedge funds has been on full display for the past two weeks as managers filed their quarterly holding reports, known as 13Fs. Everyone wants to know what John Paulson or David Einhorn or David Tepper is loading up on and what they’re getting rid of. And yes, there’s an exchange-traded fund to feed that fascination. It’s up 52 percent since its inception less than a year ago — 18 percent more than the S&P 500 Index.

Rich Returns From a Poor Man’s Hedge Fund

The Global X Top Guru Holdings Index ETF (GURU) sounds a bit gimmicky, but its inner workings are more sophisticated than its name. GURU’s methodology is to scour 13F filings and buy the biggest stock holding from each hedge fund. Filters are put in place to eliminate funds that have high turnover rates — those that do a lot of rapid-fire buying and selling — and the ETF considers only hedge funds with concentrated top holdings. In other words, it screens for stocks that hedge funds are committed to, which makes it a sort of greatest hits of hedge fund stock picks.

The outperformance of GURU, which has 80 percent of its assets in U.S. stocks, over the S&P 500 is partly due to the fact that it is an equal-weighted portfolio. That means that smaller juggernaut stocks like Pandora (P) and GameStop Corporation (GME) are given roughly a 2 percent weighting just like giants such as Microsoft (MSFT) and AIG (AIG). By contrast, market-cap-weighted ETFs tend to drown out small stocks’ gains and get hit harder by overvalued larger stocks coming back down to earth.

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Paulson Steps Up Gold Bet to 44% of Firm’s Equity Assets

Billionaire John Paulson raised his stake in an exchange-traded fund tracking the price of gold while selling other stocks during the second quarter, leaving his $21 billion hedge fund with more than 44 percent of its U.S. traded equities tied to bullion.

Reported by  Miles Weiss and Kelly Bit, Bloomberg News, Paulson & Co. purchased an additional 4.53 million shares of the SPDR Gold Trust, the firm’s largest position, and bought more shares of NovaGold Resources Inc. (NG), according to a Form 13F filed yesterday with the U.S. Securities and Exchange Commission. Gold prices posted their biggest declines since 2008 last quarter.

While Paulson trimmed his stake in AngloGold Ashanti Ltd. (ANG) and Gold Fields Ltd. (GFI), sales of energy, financial and auto-parts stocks boosted the relative weighting of gold-related securities in his U.S. stock portfolio to the highest in three years. That’s making the fund more vulnerable to declines in the price of bullion as the hedge-fund manager struggles to reverse record losses last year.

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Pruning Hedge Fund Regulation Without Cultivating Better Rules

 

Fresh from having declined to constrain money market funds, the Securities and Exchange Commission has moved to loosen marketing constraints on hedge funds.

 

Two weeks ago, the agency threw up its hands and said it would not be able to defend millions of investors from money market funds that do things like invest in dodgy European bank bonds yet proclaim themselves to be perfectly safe.

Reported by Jesse Esinger, Propublica, instead, the S.E.C. — mandated by Congress through its misnamed and harmful JOBS Act — proposed rules last week to lift advertising restrictions for hedge funds and other kinds of private investment offerings. The rules haven’t been finalized, but we can look forward to an ad featuring a wizened couple in matching tubs overlooking a sunset, holding hands and talking about how they just put money with the next George Soros.

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Paulson to Talk With BofA

Bank of America Corp.’s wealth-management arm will host a conference call Tuesday with Paulson & Co.’s John Paulson, offering some of its financial advisers and their clients a chance to grill the struggling hedge-fund manager, people familiar with the matter said.

According to David Benoit and gregory Zuckerman of the Wall Street Journal, the call comes within days of the decision by a major Paulson client, Citigroup Inc.’s private bank, to stop investing with Mr. Paulson’s firm. That move is expected to lead to withdrawals of about $410 million.

Bank of America’s wealth arm, which includes its Merrill Lynch retail brokerage and U.S. Trust private-client business, had arranged …

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