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Introducing The "Paulson Overhang" - Everything Paulson Sold In Q4 Has Soared

Tyler Durden's picture




 

The man whose fund is a pale shadow of his once invincible self, especially around the time he could tell Goldman which securities to short for him, with hapless and gullible Euros on the other side (but, hey, Goldman makes a market) continues to be the laughing stock of the market, following the latest 13F (with $13.9 billion AUM compared to $20.7 billion as Sept 30) release by Paulson. And considering the complete lack of liquidity in the market in Q4 (which is only getting worse now), the portfolio unwind of Paulson's holdings explains some very acute securities moves in November and December of 2011. Particularly the collapse in gold, which contrary to what economist Ph.D.s will tell you, was not due to technicals, or fundamentals, but due to Paulson dumping another 20% of his GLD, which is now just $2.6 billion as a share class, compared to $4.6 billion as of June 30, we for one can't wait for him to dump it all so that there is no more "Paulson overhang" in gold. Of course since this is a gold share class, it won't happen as long as Paulson & Co survives, but one can dream. What is far more laughable is that in the fourth quarter, Paulson dumped his entire Bank of America common stake (of which he had 64 million shares), his entire Citi common of 25 million shares (worth $627 million at Sept 30) and more than half of both his Capital One and SunTrust stakes, which went from $880 million to $401 million, and from $546 million to $210 million. He also cut almost his entire stake in Wells Fargo which went from $575 million to $96 million. That sure is some conviction in the always appropriately named "Recovery Fund." It is oddly ironic that precisely these stocks are the ones that have soared in Q1 as the Paulson overhang has been lifted.

So has Paulson flipflopped again, and is he chasing them one more time? We will find out on May 15. What we do know that he flipflopped on is JP Morgan which he dumped entirely in Q3 only to rebuild a $157 million stake. And while he has been selling across the board, Paulson did add see his Delphi shares hitting his AUM as per the IPO, of which he had 51.7 million shares at December 31. Paulson added some nominal holdings in Pharmasset, Goodrich, Medco and El Paso, and a bunch of others.

Once upon a time, having Paulson invest in your company was a blessing and a sure way to pick up 5% immediately. Alas, at this point, it is likely quite the opposite.

The top 50 holdings are presented below:

 

His biggest September 30 holdings are here:

 

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Tue, 02/14/2012 - 20:12 | 2159868 The They
The They's picture

more like the paulson hangover

Tue, 02/14/2012 - 20:38 | 2159962 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Without insider information, Paulson sucks at trading.

Tue, 02/14/2012 - 22:35 | 2160292 ACP
ACP's picture

More like "Bernanke's Revenge."

Paulson made Madman Bernanke look like an idiot for his "contained" comment, and therefore must PAY IN BLOOD!!!

Wed, 02/15/2012 - 08:51 | 2161132 GetZeeGold
GetZeeGold's picture

 

 

Zero sum game.......guess who gets the zero.

 

 

 

Tue, 02/14/2012 - 20:13 | 2159871 SHEEPFUKKER
SHEEPFUKKER's picture

The anti-Paulson trade is quite similar to the anti-Tilson trade. Welcome to the club. 

Tue, 02/14/2012 - 20:15 | 2159882 fonzannoon
fonzannoon's picture

I thought he dumped his gld and purchased phyz in it's place.

Tue, 02/14/2012 - 20:21 | 2159899 slaughterer
slaughterer's picture

Paulson isn't so bad.  The people who work for him, snother story.  

Tue, 02/14/2012 - 20:21 | 2159903 slaughterer
slaughterer's picture

Tepper dumped everything, and added only AAPL.  No joke.  

Tue, 02/14/2012 - 20:22 | 2159905 Downtoolong
Downtoolong's picture

It’s the curse of being a hedge fund manager.  You have to book profits every quarter to keep the wheels turning (and the bonuses flowing), even if it means you have to unload great long term investments. We little people don’t have to do that, and it’s probably the only advantage we have over them.

Tue, 02/14/2012 - 22:14 | 2160221 Vegamma
Vegamma's picture

Aren't most HF incentive fees based on MTM? Correct me if I'm wrong, but I don't think they have to "book" anything.

Tue, 02/14/2012 - 20:30 | 2159940 israhole
israhole's picture

Thanks ZeroHedge.

Tue, 02/14/2012 - 20:35 | 2159955 Paul Thomason
Paul Thomason's picture

This guy's timing is dreadful!.  

May he should read this recent article about   long vs inverse funds at major tops and bottoms - doesn't look that hard?

Wed, 02/15/2012 - 05:52 | 2160949 falak pema
falak pema's picture

"I wanna dance, I wanna dance, I could have danced all night..." He sang.

"If you wanna dance you better learn the tempo and the steps, you aint Fred Astaire." Said the cynical 2011 market. 

"But I thought I was! After Sub prime crime and my pinnacle divine. Why this debacle, now? I wanna dance!..."

"Hey, Fred Jr, watch the other guys, they're dancing you off your feet...you need another Abacus! You know... a quick leg up from the Squid, a left handed shaguppus..."

"All I know is I wanna dance, I'm USA's prime time kick- in-the-nuts jack-in-the-box and I don't like it much! Get off my backus and let me shackuppus witha spin docta who'll teach me the new hokus pokus fiat up-your-assus quick step."

"Now ya talking the talk of friends of Potus. I see a bright future for ya in 2012!"

 

 

Tue, 02/14/2012 - 20:36 | 2159958 HD
HD's picture

Just another example that "nobody knows nothing" when it comes to the markets. You can be a genius one day and a fool the next.

I for example, bought the March 2009 bottom - to the day. I nailed it. I remember some "well respected" talking head on CNBC proclaiming that there was a 70% chance the market was going to DOW 3000 and they ate it up. Bearish as I was, I starting buying with both hands within the hour and made out like a bandit for the next two years. Was it skill? Of course not. Dumb luck and fed fiat, but one hell of a ride.

Flash forward to the present day - I missed the entire LTRO 4Q run up - I simply underestimated the power of it. My shorts and gold got crushed.

Genius one day, fool the next.

Tue, 02/14/2012 - 22:40 | 2160309 fonzannoon
fonzannoon's picture

It's better to have a head start than play catch up.

Wed, 02/15/2012 - 00:02 | 2160574 Gavrikon
Gavrikon's picture

You used common sense and logic, and got crushed in the 4Q.  This is why I do not trade.  I accumulate physical metals.  Period.  I figure I will do at least as well as or better than people who do not have insider information.

Or, one could get lucky, as you did in March 2009.  Congrats on that, anyway.

Tue, 02/14/2012 - 20:40 | 2159966 dcb
dcb's picture

mucxh easier when you can manipulate thins isn't it.

Tue, 02/14/2012 - 20:46 | 2159984 justanothernerd
justanothernerd's picture

Why doesn't he secure his 2 and 20 and just by AAPL like everyone else? Would probably be more profitable. 

Wed, 02/15/2012 - 04:19 | 2160865 MarcusLCrassus
MarcusLCrassus's picture

AAPL is starting to sound like the most recent bubble. My spidey sense is starting to tingle. When everyone is scared, its time to get greedy.  But when everyone and their grandma jumps on the bandwagon, its time to get scared.   

 

"Its a new paradigm, the stock will double every year!  Steve Jobs was the second coming of Zeus!" 

 

But AAPL has some serious problems on the horizon.  China is ruling with that Chinese company Proview over AAPL, which will basically freeze AAPL out of the Chinese tablet market.  Not only that, but China would probably just seize the Foxconn operations.  AAPL wouldn't be able to ramp up production at other facilities for years. 

 

All their $50 billion in cash is stuck overseas, and every company is selling tablets now, not just them.  I wonder how long this AAPL gravy train is going to last for. 

 

http://www.macrumors.com/2012/02/14/proview-seeking-to-cut-off-apples-wo...

Wed, 02/15/2012 - 06:40 | 2160973 reload
reload's picture

AAPL: I do not trade for a living these days, its been 10 years since I did,  but I keep in touch with a few of my old collegues. Last week I had seperate dinners with two very clever, very succesful, hard working and brave traders. Within a short time of meeting both of them had that glint in their eye that says they feel a big score coming on. Both, it turns out, are in the early stages of building AAPL short positions that are going to be built with a lot of conviction over the next few months. These guys will doubtless be using some fiendishly clever option strategies to take their shot. I will enjoy watching from the sidelines.         

Wed, 02/15/2012 - 08:48 | 2161122 Smiddywesson
Smiddywesson's picture

Bolderdash!  These fellows obviously don't understand that Apple has reached a permanent plateau of leadership in the tech industry.  After finally piercing the $500 level, it cannot ever run out of buyers and will always comprise 25% of the NASDAQ.

In other words, to haters who say there's nowhere to go but down from these heights, I say this time is different.  /sarc

Wed, 02/15/2012 - 08:55 | 2161141 GetZeeGold
GetZeeGold's picture

 

 

Bubble? Oh come on.

 

The CEO and founder is gone.....but he left a hard drive full of secrets.

 

Format C:\ y

 

 

 

Tue, 02/14/2012 - 21:05 | 2160038 Seasmoke
Seasmoke's picture

cant a guy catch a break and have someone fix some MBS junk to bet against

Tue, 02/14/2012 - 21:17 | 2160074 SwingForce
SwingForce's picture

Well, its funny that this story runs today. XLF had its lowest low since IYR & IWM topped on 2/3/2012. In the immortal words of Bernie Baruch, "A speculator is a man who observes the future, and acts before it occurs."

Tue, 02/14/2012 - 21:17 | 2160079 I should be working
I should be working's picture

Tough luck. I think a lot of people on the street were selling his stock picks in anticipation that he would have to unload them. With that stinker of a year Paulson had a big target on his back.

Tue, 02/14/2012 - 21:26 | 2160115 monopoly
monopoly's picture

Hey, Paulson makes me look good. But I like all cash and physical now. This is a dangerous market. 

Tue, 02/14/2012 - 21:38 | 2160142 The4thStooge
The4thStooge's picture

Yup. Cash and phyzz. Deflation? Bring it. Inflation? Bring it. Buying or selling this market? Fuck that.

Wed, 02/15/2012 - 09:41 | 2161315 Zero Govt
Zero Govt's picture

Paulson makes me look good too.. losing over 50% almost across the board is spectacular(ly bad)

Now all i need is Warrens, over-confident from Omaha, turkeys (train-wrecks, BoA, Tesco etc) to tank and i'm going to award myself Investor of the Year and start up a -25% YoY Return Hedge Fund

..not long to wait! 

Tue, 02/14/2012 - 22:43 | 2160316 BetterOffDead
BetterOffDead's picture

There are no coincidences. Banks and gold were getting pulled down by Paulson liquidating. Seems Buffet picked up Paulson's shares of Wells Fargo on the cheap. Also looks like Goldman likes Buffet more than Paulson; I'm sure they were telling Warren that Paulson was dumping...

Tue, 02/14/2012 - 23:14 | 2160413 JuicedGamma
JuicedGamma's picture

Remember the GARB trade, this was the BARF trade.

Tue, 02/14/2012 - 23:37 | 2160489 disabledvet
disabledvet's picture

i haven't looked at GLD lately. did that price pop with the price of physical or not? oh, i forgot. "we're really not that into gold either around here."

Wed, 02/15/2012 - 08:35 | 2161095 Smiddywesson
Smiddywesson's picture

Particularly the collapse in gold, which contrary to what economist Ph.D.s will tell you, was not due to technicals, or fundamentals, but due to Paulson dumping another 20% of his GLD, which is now just $2.6 billion as a share class, compared to $4.6 billion as of June 30, we for one can't wait for him to dump it all so that there is no more "Paulson overhang" in gold.

 

Sorry, that one doesn't hold water.  Paulson selling $2 billion of GLD over the course of 6 months cannot be said to have caused GLD to "collapse."  It's a $ 71.25 billion dollar fund with enormous volume.  What caused gold to go down is central banks, who need to cover their tracks as they obliterate their fiat currencies. 

Mon, 02/20/2012 - 17:51 | 2178677 farmboy
farmboy's picture

Even a broken clock is right twice a day

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