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After Several Ugly Months, John Paulson Is Slowly Turning Bearish Again
After an ugly Q2 and a Friday several weeks ago in which the Paulson funds were collectively down by about a billion dollars, the recently overly bullish hedge fund manager has decided to turn just a little more bearish once again. As The Financial Times reports, the fund has taken down its overall net leverage materially lower across all its funds: "Amid increasing uncertainty over the sustainability of the US recovery and a vicious second quarter that saw many funds hit hard by a spike in market volatility, Paulson & Co has cut its net long bets across almost all its funds. The $3bn Paulson & Co Recovery fund, which was launched in late 2008 to take advantage of a bounceback of the US housing market and economy, has decreased its net exposure from 140 per cent to 107 per cent in recent weeks, the Financial Times has learnt. Net exposure is a measure used by hedge fund managers as a gauge of their directional bias, and is calculated by subtracting total short positions from total long positions, with leverage taken into account. Mr Paulson’s flagship Advantage fund, which manages $9bn of client money, has also shrunk its net long exposure from 72.4 per cent to 67.3 per cent. The more specialist $4.3bn merger arbitrage funds – which make money by trading corporate names engaged in takeover talks – have also scaled down from 58 per cent to 50 per cent."
According to fund of funds managers we have spoken to, the only fund that has performed well over the past several months was the firm's credit fund, with everything else "sucking a**." Yet when one is $30 billion, and has no nimbleness whatsoever to rotate in and out of positions quietly, the assumption that Paulson can achieve the same types of returns that propelled him to superstardom is very naive. It is unclear as yet if the bearish portfolio managers who had gotten the sack as recently as three months ago, at the very peak of the 2010 stock market, are also going to get their jobs back as part of the change in market perception.
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We are all Freaking Doomed, Doomed I Say!!
He is still plenty long enough then to weigh on markets and send them into a tailspin at the next sign of a spike in volatility.
When youre the 800lb gorilla in the room and the doorway is blocked by 100s of chimps , youre going to have to fight your way out to the fire escape.
Adolf Merckle?
Have you no shame? (rhetorical)
has decreased its net exposure from 140 per cent to 107 per cent in recent weeks
How is net exposure of 107% to 140% a "hedge" fund??? I'm not sure how such a fund can deliver performance regardless of market direction. Can the the Paulson & Co. 130/30 mutual fund be soon to follow?
This is just more evidence that he is a lucky donk who exploited p^2. I mean srsly merger arb? With 4.3 bill ?? Lulz
Still the same comments: one hit wonder, nobody thereafter. Bullish/bearish the way Barton Biggs is doing will get this chap no where, but his managers couldn't be bothered, $30b fund, just think of the fees will get you wet all day long.
Nice Kremlinology. Do you know if he has been smiling less lately and frowning more? That could be useful information.
He is now only 107% long. How is that "bearish"? Isn't bearish usually when you are short or neutral?
WTF?????
Someday, somewhere a hedge fund manager is going to do a Jim Brown or Barry Sanders and walk away at peak as a champion. Someday pride, a contained ego that requires no additional stroking, and controllable greed will leave a legend standing tall before the markets.
Apparently this will not be John Paulson.
chindit13, hasn't this happened already? Andrew Lahde comes to mind. His goodbye letter to his investors created quite a buzz.
http://bryanjaf.wordpress.com/2009/10/13/andrew-lahde-appreciation-day-october-17-2009/
http://www.portfolio.com/views/blogs/daily-brief/2008/10/17/hedge-fund-manager-goodbye-and-f-you
Paulson is basically set up for the end game. He will own real things and hes got a lot of gold. The dollar is currenty carrying all the risk which is favorable to both property and gold. This is now a soverign debt/currency crisis not so much of a credit crisis. Ben Bernanke is getting ready to unload the gold revaluation tool and when that happens Paulson will win in the end. Even if they turn all sovereign debt into confetti except treasuries meaning a 1 for 3 currency split he wins on real estate as well.
His citi investment isn't really doing as well also as it looks like it's going to go down even more.
Why de-leverage? Agriculture stocks are going vertical. Thank God for the Russkies!
Interesting SP500 chart ...
http://stockmarket618.wordpress.com
There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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