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 | 3445281 ABG LINE
ABG LINE's picture

Lower please.

Sat, 04/13/2013 - 18:34 | 3445294 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 | 3445321 F22
F22's picture

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

I loved that song....

Sat, 04/13/2013 - 18:56 | 3445343 Ahmeexnal
Ahmeexnal's picture

Monkey on your back.

Sat, 04/13/2013 - 19:29 | 3445380 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 | 3445393 traderjoe
traderjoe's picture

He does not own gold. He owns paper.

Sat, 04/13/2013 - 19:38 | 3445400 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 | 3445431 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 | 3445460 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 | 3445494 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 | 3445525 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 | 3445635 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 | 3445764 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 | 3445939 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 | 3446040 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 | 3446328 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 | 3445706 StarTedStackin'
StarTedStackin''s picture

Hater

Sat, 04/13/2013 - 23:03 | 3445842 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 | 3445901 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 | 3446085 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 | 3446119 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 | 3446124 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 | 3446133 Supernova Born
Supernova Born's picture

You make PM holders look bad.

As you sought.

Sun, 04/14/2013 - 06:17 | 3446140 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 | 3446242 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 | 3446309 AlaricBalth
AlaricBalth's picture

+1.
Good rant, Francis.

Sun, 04/14/2013 - 08:13 | 3446207 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 | 3446433 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 | 3446457 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 | 3446196 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 | 3446486 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 | 3445531 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 | 3445550 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 | 3445643 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 | 3445767 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 | 3445405 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 | 3445905 BigJim
BigJim's picture

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

Sun, 04/14/2013 - 04:03 | 3446097 tenpanhandle
tenpanhandle's picture

After the fact prognostications are even less help.

Sun, 04/14/2013 - 01:12 | 3446022 lickspitler
lickspitler's picture

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

Sun, 04/14/2013 - 01:47 | 3446044 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 | 3445537 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 | 3445634 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 | 3446398 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 | 3445718 Never One Roach
Never One Roach's picture

He's lost less then any Cypriot I bet.

Sun, 04/14/2013 - 10:56 | 3446431 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 | 3446641 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 | 3446104 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 | 3445346 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 | 3445349 AlaricBalth
AlaricBalth's picture

And speculating about paper?

Sat, 04/13/2013 - 19:10 | 3445355 Dr Paul Krugman
Dr Paul Krugman's picture

Investing in firms is not speculating.

Do NOT follow this link or you will be banned from the site!