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John Paulson Loses Over $300 Million On Friday's Gold Tumble

Tyler Durden's picture





 

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).

 


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Sat, 04/13/2013 - 18:17 | Link to Comment ABG LINE
ABG LINE's picture

Lower please.

Sat, 04/13/2013 - 18:34 | Link to Comment AlaricBalth
AlaricBalth's picture

John Paulson is nothing but a one hit wonder thus far. The Aldo Nova of the hedge fund community.

It's just a fantasy...
http://www.youtube.com/watch?v=miSMxBP42W0

Sat, 04/13/2013 - 18:42 | Link to Comment F22
F22's picture

Woh-o-oh-oh....it's not the real thing...

I loved that song....

Sat, 04/13/2013 - 18:56 | Link to Comment Ahmeexnal
Ahmeexnal's picture

Monkey on your back.

Sat, 04/13/2013 - 19:29 | Link to Comment Pinto Currency
Pinto Currency's picture

 

Paulson hasn't lost a penny as he is still holding gold.

We'll see who's standing in the future.

The money printers or money with a 5,000 year history, chosen by markets not governments and bankers.

For context, the 15 year chart still looking good and the money printers aren't reformed yet.

Sat, 04/13/2013 - 19:31 | Link to Comment traderjoe
traderjoe's picture

He does not own gold. He owns paper.

Sat, 04/13/2013 - 19:38 | Link to Comment Pinto Currency
Pinto Currency's picture

 

Not so.

Hes made a speech at the university club in NYC where he said that 80% of his wealth is in gold bullion and gold equities.

His estimated personal wealth is over $8 billion.

His funds are another matte.

A long term market participant.

Sat, 04/13/2013 - 19:53 | Link to Comment I think I need ...
I think I need to buy a gun's picture

"i stopped following John Paulson years ago"

"he used the wrong vehicles"

Joe Terronova CNBC Fast Money Team

 

Mr Terranova mentioned this on fast money a few weeks ago

Sat, 04/13/2013 - 20:02 | Link to Comment mjcOH1
mjcOH1's picture

"John Paulson Loses Over $300 Million On Friday's Gold Tumble"

I'm thinking he won't be losing much sleep over this

Sat, 04/13/2013 - 20:20 | Link to Comment Pure Evil
Pure Evil's picture

Wow, I almost squirted a tear reading this. It must be rough out there for all those billionaires.

OT: Can you even buy a decent D.C. politician for a billion anymore, much less ten billion.

Sat, 04/13/2013 - 20:29 | Link to Comment AlaricBalth
AlaricBalth's picture

PE
You know for a fact that most politicians will work cheaper than a whore on nickel night.

Sat, 04/13/2013 - 21:04 | Link to Comment Pinto Currency
Pinto Currency's picture

 

Also interesting to hear Cramer pushing "diversify, diversify, diversify"

You're supposed to hold financials, health care, tech, mfg., etc.  

Cramer is sucking-in the uninformed.

There is a time for holding a very narrow portfollio and it is times exactly like these.

Precious metals, energy, food & food production - get as much off the financial grid as possible.

Buckle up and hold tight.

 

Sat, 04/13/2013 - 23:45 | Link to Comment Pinto Currency
Pinto Currency's picture

 

BTW, driving this week I've been hearing Cramer really pushing Merck and the pharmaceuticals.

I believe that there is a massive scandal coming regarding both vaccines and psycotropic (a la the Batman shooter) drugs.

The vaccine scandal may well fatally damage the industry.  Buy, buy, buy.

We'll see how this develops - a bit near the end on psychotropics - do your own research on their impact:

http://www.youtube.com/watch?v=rAxXyMAmBMs&feature=player_embedded#!

See also this on SSRI's (psychotropic drugs) connection to shooting rampages:

http://beforeitsnews.com/health/2012/07/mass-murders-and-the-ssris-conne...

Sat, 04/13/2013 - 23:56 | Link to Comment flacon
flacon's picture

Shooting rampages. I didn't see any victims or wounded people in Newtown. And come to think of it... I didn't see any blood either. And I didn't see 200 school children that were inside the building being evacuated (or 200+ parents). There is a lot I didn't see about that case in Newtown.

Sun, 04/14/2013 - 01:42 | Link to Comment Pinto Currency
Pinto Currency's picture

 

I don't know enough about Sandy Hook to comment, but this Sandy Hook summary is worth watching just for the fake CNN footage from Gulf War I as well as that of Anderson Cooper's nose disappearing (putatitively because of a blue screen error) in covering Sandy Hook. 

Time will tell.

The fake CNN Gulf War footage starts at 3:00

https://www.youtube.com/watch?v=tM5ZdO-IgEE

Sun, 04/14/2013 - 10:07 | Link to Comment Tapeworm
Tapeworm's picture

Paulson is rich only because the taxcows were forced to make good on his wagers. He is no genius, just another asshole that bought a portfolio of politicians.

Sat, 04/13/2013 - 21:39 | Link to Comment StarTedStackin'
StarTedStackin''s picture

Hater

Sat, 04/13/2013 - 23:03 | Link to Comment Jungle Jim
Jungle Jim's picture

Yes, "Let me wipe away the tears with my plastic hand."

 I reckon I just lost about $55,000 to $60,000 in purchasing power, in the twinkling of an eye. Yes, yes, of course, I still have the metal (or rather, I know where it's at). But all of a sudden that metal has FAR less purchasing power.

 And I have nothing else left. In a day or two I must start selling it. This is NOT at all because I am so stupid that I can't see this is the worst possible  time in history to sell PMs. This is because I have debts and bills to pay, and nothing else left to sell to raise the cash to pay them with.

Sat, 04/13/2013 - 23:36 | Link to Comment BigJim
BigJim's picture

Our sympathies are with you.

But I thought everyone here knew you need a few months supply of fiat to cover everyday exigencies?

Sun, 04/14/2013 - 03:28 | Link to Comment SilverSavant
SilverSavant's picture

I have been putting off surgeries and postponing most spending for years now, waiting for a good time to sell some metal.   Some days I am in pain and if I had a gun and a bankster convention in sight I would be spraying bullets in glee.   Sure, thsi is another buying opportunity for those who have been stupid and stayed in risky assets.   But for those of us who have owned metal for years it is just another ass raping and I am more than fucking tired of it.   These fuckers have been robbing us blind and laughing.   They are just one convincing diagnosis away from seeing some action from the likes of me.   

Sun, 04/14/2013 - 05:05 | Link to Comment chindit13
chindit13's picture

This is why people like you (and those who enable you like Turd, Jim Sinclair, et al) are dangerous.  In your mind, you can't possible be wrong.  Your losses MUST be somebody else' fault.

Wrong.  The losses are your fault and yours alone.  You built a world on assumptions you believe are inviolable facts (e.g., since there is printing everybody must turn to shiny metals).  That is an assumption.  It is YOUR assumption.  The markets are telling you that you are wrong, but you want to cap somebody else' ass because your ego can't take it.

Your PM gurus never consider, or won't tell you if they do consider, that many generational holders of metals have been dumping for years and moving their wealth into productive assets.  The uber rich get more fun owning companies, arable land, resource land, transport systems, and stuff that not only generates income  and employs people, but requires thought, strategy and real business acumen.  Gold is something long championed...by people who are mostly dead now.

It's a new world, with new games, new toys and new competitions.  Holding PM, for most people---and especially those who already have everything---is boring.  They sold it to you.  You got what you wanted, yet now you are complaining because it isn't rising against the measurement index you supposedly wanted to flee from (fiat).

That you rant about taking someone else out for YOUR error of judgment and analysis is childish.  Every choice comes with consequences.

Sun, 04/14/2013 - 05:22 | Link to Comment Debugas
Debugas's picture

mostly right but even though owning real companies is interesting it is also risky - you may run into slowing down sales and prices going under your cost of production. This is widespread right now

Sun, 04/14/2013 - 05:42 | Link to Comment Supernova Born
Supernova Born's picture

You make PM holders look bad.

As you sought.

Sun, 04/14/2013 - 06:17 | Link to Comment Quinvarius
Quinvarius's picture

No.  It is people like you who are dangerous and misinformed.  As you will find out when all those paper promises of trust evaporate.  The money supply is hyperinflating.  The debt is too high to pay.  The banking system is falling apart.  They are seizing people's "productive assets" and savings accounts.  You keep telling yourself it is a new world, and things are different this time.  I am sure your productive assets, paper money value, won't continue to crash like everything else vs gold as the trends of government and economic stupidity continue.

Go ask those people in Cyprus how keeping their wealth in the system worked out.  It is too bad that people can feel so many earth shaking tremors a day that they just assume the earth always shakes.  There is a magnitude 11 coming.

Sun, 04/14/2013 - 08:43 | Link to Comment francis_sawyer
francis_sawyer's picture

@Quinvarius (+1)

~~~

The previous comment would assume every person holding PM's is just a Turd or Sinclair sychophant... CHILD PLEASE...

China is buying gold, Russia is buying Gold, Germany wants it's gold back, Texas wants it's gold back, Venezuela got it's gold back [then it's leader got deaded]... Ghadaffi got dead-ed... French charge into Mali... Troika wants Cyprus gold...A coordinated paper attack is placed [for the 2nd time], on paper gold, whereby, the bullion BUY market is frozen 'Mt. Gox' style... Bullion is flying off the shelves at Comex... The mint isn't producing anymore ASE's... Half the countries in the world, including France now, want direct currency swaps with China... Celente gets Corzined...

Yeah... motherfucking right... The uber rich are pouring their paper sideline money into building the 'new economy' because they dig 'strategy sessions' & all the CEO's they hire to run their operations bail out with $10 million dollar parachutes after the Ellen-de-fucking-Generes idea dies like a fart in the wind... So I'm guessing what chindit is looking at must be fucking happening underground where all the goddamned 'tunnel people' live...

~~~

I'll agree with the first comment on one aspect though... QUIT BITCHING [and get back to accumulating]...

Sun, 04/14/2013 - 09:48 | Link to Comment AlaricBalth
AlaricBalth's picture

+1.
Good rant, Francis.

Sun, 04/14/2013 - 08:13 | Link to Comment Harlequin001
Harlequin001's picture

Fifty years of fiat money does that to you.

It makes you wrong.

Creating money from nothing and lending it to someone to buy a house he can pay too much for so he can take 'equity' from its rising price and spend might boost company earnings and make these 'productive assets' seem attractive for a while but the game is over when the mortgage can't be paid. So now we revert to real value of company earnings without rising house prices which is why those people you refer to who might have sold gold, though I doubt it, are now actively trying to offload those same 'productive assets' at a gain to accumulate more gold as it finds its fair value in a collapsing credit world. That means fake profits from fake credit going into gold driving the price up. Your 'productive assets' are imploding.

Nice try but wrong.

If what you say is correct then explain to me now why we live in an environment where there is not one country on this planet that cannot print enough brand new money by midnight tonight to buy up all the worlds gold yet they can't take delivery of it from the post war holders of the gold?

Why? And don't be dumb enough to tell me it doesn't exist.

Sun, 04/14/2013 - 10:58 | Link to Comment Dealyer Turdin
Dealyer Turdin's picture

Wrong.  Because everytime They are going to lose, They change the rules.  Now you know, the only way to win is to change the rules.  It's not a fair fight, and people who are bootstrapping, saving, scraping, raising kids, have medical problems are getting burned like cars in Paris.  The crime is being here and alive.  God help you if you can't afford medical insurance, because it's one more gun-backed heist.  Just diagnosis could bankrupt you.  I have a friend who gets a needle in his eye.  4000 dollars a pop.  Hospitals eat the value of an entire home for breakfast.  Ever tried to pay off a home?  Easy peasy, huh?  

Sun, 04/14/2013 - 11:09 | Link to Comment BigJim
BigJim's picture

 ...Your PM gurus never consider, or won't tell you if they do consider, that many generational holders of metals have been dumping for years and moving their wealth into productive assets.  

They're only 'productive assets' if they can be purchased at the right price. At the moment, 'our' governments have completely destroyed anything like true price discovery through the creation of virtually unlimited amounts of money. At this stage, doing anything is risking is loss of capital, including doing 'nothing' -ie, leaving it 'desposited' in a bank.

So buying PMs makes perfect sense. And seeing them being suppressed - ie, by more government-enabled destruction of the very price discovery that capitalism needs to succeed - is pretty fucking annoying.

Having said that, it's stupid to tell the world you're on the verge of going around shooting complete strangers because they might be peripherally involved in the PM suppression shenanigans. The vast majority of 'bankers' have nothing to do with any of this - they're involved in arcane minutiae like pricing 3-day Bolivian Central Bank repo swaps for oil puts (I just made that bit up, but you get my point)

Wrong.  The losses are your fault and yours alone.  

Yes, and if I get burgled or robbed at knifepoint the losses are no doubt 'my' fault too. When you buy any 'investment' you risk losing money. But I'll bet you'd be bitching if a 'productive' company you'd invested heavily in went bankrupt because the government (or its proxies) arbitrarily - and illegally - decided to suppress the price of its products.

Sun, 04/14/2013 - 07:31 | Link to Comment nod2glod
nod2glod's picture

So what are the odds they raise margins on gold and silver Monday?

Of course due to the volatility and to protect investors. This is a completely different type of volatility to the JGB market, where margin were set to zero, just so that you don't misunderstand.

Sun, 04/14/2013 - 11:17 | Link to Comment BigJim
BigJim's picture

I seem to recall seeing the price of gold following the US debt ceiling almost perfectly.

If this is so, this recent shitshow might be in anticipation of more debt ceiling-driven fireworks later in May.... if you can hold out til then, you may be amply rewarded.

Or not, of course. Maybe the Black Eagle Trust is reality and there's more Ag and Au out there, ready to be injected into the market, than we realise. In which case the shitshow could continue for a very long time.

Sat, 04/13/2013 - 20:32 | Link to Comment kito
kito's picture

many consider "gold bullion" the same as gold futures on comex............ready and waiting for "delivery" when needed...............

Sat, 04/13/2013 - 20:40 | Link to Comment fonzannoon
fonzannoon's picture

Kito enough is enough. I get the deflation argument and I can't sit here and not agree that the coming deflationary shitstorm (buzzsaw) is hitting gold. All the data is heading south. The only question is, when does the almighty dow fall? 

Sat, 04/13/2013 - 21:08 | Link to Comment kito
kito's picture

I feel like Noah...preparing the ark but never knowing when the rains will begin........

Sat, 04/13/2013 - 22:18 | Link to Comment RockyRacoon
RockyRacoon's picture

Not to mention all those animals stinkin' up the place, and the feed bills!

Lemme know if you need an extra stud coon.

Sat, 04/13/2013 - 19:47 | Link to Comment Pegasus Muse
Pegasus Muse's picture

“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.”  --TD 

 

They better start squeezing countries with more gold than poor little Cyprus. 

  

Andrew Maguire says Eastern Central Banksters are backing up the truck.  Just yesterday, “… at least 90 tons of central bank buying today was seen below $1,550, into the afternoon fix (in London).”    Furthermore, “… what we are looking at here is over 400 tons (of gold) in less than a month and a half.”

 

Audio podcast:  http://kingworldnews.com/kingworldnews/Broadcast/Entries/2013/4/13_Andrew_Maguire.html 

Sat, 04/13/2013 - 23:38 | Link to Comment BigJim
BigJim's picture

I've given up on KWN. Couldn't handle the endless premature catastrophisms.

Sun, 04/14/2013 - 04:03 | Link to Comment tenpanhandle
tenpanhandle's picture

After the fact prognostications are even less help.

Sun, 04/14/2013 - 01:12 | Link to Comment lickspitler
lickspitler's picture

listened to maguire..that guy is long gold and tin foil hats.

Sun, 04/14/2013 - 01:47 | Link to Comment Pinto Currency
Pinto Currency's picture

 

He's the guy that reported JPM's silver raids to the CFTC the day before they happened and CFTC did squat.

http://en.wikipedia.org/wiki/Andrew_Maguire_%28whistleblower%29

As an ex-Goldman Sachs and a 40 year LBMA trader, I thought you would say he's long tungsten foil hats.

Sat, 04/13/2013 - 20:35 | Link to Comment mayhem_korner
mayhem_korner's picture

Paulson hasn't lost a penny as he is still holding gold.

We'll see who's standing in the future.

 

+1  The height of smart people's gold stacks are correlated with the volume of CB money printing.  "Price" is the misdirection that not-so-smart people fall prey to.

Sat, 04/13/2013 - 21:04 | Link to Comment fourchan
fourchan's picture

well said. nothing changes the fact of the devaluation in fiat around the world or the static supply of real pms.

 

my stacks are exactly as heavy and beautiful as any other day this year, this can not be  said for my paper losing money daily beause of the fed.

Sun, 04/14/2013 - 10:43 | Link to Comment Pinto Currency
Pinto Currency's picture

 

On the physical side, see this interview with Maguire re. the rate of physical off-take of gold from the Shanghai exchange.  At this rate, the Shanghai Gold Exchange is alone pulling 3,600 tonnes of gold p.a. vs. world total gold mine annual production of 2,500 tonnes.  Then there's London, Dubai, Hong Kong, etc., etc.:

"Deliveries in Shanghai alone in March were 283 tons.  In the eight trading days of April, we have seen another 117 tons (of gold) delivered.  Today was another 20 tons delivered.  So what we are looking at here is over 400 tons (of gold) in less than a month and a half."

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/12_Ma...

 


Sat, 04/13/2013 - 21:47 | Link to Comment Never One Roach
Never One Roach's picture

He's lost less then any Cypriot I bet.

Sun, 04/14/2013 - 10:56 | Link to Comment jekyll island
jekyll island's picture

PC, 

 

You are absolutely correct.  Of course the MSM would like to support their puppethandlers in pointing out who got hurt in the hammer down orchestrated by the Fed.  Who short sells 500 tonnes of gold in one day?  Someone who can take both sides of the trade, pay the small transaction fee and elect to settle in cash, wiping the trade off the books with no metal or cash changing hands.  Who can do this without regulatory oversight?  It's a very short list.  Didn't central banks have an agreement not to sell more than 500 tonnes in a year not too long ago?  This actually undercovers the increasing desperation of the central planners, get ready for some serious volatility.  

Sun, 04/14/2013 - 12:28 | Link to Comment Pinto Currency
Pinto Currency's picture

 

JI - with gold and silver price controls, the physical market will lock up.

It is a matter of time and with current gold off-take from the major exchanges, it cannot be long.

Sun, 04/14/2013 - 04:27 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

As I recall, either Jim Rogers or the Doom, Gloom, Boom Swiss guy recently stated that they expected Gold to undergo a correction, after its 10 year growth, and they expected it to be near $1400.

After that, they expect it to slowly go back up again. So, a good stacking opportunity, not a get rich quit scheme (for Americans who've become conditioned to get-rich-quick schemes, rather than long-term savings). Will have to find the link and share it.

Sat, 04/13/2013 - 18:58 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

This is why speculating about rocks is bad news - you can lose all of your money.

Sat, 04/13/2013 - 19:01 | Link to Comment AlaricBalth
AlaricBalth's picture

And speculating about paper?

Sat, 04/13/2013 - 19:10 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

Investing in firms is not speculating.

Sat, 04/13/2013 - 19:16 | Link to Comment AlaricBalth
AlaricBalth's picture

Perhaps I should familiarize you with the theory of Rational Speculation by Dr. Paul Krugman.

Sat, 04/13/2013 - 19:49 | Link to Comment I think I need ...
I think I need to buy a gun's picture

we need a good debate with MDB vs Mr. Krugman

Sat, 04/13/2013 - 19:56 | Link to Comment de3de8
de3de8's picture

You mean lovefest.

Sat, 04/13/2013 - 20:25 | Link to Comment Pure Evil
Pure Evil's picture

It would just be two lesbians pulling a U-Haul.

U-Haullesbian

Ok, not as bad as it seems.

Sat, 04/13/2013 - 20:00 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

I am not advocating playing in the futures market, nor am I suggesting that stocks are not overvalued - it is likely that stocks are high and will fall to meet the yields on bonds.

Sat, 04/13/2013 - 20:03 | Link to Comment fonzannoon
fonzannoon's picture

You are on here more than me, and I have absolutely no life.

Sat, 04/13/2013 - 20:05 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

I write a blog, so I am on the computer for several hours a day; this gives me a chance to scour reports on finance and economics.  Zero Hedge has done a great job understanding finance, even though they do not understand how to solve the problems that the economy faces.

Sat, 04/13/2013 - 20:10 | Link to Comment SilverIsKing
SilverIsKing's picture

but you do...LOLOLOLOLOL!!!!!!!!

Sat, 04/13/2013 - 20:25 | Link to Comment Pure Evil
Pure Evil's picture

And, your recommend course of action Dr. Kruggle?

 

Ctrl-P

Sat, 04/13/2013 - 20:45 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

No, that would produce a liquidity trap.  Thus why a jobs stimulus is needed.

Sat, 04/13/2013 - 20:54 | Link to Comment TeamDepends
TeamDepends's picture

They keep talking long past closing time.

Sat, 04/13/2013 - 23:44 | Link to Comment BigJim
BigJim's picture

 Thus why a jobs stimulus is needed.

Let me guess what the central planners of America will determine needs doing... converting 2-lane highways into 4 lanes? That kinda thing?

So you genuinely believe it's a lack of infrastructure that is holding back the American economy? 

Do you Keynesians believe capital is a limited resource? From what I gather you think it can be conjured (in virtually infinite amounts) out of thin air via government fiat.... and I chose that latter word with great care.

Sat, 04/13/2013 - 21:49 | Link to Comment Never One Roach
Never One Roach's picture

Dr Paul, when I look aruodn I see more and more small businesses collapsing and unemployment rising. Does Teh bernank have an Ace up his sleeve to solve this downward spiral?

Sat, 04/13/2013 - 19:30 | Link to Comment DogOfSinope
DogOfSinope's picture

Yeah. Tell that to Facebook investors.

Sat, 04/13/2013 - 19:44 | Link to Comment akak
akak's picture

And investing in US Trasheries is not speculating --- it is financial suicide.

Sat, 04/13/2013 - 20:00 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

Treasuries are the largest market out there, and I don't think Bernanke is going to let anything happen to it.

Sat, 04/13/2013 - 20:09 | Link to Comment auric1234
auric1234's picture

Bernanke can't create wealth. How is he going to do anything about it?

 

Sat, 04/13/2013 - 20:20 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

He can create future growth and future revenue which creates wealth.

Sat, 04/13/2013 - 20:30 | Link to Comment Pure Evil
Pure Evil's picture

Wow, he can create wealth the same as he does FRN's, straight out of thin air.

He's a master magician. An alchemist, a wizard, a sorcerer.

Not even The Great and Powerful Oz was capable of that.

 

If works so well, why can't the dorkholes in NK do it?

Sat, 04/13/2013 - 20:32 | Link to Comment AlaricBalth
AlaricBalth's picture

Ivory Tower economists - the alchemists of our age.

Sat, 04/13/2013 - 20:36 | Link to Comment tarsubil
tarsubil's picture

Exactly what I was thinking. It truly is magical thinking. Childish thinking.

Sat, 04/13/2013 - 20:29 | Link to Comment DogOfSinope
DogOfSinope's picture

Nope, future wealth will be created only by future productivity, created by future technological and scientific advancement.
What Bernanke does is spending it today.

Sat, 04/13/2013 - 20:48 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

And, thus, why a jobs stimulus is needed.

Sat, 04/13/2013 - 20:49 | Link to Comment fonzannoon
fonzannoon's picture

What happened to high speed rail Paul?

Sat, 04/13/2013 - 22:33 | Link to Comment Arrowflinger
Arrowflinger's picture

Manufacturing and construction employment is down. The unemployment in the former is largely due to competitive currency devaluations. Such gyrations were once born out of tariffs, but eCONomists seem to think protecting jobs through devaluation, which does the same thing, are OK. Perhaps you all could prop up those sectors like you have Finance, Insurance, and Banking where employment is steady due to ZIRP.

 

Why not just monetize EVERYTHING and send every US citizen a check? No jobs then would be needed.?

 

$16 trillion of banking support come to about $150,000 per family.

 

Maybe I would pay attention if eCONomists actually contributed to society instead of leeching off of it.

Sun, 04/14/2013 - 06:02 | Link to Comment Quinvarius
Quinvarius's picture

And who is going to pay for it?

Sun, 04/14/2013 - 08:08 | Link to Comment Son of Loki
Son of Loki's picture

I'll agree with Dr Paul on this one. We need more money on Main Street. Too bad Barry broke his promise; i.e., not giving out $3,000 for "Thingamajigs" to every American. This is better then $85 billion a month to bankers. If he is so hard pressed, he could have done both. At least that money would flow thru hands on main street and in local stores that are also on the verge.

Jobs and $$$ for Main Street private sectors would help soften the Deflationary Depression we ar ein that just began again frist week of April when the St Louis Fed reported a negative yield on thise inflation protected bonds.

Sat, 04/13/2013 - 20:33 | Link to Comment tarsubil
tarsubil's picture

LOL, I'm imagining Bernanke dressed up like Gandalf standing on a mountainside waving his staff to create future growth. Bernanke can drink cold water and piss warm. That is about all the wealth he creates.

Sat, 04/13/2013 - 20:42 | Link to Comment DogOfSinope
DogOfSinope's picture

Well, according to the Second Law of Thermodynamics, he can't eve do that. But, laws of physics don't mater. Same as debt doesn't matter.

Sat, 04/13/2013 - 20:38 | Link to Comment auric1234
auric1234's picture

He can create promises of future wealth, which has nothing to do with actual wealth. In the end, all your little game is just pieces of paper confusing people and messing up with the economy.

 

Sat, 04/13/2013 - 20:46 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

"He can create future growth and future revenue which creates wealth."

How exactly does he create future growth?  By creating growth in the present?  That growth hasn't materialized today, and it won't materialize in the future.  Why?  Because all you are doing to prop up growth today, is steal growth from the future.  There won't be any future growth.  If you create a big sale on cars today, even thought I don't really need one until a year from now, if I buy one today, I won't be buying one next year.

Let's say you put the $30k car on sale today for $20k and I buy it.  Now I won't be there to buy it next year at $30k.  Where's the demand? 

Money printing CREATES NO WEALTH, and neither does digging a ditch with one worker and filling it in with another.

Sun, 04/14/2013 - 00:04 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

@ D P Krugman .

You make me fucking ill with your stupidity. I would love to put my hands firmly around your neck and see how soft your skin is.

Go away.

Sat, 04/13/2013 - 20:17 | Link to Comment akak
akak's picture

Your naive faith in the omniscience and omnipotence of sociopathic central banksters and oligarchic financial elites is most touching, if quite perverted.

Do you put glass shards under your pillow for the Broken Window Fairy too?

Sat, 04/13/2013 - 20:22 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

You are just a sad little doomer who doesn't understand economics and how the world works.

Sat, 04/13/2013 - 20:28 | Link to Comment akak
akak's picture

The difference between us, Krugpigtroll, is that I merely fear doom, whereas your policies create doom.

Sat, 04/13/2013 - 20:36 | Link to Comment Pure Evil
Pure Evil's picture

And, once Berstank finally creates his singularity, Dr. Kruggle will finally understand how the Law of the Jungle works. It must be nice to be cloistered in your little rabbit hole right now over at Princeton. Away from the collateral damage created by your policies, but real soon the big bad wolf will soon come a knockin'. And he won't be askin' what's for dinner.

Sat, 04/13/2013 - 20:51 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

"You are just a sad little doomer who doesn't understand economics and how the world works"

And neither do you Paul.  All of the policies you have advocated for, have done nothing but left us swirling the drain.

Sat, 04/13/2013 - 23:48 | Link to Comment BigJim
BigJim's picture

Ah, Akak vs. The KrugPigTroll.

Does life get any better than this?

Sat, 04/13/2013 - 20:55 | Link to Comment Miffed Microbio...
Miffed Microbiologist's picture

Well, I for one am glad you're here Dr K. Little people like us are so confused what to do with our money and can sleep well knowing someone with your education and knowledge is guiding our economy. I guess people at ZH just can't appreciate this.

Miffed:-)

Sat, 04/13/2013 - 21:18 | Link to Comment Oldballplayer
Oldballplayer's picture

If you really feel that way....there is a channel on cable. I think it is called the Consumer News and Business Channel. They will tell you everything you need to know.

Booyah.....buy. Buy. Buy.

Sat, 04/13/2013 - 21:11 | Link to Comment prains
prains's picture

Investing in firms is not speculating.

 

It is when the principle of a fair and transparent market no longer apply

Sat, 04/13/2013 - 23:45 | Link to Comment Schmuck Raker
Schmuck Raker's picture

I submit that it's still speculating even with 'fair and transparent' markets. Otherwise there would be even less profit potential. Not that I know of what I speak.

Sun, 04/14/2013 - 00:40 | Link to Comment prains
prains's picture

you're right, just speed bagging the fake kruggie

Sun, 04/14/2013 - 09:51 | Link to Comment Schmuck Raker
Schmuck Raker's picture

"speed bagging the fake kruggie"

LOL - Please, do continue.

Sat, 04/13/2013 - 23:42 | Link to Comment Schmuck Raker
Schmuck Raker's picture

This comment deserves both an UP and DOWN vote.

As only one is available to me, a junk (-1) it is.

Sun, 04/14/2013 - 04:32 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Krugman: "Investing in firms is not speculating."

Is he for real, or an amateur? 'Speculating' has less to do with the Vehicle than with the Timeline/Duration of investment. Stocks, like paper gold, can be bought & sold for speculation. Even more so, in fact.

E.g. HFT. "I rest my case, your honor."

Sun, 04/14/2013 - 11:53 | Link to Comment Osmium
Osmium's picture

Investing in firms?  Like buying AAPL at $700?

Sun, 04/14/2013 - 11:04 | Link to Comment dow2000
dow2000's picture

97% loss of purchasing power in 100 years....kinda like TVIX

Sat, 04/13/2013 - 19:01 | Link to Comment akak
akak's picture

I have only one word for you: mouthwash.

Sat, 04/13/2013 - 19:40 | Link to Comment JonNadler
JonNadler's picture

Krugman:

Be careful about what you say about gold, it has a bad habit of coming back again and again and then....well, just look at what it did to my career! Dumped by Kitco, collecting public assistance and food stamps at this point, applying for section 8 housing...you don't suppose you can help a brother out getting me a job in the mailroom at that rag you work for?

Sat, 04/13/2013 - 20:02 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

My career does not rest on the price action of gold - my career rests on my ability to understand economics.

Sat, 04/13/2013 - 20:11 | Link to Comment akak
akak's picture

Your career is therefore apparently one giant house of cards built on a foundation of sand in front of an approaching hurricane.

Sat, 04/13/2013 - 20:16 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

I teach at Princeton.  I write for the NYT.  I won a Nobel Prize.

Sat, 04/13/2013 - 20:20 | Link to Comment akak
akak's picture

You indoctrinate gullible minds in the precepts of statist submission to oligarchic authority at Princeton.

You scribble facile and risible defences of the corrupt and failing financial, political and monetary status-quo at the New York Times.

You won no such thing, as there IS no Nobel Prize in Economics.

 

PS: I love whipping out my red pen.

Sat, 04/13/2013 - 20:28 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

You are speaking of one of the world's most reputable Universities, one of the world's most reputable news organizations, and one of the world's most reputable awards.

Sat, 04/13/2013 - 20:29 | Link to Comment akak
akak's picture

I did not realize that "reputable" had been redefined to mean "coated thickly and continuously with excrement".

Sat, 04/13/2013 - 20:37 | Link to Comment Pure Evil
Pure Evil's picture

You know, I was up in that neck of the woods not to long ago and I always wondered why it stank everytime I drove through Central Jersey.

Sat, 04/13/2013 - 22:17 | Link to Comment AlaricBalth
AlaricBalth's picture

The good Dr. K. is obviously suffering from Dunning–Kruger effect. It is an effect in which incompetent people fail to realise they are incompetent because they lack the skill to distinguish between competence and incompetence.

Sat, 04/13/2013 - 20:43 | Link to Comment Ignatius
Ignatius's picture

"...and one of the world's most reputable awards."

In physics, sure...

It seemed they could not go any lower than giving Kissinger the peace prize, then came Obama who had done absolutely NOTHING to earn it. 

So this begs the question:  Do you still shit your pants?

Sat, 04/13/2013 - 22:34 | Link to Comment Arrowflinger
Arrowflinger's picture

Reputable? How about ill reputable?

The last decade discredits you totally.

Sun, 04/14/2013 - 06:35 | Link to Comment auric1234
auric1234's picture

You bring a bad name to all three of them.

 

Sat, 04/13/2013 - 20:20 | Link to Comment fonzannoon
fonzannoon's picture

You teach douchebags, you write for douchebags and you won a prize only douchebags care about.

Sat, 04/13/2013 - 20:21 | Link to Comment otto skorzeny
otto skorzeny's picture

i'm not sure why you guys respond to this troll-he's like an unamusing MDB

Sat, 04/13/2013 - 20:26 | Link to Comment akak
akak's picture

Think of it as burning a Keynesian Quisling in effigy.

Sat, 04/13/2013 - 20:26 | Link to Comment fonzannoon
fonzannoon's picture

akak you need your own column. You have a tremendous way of framing things.

Sat, 04/13/2013 - 22:52 | Link to Comment RockyRacoon
RockyRacoon's picture

Yes.  His presence here does add a certain je ne sais quoi.  Were it not for him and his ilk we'd just be a mutual admiration society -- preaching to each other's choirs.

Sat, 04/13/2013 - 22:48 | Link to Comment Arkadaba
Arkadaba's picture

I know lol is overused but lol! Nice one!

Sat, 04/13/2013 - 20:22 | Link to Comment DogOfSinope
DogOfSinope's picture

European Union won Nobel prize, too.
So, not something I would advertise about these days.

Sat, 04/13/2013 - 20:25 | Link to Comment dogbreath
dogbreath's picture

so why am I not impressed?

Sat, 04/13/2013 - 20:39 | Link to Comment tarsubil
tarsubil's picture

You're a high priced whore. What? You get paid a lot so you aren't dirty? The poor women walking the streets turning 50 FRNs tricks are more noble than you are.

Sat, 04/13/2013 - 23:53 | Link to Comment BigJim
BigJim's picture

At least if you do what THEY suggest there'll be a happy ending.

Sat, 04/13/2013 - 20:44 | Link to Comment Crabshacker
Crabshacker's picture

You didn't win shit...They gave it to you just like the one they gave to war monger Barry... that prize rates just below the duck at the carnival..

Sat, 04/13/2013 - 20:54 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

That's not entirely true either. Your 'Prize' is from the Swedish Rijksbank, I.e. their central bank, and awarded by the Nobel Committee. Alfred Dynamite Nobel never created that one.

Sun, 04/14/2013 - 01:34 | Link to Comment Svendblaaskaeg
Svendblaaskaeg's picture

"I won a Nobel Prize"

Well hallo Mr. Fancypants

So did IPCC and Al Gore - and where is Catastrophic Anthropogenic Global bloody Warming?

So did Obama - Child Casualties As a Result of U.S. Drone Strikes: 178 children in Pakistan and Yemen

Sat, 04/13/2013 - 20:12 | Link to Comment JonNadler
JonNadler's picture

well then your career is screwed NO MATTEr what happens to gold?

Sat, 04/13/2013 - 20:24 | Link to Comment akak
akak's picture

How much like your own sordid story, eh Jonny?

Tell us, how is life treating you post-Kitco anti-gold bully pulpit?

Sat, 04/13/2013 - 23:07 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Krug-girl, Nadler...

Nadler, Krug-girl...

Which is my favorite troll?  Decisions, decisions...

Sun, 04/14/2013 - 08:41 | Link to Comment JonNadler
JonNadler's picture

DOchen and Akak:

life is not easy for a gold-bashing has been. I am reduced to attending social events, looking for rich old ladies who might want to take me in, maybe as a concubine, maybe marriage even (I can divorce after 6 weeks and get something my lawyer tells me). You know what is like to look at these old ladies and their mustaches, with the lust in their eyes...AAAHHHHH

And I used to date Blythe! As far far as a a beard, don't you needs "nads" for that?

Sun, 04/14/2013 - 08:56 | Link to Comment francis_sawyer
francis_sawyer's picture

I heard that beards are popular with billygoats... You'd fit right in... Are you a "catcher"?

Sun, 04/14/2013 - 10:06 | Link to Comment JonNadler
JonNadler's picture

at this point I'll "take" anything

Sat, 04/13/2013 - 20:32 | Link to Comment DogOfSinope
DogOfSinope's picture

Well, if you do understand it I wonder what might be your incentive for misinterpreting it publicly? First, it was "debt doesn't matter" (which is, to be fair, partially true - what matters is paying it back). Now, it seems reality doesn't matter, too? Or you want to provide some evidence that average Joe is not in the worse position today than a year ago - despite numbers on colorfull sliding tickers show larger values?

You can ignore reality. But you can't ignore consequences of ignoring reality.

Sat, 04/13/2013 - 20:43 | Link to Comment Dr Paul Krugman
Dr Paul Krugman's picture

We are still in a depression and we need a jobs stimulus.  Are we better off?  Well, unemployment has been steadily dropping.

And if your plan is austerity, look at what austerity has done to Europe.

Sat, 04/13/2013 - 20:46 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Austerity has kept me and mine off of food stamps.  Can't say that for the 50 million that have been suckered into the welfare state, eh?

(BTW, why would you mock Europe and also repeat its mistakes, "doctor"...?)

Sat, 04/13/2013 - 21:05 | Link to Comment DogOfSinope
DogOfSinope's picture

There is no evidence that unemployment is dropping. Regarding Europe you made an inversion of cause and consequence. Plus, there are much "fishier" things going on in Europe... Boy, I hope that I'm wrong, but politically EU today looks too much like former Yugoslavia to me...

Sat, 04/13/2013 - 21:00 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

"We are still in a depression and we need a jobs stimulus. Are we better off? Well, unemployment has been steadily dropping"

Unemployment has been dropping because and only because people HAVE STOPPED LOOKING for work.  They are STILL UNEMPLOYED!! 

As for jobs stimulus, you can build all the 13 lane highways you want, that doesn't create wealth, all it creates are empty freeways.  The private sector needs to create something real, like perhaps a hamburger.  Because the restaurant buys the beef from the packer and the packer buys it from the farmer, thats wealth.  Some government turd counter collecting a check doesn't create anything.  And the only way to pay the turd counter is to take from the private sector.

Sat, 04/13/2013 - 23:10 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

@ JonNadler

Yeah, too bad about your Kitco gig.

Hey!  With that scungy beard you could maybe get a job teaching at Princeton!  I would even bet you could get a recommendation...

Sat, 04/13/2013 - 20:44 | Link to Comment mayhem_korner
mayhem_korner's picture

This is why speculating about rocks is bad news - you can lose all of your money.

 

First, speculating is attempting to monetize one's market view.  By definition, one must have the intent to exit the speculative position (either to capture gains or limit losses). And so...if one never plans to divest of a postion - say, by holding physical gold - then one cannot be speculating and there must be another reason to hold the position.

Second, in order to lose all of your money, you have to invest it into something that goes to zero.  Precious metals have the longest-running history of any asset that has never been worth zero.  So there is no empirical support for the notion...HOWEVER, there is plenty of evidence that continued fabrication of credit via money printing can and will drive the value of un-backed fiat to zero.

The game has not changed.  The amount of unrepayable debt continues to grow each day.  The end result is known, the only thing that isn't is the TOA.  The CB's and the unwashed economists are petrified that the world is finding out that they are liars. 

There is only one thing that begins with k-r-u-g that has any worth, and it comes from S. Africa.

Sat, 04/13/2013 - 22:00 | Link to Comment bmwm395
bmwm395's picture

did they take 300mm of his phyical from him?

 

Sat, 04/13/2013 - 22:17 | Link to Comment Hulk
Hulk's picture

Its not a rock you fucking dumbass, its an element...

Sat, 04/13/2013 - 18:45 | Link to Comment razorthin
razorthin's picture

So long, well it's sad to say that you're only fooling yourself...

Sat, 04/13/2013 - 18:46 | Link to Comment Harbanger
Harbanger's picture

I don't follow him but if he had possession he didn't lose an ounce.  Wassup with the gay 80's music?

Sat, 04/13/2013 - 19:22 | Link to Comment fonzannoon
fonzannoon's picture

I thought Paulson owns a ton of "GLD"

I wonder if he sits there at night with cold sweats knowing that he will probably have to sit there and watch the price of paper gold fall and fall and yet if he asks for delivery he will singlehandedly cause a comex default and he won't get shit. His only choice would be to sell his paper gold at a massive loss.

Sat, 04/13/2013 - 19:44 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Paulson could easily get his 120 tons, GLD has 1350 tons...errr 1200 tons err 1158 tons...um maybe he should ask for it soon...

Sat, 04/13/2013 - 19:46 | Link to Comment Harbanger
Harbanger's picture

That's a tuff situation to get yourself into.  I dont know enough about his positions to comment.  But I know all this paper manipulation will cause Comex to default sooner than most people expect.

Sat, 04/13/2013 - 20:44 | Link to Comment Pure Evil
Pure Evil's picture

I'm sure Paulson's quite aware that there's no use in asking for physical delivery. This is a minor burp in the continuum. If anything he'd probably doubling down knowing full well the rats in the Ecclles building can't suppress the price of gold forever.

Sat, 04/13/2013 - 21:07 | Link to Comment EINSILVERGUY
EINSILVERGUY's picture

I'll have yo know that Aldo had 2 hits

Sat, 04/13/2013 - 22:26 | Link to Comment Randall Cabot
Sat, 04/13/2013 - 18:48 | Link to Comment GenXer
GenXer's picture

It's a quality problem when a 4% decline in an investment cost you $300 million. I wish I had enough money to make such a loss.

Sat, 04/13/2013 - 19:59 | Link to Comment de3de8
de3de8's picture

I'll take the loss!

Sat, 04/13/2013 - 20:52 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Just put up a "We Buy Gold" sign on my lawn.

(so far, no drones...)

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