Hedge fund manager John Paulson won big in the credit meltdown by betting against the housing market. His recent missteps in financial stocks including Bank of America (BAC) have been offset by a huge position in the world’s largest gold ETF.
Paulson, founder of the hedge fund firm Paulson & Co., recently apologized for his mistakes during the bout of market volatility but confirmed his bullish outlook on the U.S., report Gregory Zuckerman and Steve Eder for The Wall Street Journal.
Paulson believes the U.S. economy and stock market will improve in a year or two, stating that “the problems in the U.S. can be solved,” according to the report.
Paulson saw two of his largest hedge funds plummet 23% and 33% for the year through August after wagering on financial stocks and other firms linked to an economic rebound. The higher allocation to public company shares has hurt the hedge funds as the markets went through a wild ride. He has held to the belief that “banks are trading at massive discounts” to their true values and are set for a rebound.
The hedge fund manager, though, has placed correct calls on some contrarian trades. For instance, Paulson won big on his bet against subprime mortgages in the credit crunch, went long long before the subsequent global recovery and hoarded gold in 2009 in anticipation of rising inflation and weakening currencies.
“Gold has glittered over some of John Paulson’s blushes,” the Economic Times reported earlier this month.
Paulson’s SPDR Gold holdings comprised almost 16% of the firm’s total portfolio, and their value has soared since he bought the shares in 2009, Bloomberg reported last month.
SPDR Gold Shares (GLD)
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Max Chen contributed to this article.
Disclosure: Tom Lydon’s clients own GLD.