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Paulson's Biggest Fund Cut In Half

Tyler Durden's picture


A few days ago we suggested that based on ongoing losses in the portfolio of Paulson & Co, the biggest fund of the firm, Advantage Plus, is down a massive 50% YTD. A few hours ago, Absolute Return confirmed that the firm which has stepped on virtually every single possible landmine year to date, has had its AUM cut if not exactly in half, then surely close enough for Keynesian work, at -47%. And with that the speculations of an imminent terminal redemption event coupled with liquidations of the firm's gold share class (its GLD holdings) will resume, although the one thing unclear is whether Paulson has already sold off the bulk of his winners. We are confident we will learn the answer as soon as Monday.

And also:

  • Paulson Credit Opportunity:-11.86% (-18.13%)
  • Paulson [very appropriately named] Recovery Fund:-14.25% (-31.33%)
  • Paulson Gold: -16.35% (1.34%)

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Fri, 10/07/2011 - 21:53 | 1751875 Long-John-Silver
Long-John-Silver's picture

You're Fired!

Fri, 10/07/2011 - 22:15 | 1751953 X.inf.capt
X.inf.capt's picture

geez, wonder what his golden parachute would look like....

Fri, 10/07/2011 - 23:04 | 1752051 Long-John-Silver
Long-John-Silver's picture

Before or after 5 rapid pace margin hikes?

Sat, 10/08/2011 - 00:31 | 1752183 Fukushima Sam
Fukushima Sam's picture

Everything is fine, absolutely fine, over at Paulson & Co.

Sat, 10/08/2011 - 00:38 | 1752192 CrazyCooter
CrazyCooter's picture

Hey ZHers, I am working on beefing up my reading pile for the winter (days are getting short!) and I bumped across this book ...

A History of Interest Rates (Fourth Edition) by Sidney Homer/Richard Sylla

... and was curious if anyone could reccomend a better book (for non-finance folks such as my self) regarding said topic? Interest rates are historically low and I want to try to get some perspective on how this song/dance played out in the past. I specifically want a historical perspective of interest rates and prefer something narrative being as I am not a finance professional by trade.

This book seemed a good fit given these criteria, but I figured ZH would be a good place to ask for a second opinion!

Thanks in advance!


Sat, 10/08/2011 - 00:47 | 1752202 Richard Chesler
Richard Chesler's picture

Literal ivory towers.


Sat, 10/08/2011 - 00:58 | 1752214 CrazyCooter
CrazyCooter's picture

Care to expound on that recommendation? "Literal ivory towers" googles nothing but junk (and I am not a chick - no junk for me!)



Sat, 10/08/2011 - 09:02 | 1752569 GubbermintWorker
GubbermintWorker's picture

Then why do you call yourself a crazy pussy?

Sat, 10/08/2011 - 11:58 | 1752919 CrazyCooter
CrazyCooter's picture

Cooter is a "new" euphemism that seems to be regional to the SE. Cooter is actually southern slang for a turtle, so its Crazy Turtle.

The moniker actually comes from The Dukes of Hazard. Given this was a family show at the time, I am pretty sure the producers did a bit of work to make sure the mechanic in the show was not "crazy pussy".



Sat, 10/08/2011 - 00:51 | 1752208 caerus
caerus's picture

hi cooter...not about interest rates really, but if you trade i would recommend "reminiscences of a stock operator" by livermore...he wrote another book called "how to trade in stocks" which is less biographical and more technical...there's also "extraordinary delusions and the madness of crowds" which is a great history of mass hysteria, markets and otherwise...just my opinion...good reading

Sat, 10/08/2011 - 01:00 | 1752213 CrazyCooter
CrazyCooter's picture

Yup, read that one. Excellent read. It makes it very clear how things have, and more importantly, have not changed. Based on my science/engineering know how, there are some equities I could get long, but otherwise I see the whole market as a casino and I am not the house.

Right now I am trying to wrestle the topic of interest rates and where they are going, not based on micro, but on macro/historical. We are basically at zero, so there isn't much move left to the downside (and bond prices are topped off), so, and I mean this with all humility, there is no where to go but up (and down for bond prices).

I don't think it is so simple, but that is what I am interested in learning about, at least from a historical perspective.

Thanks for your response. :-)



EDIT: I added "Extraordinary Popular Delusions & the Madness of Crowds" to my list, seems interesting!

Sat, 10/08/2011 - 01:13 | 1752225 caerus
caerus's picture

it's a great book...btw there's a book that was published fairly recently by niall ferguson called "the ascent of money" i think he has a pbs special too...anyway he does a pretty good job of tracing the origins of the bond market beginning w the medicis...he's a bit cheezy but his facts are if nothing else a nice starting point

Sat, 10/08/2011 - 01:28 | 1752245 CrazyCooter
CrazyCooter's picture

Yeah, I went through a bunch of Niall YouTubes. Good stuff over all. I really prefer Tainter on that particular subject, but it was good material none less. Also read Ralph Fosters "Fiat Paper Money" which was excellent.



Sat, 10/08/2011 - 02:18 | 1752300 jeff montanye
jeff montanye's picture

as you have found out, there isn't as much effort put into explaining the history of interest rates to beginners as one might wish.  my reading of an earlier edition of homer's book gave me one sort of insight: there are four major types of markets related to interest rates/inflation and each has a different ordering of expected performance of asset classes.  an economy goes through cycles of rising rates and falling rates, inflation and deflation, each initiated by the excesses of the predecessor.  the first part of each cycle, the "good" part because the excesses are corrected, is followed by the "bad" part where excesses of the new cycle (either inflation or deflation) assert themselves.  

stocks perform well in the first part of either era, poorly in the second (usually 80% real losses). bonds perform well in both parts of a falling rates cycle, poorly in the rising one, spectacularly so in the second part.  cash and gold perform well in the second parts of both cycles.  miners also do well in the early years of the first part of a rising rates cycle.  real estate does better with rising rates but can progress in the first part of a falling rates cycle.  the second part is poison for it like the second part of the rising cycle is for bonds.

the current cycle begins about 1932 for stocks, later (maybe '42) for real estate.  interest rates rise slowly from 2% to 4% or so by the mid sixties when stocks top and begin to decline (especially inflation adjusted).  gold peaks in 1980, rates in '81 (bonds bottom) and the deflation cycle begins.  stocks top in 2000 and gold bottoms in 2002.  bonds put in a near term top in '08 (but it is not over yet, possibly).  a bit programmatic but it seems to help.

Sat, 10/08/2011 - 02:29 | 1752302 caerus
caerus's picture

saturn dude


Sat, 10/08/2011 - 13:22 | 1753055 CrazyCooter
CrazyCooter's picture

Very interesting opinion. I will tuck this one away and chew on it.

Thanks for sharing!



Sun, 10/09/2011 - 12:58 | 1754927 spekulatn
spekulatn's picture

Victor Niederhoffer's site may be helpful. He is quite the character. Hope it helps.


Try the search function for past posts on the subject you are interested.


Here is a reading list:

Sun, 10/09/2011 - 21:18 | 1756016 CrazyCooter
CrazyCooter's picture

Thank you. Going through it now. :-)



EDIT: Excellent stuff in that link! I think I found enough to keep me busy for a few months! ;-)

Sat, 10/08/2011 - 04:47 | 1752384 disabledvet
disabledvet's picture

Read all of Chernow's biographies (Morgan, Rockefeller, etc) and of course Buffet's "Snowball" is a must read. Finish it off with Treasury Secretary Hank Paulson's book about his time during the finanical crisis in 2008. Then ask yourself "who the phuck am I?"

Sat, 10/08/2011 - 23:53 | 1754002 Freddie
Freddie's picture

It is a shame that no one rubs Buffett's nose in his dispers.  Evil old man like Soors.

Sun, 10/09/2011 - 09:04 | 1754371 j0nx
j0nx's picture

What's a disper and who is Soors?

Sat, 10/08/2011 - 06:43 | 1752438 hondamikesd
hondamikesd's picture

Just wanted to chime in and second that the "the ascent of money" was a pretty good read read, if, like Caerus said, a bit cheesy at times.

Sat, 10/08/2011 - 01:05 | 1752218 Dick Fitz
Dick Fitz's picture

CrazyCooter (love the name)

I know you want something "Modern" but understanding the fundamentals of interest rates and modern banking is more important, so go here-

Man, Economy, and State with Power and Market - Scholars Edition by Murray N. Rothbard.

It's all you need to know to understand the future of the USDollar, and the world economy.

Sat, 10/08/2011 - 01:35 | 1752252 CrazyCooter
CrazyCooter's picture

Thanks, will look into it. I am really focused on interest rate moves and the circumstances/implcations surrounding them. I mean, our rates are historically low outliers, so it begs to be thought about. Kind of obvious where things are going from here!

I think I have my head generally screwed on straight in the macro sense of things and in terms of fundamentals, but I feel sort of ignorant ont he subject of interest rates and the policy implications surrounding them.

Thanks for the material!



EDIT: Holy shit, 1400+ pages!

Sat, 10/08/2011 - 01:32 | 1752253 chump666
chump666's picture

the Art of War.

Sat, 10/08/2011 - 01:37 | 1752259 CrazyCooter
CrazyCooter's picture

LOL! There is truth in that recommendation me thinks!



Sat, 10/08/2011 - 06:24 | 1752430 Mike in GA
Mike in GA's picture

Money of the Mind by Jim Grant

You won't read a better book than this.  Jim covers the dry topic of archaic American financial history with such a rich wit it is like colorizing an old black & white movie.  Great wintertime reading. 

Sat, 10/08/2011 - 13:38 | 1753076 CrazyCooter
CrazyCooter's picture

Oh, didn't think to see if he had any books. Will do!



Sat, 10/08/2011 - 06:19 | 1752427 falak pema
Sat, 10/08/2011 - 12:49 | 1753012 Freddie
Freddie's picture

There is no comparable period in US history of this level of corruption with an usurper in the White hut looting the treasury and his zombies on the streets doing faux street theater.   The Wall Street Protests are ACORN 2 aka typical fake community agitator marxism.  A better book might be about the rise of Lenin.

Sat, 10/08/2011 - 03:16 | 1752340 Die Weiße Rose
Die Weiße Rose's picture

As long as corporate criminals like John Paulson and Lloyd Blankfein

are part of Wall Street, there will be No Reform or Change in financial markets or for the US economy.

There will be more un-employment and the US will face a severe Depression

due to a total lack of faith world-wide in the sick US financial market System and faulty US economic Policy.

John Paulson and Lloyd Blankfein are the Poster-boys for all that is rotten with Corporate America:

Who should go to jail? Fill in the Blank(fein).

The case also involves John Paulson, a hedge fund investor whose firm Paulson & Co made billions of dollars by betting the nation’s housing market would crash. This included an estimated $1 billion from the transaction detailed in the lawsuit, which the SEC said cost other investors more than $1 billion. Paulson was not charged.

Sat, 10/08/2011 - 08:46 | 1752550 SwingForce
SwingForce's picture

Paulo your re-hired!

Fri, 10/07/2011 - 21:53 | 1751877 baby_BLYTHE
baby_BLYTHE's picture

people like Paulson would be gdoing fine every single year if they just stuck to their gold investments alone. Instead they risk putting many of their funds in totally insolvent Western Nation'ss debt and TBTF banks whose stocks are getting hammered in anticipation of the next (far larger in scale) crisis that is impending.

Fri, 10/07/2011 - 21:56 | 1751885 Long-John-Silver
Long-John-Silver's picture

99% of the population have no idea what is going to happen to them.

Fri, 10/07/2011 - 22:00 | 1751900 baby_BLYTHE
baby_BLYTHE's picture

hopefully billionaries like Buffett got some Whiskey spiked in that bathwater. Soon much of the middle-class will be millionaries while billionaries see the majority of their net worth going up in smoke due to rampant inflation. 

Someone on ZH earlier said the next crisis would be one everyone could see coming, but no one was WILLING to do anything to prevent. Spot on, IMO. 

Fri, 10/07/2011 - 22:09 | 1751934 trav7777
trav7777's picture

nobody has any clue what to do because economists and the people in charge do not understand the physical world.

There is literally NOTHING that can be done once aggregate energy rate of supply peaks.  The rate of activity based on that energy must also plateau and then decline.  To a financial system depending upon continued growth for the coupon, it's doom

Fri, 10/07/2011 - 22:17 | 1751954 baby_BLYTHE
baby_BLYTHE's picture

exactly, net energy inputs in decline means shorter supply and higher prices across the board (never mind monetary policy or debt/gdp). Most fail to recognize just how much a part oil is in the price equation of just about everything one consumes. No fiat currency based on debt can overcome this economic real world reality.

Fri, 10/07/2011 - 23:54 | 1752128 Fish Gone Bad
Fish Gone Bad's picture

The world is in a Malthusian trap.  How to get out is actually simple.  A lot of people need to no longer exist.  This can be accomplished with devastating wars, a real pandemic (did any poor nations die off from H1N1?), a meteor hitting the earth, some combination of the above, or some combination of the above and something I have not thought of yet.

And yes, the next depression will happen right in front of everyone and no one will think to get out of its way.  For some reason, people think bad things only happen to "someone else". 

Sat, 10/08/2011 - 01:51 | 1752281 Iggy
Iggy's picture

It's sad that we would even bring this up but if you look at history most famines and depopulation events are caused by interuptions in supply. Preceded by economic or political problems. Prepare for the worst and sleep better at night.

Sat, 10/08/2011 - 07:45 | 1752484 Smiddywesson
Smiddywesson's picture

One EMP could knock out the power of everything from Ottawa to Miami, leaving everyone to starve.  War is obsolete when your enemy has placed themselves in the position where they have 3 days of food on the shelves and no way to bring in food without power.  

Sat, 10/08/2011 - 11:45 | 1752891 Fukushima Sam
Fukushima Sam's picture

The consequences of an EMP are likely much worse than just starvation for many.  One massive EMP that knocked out all power around the globe would result in all nuclear power plants losing their cooling systems, causing all of them to melt down in one way or another, and resulting in hundreds of Fukushimas across the planet.  This would likely be the end for the human race and most of the rest of life on Earth.  Life would not end immmediately, but cancer and sterility would finish us off over the next few decades.

Mon, 10/10/2011 - 00:06 | 1756425 Die Weiße Rose
Die Weiße Rose's picture

Recession is when your neighbor loses his job.

Depression is when you lose your Job.

And Recovery is when Ben Bernanke and Tim Geitner lose theirs.

Sat, 10/08/2011 - 00:55 | 1752212 Stax Edwards
Stax Edwards's picture

Gas is 3.30 down in FL not too bad

Sat, 10/08/2011 - 04:49 | 1752387 disabledvet
disabledvet's picture

i see you've been upgraded to a "mommy picture" here.

Sat, 10/08/2011 - 12:53 | 1753015 Freddie
Freddie's picture

Obam's gang are marxist looters.  They are looting the treasury.  Meanwhile - his fake union troops are marching to distract from Solyndra, Fast & Furious, plummeting poll numbers and his looting.  The "students" should be marching on the universities who got them in debt by raping them with tenured professors, worthless degress and $100,000 debts they cannot be discharged in bankruptcy

Sat, 10/08/2011 - 00:43 | 1752195 CrazyCooter
CrazyCooter's picture

Damn this top one percentile sucks!



Fri, 10/07/2011 - 22:11 | 1751940 DormRoom
DormRoom's picture

Paulson hit it big in 08, because he followed Micheal Burry's newsletter, and shadowed the trade.

GLD liquidation soon, unless he sells off his position on the cheap to another hedgefund.

Sat, 10/08/2011 - 06:27 | 1752433 reload
reload's picture

"Paulson hit it big in 08, because he followed Micheal Burry's newsletter"

Dont forget also that he and the squid colluded in the creation of extra shIt MBS/CDO garbage to bet against. Nice theivery if you can get away with it - and they did. But I wonder - did he buy all the City & boa stock to keep himself out of trouble and apperar patriotic. I am still amazed he and his collaborators are not doing hard time. If a deal was done obliging him to load up with wobbly TBTF stock in order to remain at liberty would any of us be suprised? 

Sat, 10/08/2011 - 07:46 | 1752486 Eugend66
Eugend66's picture

Indeed ! +1

Fri, 10/07/2011 - 21:56 | 1751883 mynhair
mynhair's picture

Tax his ass based on 6/30 holdings!

Isn't that what the dimwits want?

Fri, 10/07/2011 - 21:56 | 1751884 Mike2756
Mike2756's picture

Silver looks terrible on a monthly chart, looks like 2008.

Fri, 10/07/2011 - 21:58 | 1751894 mynhair
mynhair's picture

O, fuk off.

Fri, 10/07/2011 - 22:03 | 1751908 ReallySparky
ReallySparky's picture

Thanks hair, took the words right out of my mouth.

Fri, 10/07/2011 - 22:08 | 1751932 Mike2756
Sat, 10/08/2011 - 00:46 | 1752201 CrazyCooter
CrazyCooter's picture

If silver drops to 20 and I can get anything close to that retail for ASE, I am maxing all my cards without a second thought.



Fri, 10/07/2011 - 22:03 | 1751913 Mike2756
Mike2756's picture

Don't shoot the messnger, lol. Should get a good bounce off of 20.

Fri, 10/07/2011 - 22:12 | 1751945 buzzsaw99
buzzsaw99's picture

Stick to your guns Mike, silver is fukked.

Fri, 10/07/2011 - 23:19 | 1752074 Diablo
Diablo's picture

u wanna see something scarier...look at palladium. yikes!


Sat, 10/08/2011 - 07:57 | 1752500 Smiddywesson
Smiddywesson's picture

If they don't want the PMs to decouple from the paper game, they can't drive down prices too far.  We have already seen that in gold where it spiked down in the low $1500s but then rose to a range of $1600-$1650.  They didn't allow it to rise that much because they are friends of gold bulls, they had to or risk having the whole price suppression scheme blow up.  If you are trading paper PMs, you should have covered.  If you have physical, sleep well, they can't touch you.

They know you are going into a buying frenzy at $20, so you won't see that level.  

Sat, 10/08/2011 - 10:18 | 1752714 Mike2756
Mike2756's picture

Not paper trading, went long some zsl calls on friday. Been trading either side in here, was looking at the breakaway in the stoch, also, weekly macd is flipping negative. We got the bounce off of the weekly 100 ma, next support is the 200 at around $20, ties in nicely with the breakout last year. Euro looks like it's only halfway through the move and is headed to the mid 1.10's. Rather play things from the short side until proven otherwise.

Fri, 10/07/2011 - 22:05 | 1751919 Long-John-Silver
Long-John-Silver's picture

Everything is looking like 07/08 all over again. Business are closing. Strip malls are empty. People are filling their trucks with everything they own and moving. New car dealerships are overflowing with unsold vehicles. A local newspaper dedicates an entire page of the classifieds for Moving, Garage, and Yard sales. More homes are being abandoned.

Fri, 10/07/2011 - 22:15 | 1751950 DormRoom
DormRoom's picture

yes.. if you dig into the today's labor number,s you'll see part time & temp workers increasing over the last 3 months, because they couldn't find full time work.


That's a leading indicator of layoffs ahead, if there's a small shock to the system. Greece. cough. Belgium. cough.

Fri, 10/07/2011 - 23:37 | 1752098 sun tzu
sun tzu's picture

45,000 of them were verizon strikers going back to work

Sat, 10/08/2011 - 04:51 | 1752390 disabledvet
Sat, 10/08/2011 - 12:55 | 1753019 Freddie
Freddie's picture


Fri, 10/07/2011 - 21:57 | 1751888 Comrade de Chaos
Comrade de Chaos's picture

Arrogance... has grave concequences. /TBTManage 

Fri, 10/07/2011 - 21:59 | 1751891 buzzsaw99
buzzsaw99's picture

he looks like a fool when he isn't ripping off schoolteachers. karma bitchez.

Fri, 10/07/2011 - 22:03 | 1751911 mynhair
mynhair's picture

Go to bed.  Non-Trader.

Fri, 10/07/2011 - 22:05 | 1751920 buzzsaw99
buzzsaw99's picture


Fri, 10/07/2011 - 22:08 | 1751929 mynhair
mynhair's picture

byte me

Fri, 10/07/2011 - 22:18 | 1751964 mynhair
mynhair's picture


Fri, 10/07/2011 - 22:21 | 1751975 buzzsaw99
buzzsaw99's picture

i knew it, another closet case!

Fri, 10/07/2011 - 21:59 | 1751897 xtop23
xtop23's picture

 Couldnt happen to a nicer guy. His demon dialer must be smoking by now , what with his manic calling of government contacts for news on the upcoming waterfall of FRN's

Fri, 10/07/2011 - 22:01 | 1751905 XRAYD
XRAYD's picture

Paulson collects his 2+20 in duirng good times (paying 15% tax mostly), and then his investors bail out with half their money.

They deserve each other!



Fri, 10/07/2011 - 22:02 | 1751906 RobotTrader
RobotTrader's picture



Tom O'Brien says stocks and currencies will rally a little bit longer, then an epic crash in "Risk Assets" and the USDX goes up to 85.

Some caller who said he has held SLV for 18 months called in wondering what to do.

Tom said sell it.

He says much more pain is in store for the PM bulls.

Hear it for yourself:

Paulson is about to get "Amaranthed".

Fri, 10/07/2011 - 22:06 | 1751922 mynhair
mynhair's picture

Robo, better buy some miners while they are cheap.

Fri, 10/07/2011 - 22:06 | 1751923 xtop23
xtop23's picture

 But those physical PMs will always be worth something ..... those stocks...... er.. not so much.

Fri, 10/07/2011 - 22:28 | 1751961 DormRoom
DormRoom's picture

I read that if Germany can get the 50% haircut on Greek bonds, there may  be a banking holiday for a few days, so the markets can digest the news, and the Euro may collapse to 1.20-1.10.


If the Euro has a sigma 6+ drop in one day to that level, USD & yen carry trade unwind, will break all markets.  Hedgefund models are poorly programmed for a 6+ sigma move in a major currency.  And if these leveraged krakken start to sell all at once, you could have flash crash 2.0.



Sat, 10/08/2011 - 11:47 | 1752895 trav7777
trav7777's picture

the high implied correlation caused by all the index fund and ETF chasers means that there will be some alpha opportunities galore on the other side of that

Fri, 10/07/2011 - 23:12 | 1752062 Aguadulce
Aguadulce's picture

The difference is that BHunter was an idiot.  He was the zoolander of natty.  He only knew how to do one trade.  Paulson is a little bit more savvy, come on.

Sat, 10/08/2011 - 01:20 | 1752233 CrazyCooter
CrazyCooter's picture

Hey Robo, I know you take a bit of heat around here for your equities stance. It doesn't seem to phase you much and you seem to have conviction regarding your trade/position. Not siding with you, but I do find that sort of thing intriguing.

I would like to ask a sincere question and I am really interested in your response, given your position on PMs. Not trolling (go read my last 20 posts in my profile before you respond if you are so inclined). I am just a nut job red neck that moved to Alaska because I think all hell is about to break lose and I really don't want to get shot/arrested/robbed trying to earn a living.

I see, in my minds eye, a tightening death spiral of fiat currency and debt. I think you have to agree, since its reality, but you also seem to interpret this differently. That is what I am digging at.

With that said, do you feel PMs are forever a broke investment? Or do you feel that PMs will ramp and collapse like the late 70s/1980? Given a huge run up, isn't that a trade opportunity, assuming the timing was right? I suppose there is plenty of volatility to go around and make money on.

I plan to eventually sell some PMs in the future, so I am really trying to formulate in my mind the right circumstances to make such an exchange. I want to know why I should/should not sell prior to the moment I actually do sell. I thought you might be able to help me out on this subject since you are dismissive of PMs (and probably for some logical reason(s)).

You can rant or dismiss, but I am interested in an intellectual position on the subject. The sell time will come, of this I am confident.



Sat, 10/08/2011 - 04:49 | 1752388 pelagivore
pelagivore's picture

Cooter, I've been asking myself the same thing, reading posts by Robo and Milliondollarbonus, etc. My sense is that there is a strong likelihood that they are arguing counter to their real positions and sowing doubt/disinformation. I am quite sympathetic to this actually as the last thing I want to see is a strong consensus in favour of gold, given the profit opportunities that a lack of conviction creates.

I myself toyed with the idea of going in this direction but decided against it given we are bombarded by too much double-speak, cynicism as it is so was ultimately disinclined to add to it. But maybe I'm just being overly altruistic.

If it is genuine then we have another willing counterparty so its all good.

Rgds, P

Sat, 10/08/2011 - 08:05 | 1752506 Smiddywesson
Smiddywesson's picture

Robo is an alter ego of Tyler, or more probably all the Tylers, who shows up when they want to change the subject or to spice things up.  It's 10 pm on a Friday and wham, here's Robo.  Robo comments on PMs and momo stocks because that gets everybody whipped up and angry.  So you can't ask Robo for advice or he would have to step out of character to answer the question or risk giving you bad advice, because even Robo doesn't believe the crazy stuff he says half of the time.

Sat, 10/08/2011 - 10:05 | 1752687 DormRoom
DormRoom's picture

My view is that gold prices will collapse in the near term, if there is another financial crisis, as panic investors flee to liquid, and ostensibly safe assets (Treasuries).


But in the medium term gold will be buoyant as it becomes a stop gap between the USD, and a new reserve SDR currency called, the bric.    A reserve SDR underpinned by the currencies of  current account surplus nations.  I also expect the BRIC to form an economic block, strengthening free trade ties among them, as the West goes through a very rough 20 years.


Long term gold will decline, as the bric currency, becomes the  new safe haven.



Sat, 10/08/2011 - 13:50 | 1753095 CrazyCooter
CrazyCooter's picture

I am kind of off my original topic, but (per Jim Rickards) there our four possible monetary outcomes in the relatively near future:

  • SDRs
  • Multiple reserve currencies
  • Gold standard
  • Utter chaos

Assuming SDRs are the route, that mechanism already exists and used by international trade partners/nations to balance accounts. This is happening today.

BRIC typically refers to Brazil, Russia, India, and China, so I see zero correlation with SDRs and BRIC. Yes they will participate in international markets, but they are not going to be running the show in any way. I also do see BRIC having much control/influence over the SDR, so they will probably get screwed just like they get screwed by dollar reserve status today.

Multiple reserve currencies basically means that instead of an overweight dollar reserve position, a nation might hold dollars, euros, and yuan, say 30/30/30, with a mix of other stuff for the last 10. In this setting, there is no single reserve currency. These currencies then float against each other on open exchanges. This was the case in the 20s (if I am not mistaken) when both the pound sterling and the dollar were reserve currencies.

The last two are self explanatory.



Sat, 10/08/2011 - 14:49 | 1753201 L G Butz PhD
L G Butz PhD's picture

Read up all you want, but predicting future moves in interest rates is futile. If you understand that and just want more understanding, Jim Grant's book is good. Other suggested readings are Peter Bernstein's The Power Of Gold and Milton Friedman's Money Mischief.

If you haven't already, you might also enjoy getting understanding of how minds work and how that affects decision making in general, and more specifically, markets. (The madness of crowds is just the herding bias amplified.)

Recommended Cognitive Bias Reading

The list begins with general bias, gets more specific to finance as you go down the list, and ends with my current favorite dealing with trading, investing, wealth management.

How We Know What Isn’t So by Thomas Gilovich

Think Twice by Michael Mauboussin

Stumbling on Happiness by Daniel Gilbert

The Psychology of Intelligence Analysis by Richard Heuer, Jr

Dance with Chance by Spyros Makridakis, Robin Hogarth and Anil Gaba

Your Money and Your Brain by Jason Zweig

MarketPsych by Richard Peterson and Frank Murtha

If your real goal is to protect wealth, don't overlook land in addition to physical PMs. Either farmable land or with timber, preferably timber with water. Find it, do due diligence, and negotiate a reasonable price. Then buy it.

Or, if it's easier for you, move to Singapore.

Sun, 10/23/2011 - 23:38 | 1803359 Temporalist
Temporalist's picture

There is NO WAY China and Brazil are going to give up their power to print.

Fri, 10/07/2011 - 22:06 | 1751924 YesWeKahn
YesWeKahn's picture

He has been too successful. This led him to believe that he is always right whatever he does. Unfortunately that was the biggest mistake he has made: over-confident.

Fri, 10/07/2011 - 22:10 | 1751939 YesWeKahn
YesWeKahn's picture

BTW, in the interview he gave to WSJ, he said that bank stocks were too cheap to overloop. Well, they got a lot of cheaper now, and they will be much cheaper in another month. JPM will be 15$ stock again, GS 40, MS 1, C 10, BAC 50c.

Sat, 10/08/2011 - 08:08 | 1752511 Smiddywesson
Smiddywesson's picture

Mean revision works, until it doesn't.

Fri, 10/07/2011 - 22:06 | 1751925 bigwavedave
bigwavedave's picture

The cost of carry on GLD will kill him eventually.

Fri, 10/07/2011 - 22:11 | 1751942 mynhair
mynhair's picture

Pure paper.  Serves him right.

Fri, 10/07/2011 - 22:12 | 1751946 mynhair
mynhair's picture

I'm long kitty litter.  It goes up the more DC spews.

Fri, 10/07/2011 - 22:16 | 1751957 buzzsaw99
buzzsaw99's picture

you are kitty litter. lulz

Fri, 10/07/2011 - 22:50 | 1752026 mynhair
mynhair's picture

Only a user thereof.  Thumbs won't let me outside.

'Dem be Libs out there.'

Fri, 10/07/2011 - 22:18 | 1751960 Seasmoke
Seasmoke's picture

tough game , when you cant just sell shit to customers and then short what you just sold them......Goldman and Paulson need to financially die

Fri, 10/07/2011 - 22:23 | 1751980 buzzsaw99
buzzsaw99's picture

both paulsons should getting their fudge packed at regular intervals.

Fri, 10/07/2011 - 22:21 | 1751974 monopoly
monopoly's picture

We have been hearing crash for months now, we get a sharp swoosh, than back up, down, up down, up. Just goes on and on. At some point we will clean out the system and start over again. But not now.


Fri, 10/07/2011 - 22:57 | 1752041 WonderDawg
WonderDawg's picture

I predict that by January we'll be dropping like a stone, and will take out the 2009 low's early next year.

Sat, 10/08/2011 - 00:03 | 1752139 Fish Gone Bad
Fish Gone Bad's picture

This time it will be the same, just a little different.  The market has to shake out all the (weak) shorts as it goes down (everybody knows this, right?).  In the old days, people had to short on margin.  But with these short ETF's, now people have to be brutalized to get them to cover at a loss.  The stock market is a merchandizing game.  Buy low, sell high, and use baseball bats.

Fri, 10/07/2011 - 22:23 | 1751977 devo
devo's picture

I outperformed Paulson with two day trades on Apple's earnings report.

Simplicity is beautiful.

Sat, 10/08/2011 - 01:24 | 1752239 CrazyCooter
CrazyCooter's picture

When a Paulson comes along, you must whip it.

Sorry, couldn't resist.



Fri, 10/07/2011 - 22:23 | 1751981 rawsienna
rawsienna's picture

At the end of the day, Paulson's net P+L over 5 years will be negative - yet he will have collected billions for himself and his employees.  Investors are suckers. The guy had a few good trades while his firm was small and had NO EXPERIENCE managing such large sums of money.  He had a terrible macro call combined with illiquid positions. He is no Alan Howard.  He was never a macro guy - just an above average credit guy with a few good calls.  Wall street is brutal to those that overstep their basic expertise. The idea that he took all that money is an indication of him caring more about his return vs investor return. What a joke. Without clawbacks of prior fees, never invest in a hedge fund 

Fri, 10/07/2011 - 22:34 | 1751991 slewie the pi-rat
slewie the pi-rat's picture



  • i want you to meet me at the casino tonight
  • they have a bunch of great games i want to show you
  • you're gonna love playing, especially when we win
  • p.s.  we'll be using all your money...

john paulson

Fri, 10/07/2011 - 22:35 | 1752007 navy62802
navy62802's picture

I hope the other major hedge funds are doing better than this.

Fri, 10/07/2011 - 22:37 | 1752012 Astute Investor
Astute Investor's picture

Boom boom...out go the lights!

Fri, 10/07/2011 - 22:40 | 1752017 max2205
max2205's picture

Bailout time. Too big to be embarassssed

Fri, 10/07/2011 - 22:44 | 1752020 stocksugg
stocksugg's picture

Can he print money .........Let him print money then his total returns will go up 50% over night

Fri, 10/07/2011 - 22:52 | 1752030 mynhair
mynhair's picture

Bailout Paulson now!

Or the world ends!

Fri, 10/07/2011 - 23:31 | 1752090 Dasa Slooofoot
Dasa Slooofoot's picture

Andrew Sorkin is writing a book fellating Paulson as we speak.

Sat, 10/08/2011 - 03:35 | 1752350 LongOfTooth
LongOfTooth's picture

Is that with or without KY?


Fri, 10/07/2011 - 22:55 | 1752037 Kina
Kina's picture

Let me see. Global financial system about to break down, China looking at a hard landing, EU Euro on the verge of fracturing, US economy scraping the bottom of the pool, US about to implode if Europe crashes, prospects of printing USD galore.....and some say....sell your gold and silver??


One thing is certain - nobody knows how this is going to end up, but it wont be good.


This is one gun fight I won't be taking a knife to.

Fri, 10/07/2011 - 23:00 | 1752045 Blorf
Blorf's picture

Sorry Paulson, you can't win em all, unless you are Reggie Middleton.  Time to investigate a private placement of gold assets with China.

Fri, 10/07/2011 - 23:25 | 1752073 Diablo
Diablo's picture

paulson = LTCM? 

ie; bailout imminent?


Sat, 10/08/2011 - 04:53 | 1752391 disabledvet
disabledvet's picture

hahahahahaha! so he's worth 15 billion instead of thirty....

Fri, 10/07/2011 - 23:23 | 1752081 chindit13
chindit13's picture

I suspect Paulson has more physical Au and Ag than everyone on Zerohedge combined.  The same is probably true of most other big HF managers.  Ten percent of a $12 billion net worth is a lot of physical.  PM prices did not soar merely from CB buying, and certainly did not soar since 1999 because of the guy who hits his local coin shop every few weeks.  Prices rose because the wealthy diversified.  This might come as sad news to many of the faithful, but when I did my buying back in '99-'00, I was late compared to the people with whom I used to work, who ALWAYS held 5-10% of their net worth in PMs.

If the PM holders here think they are going to come out smelling like roses, Paulson will come out smelling like January 1st in Pasadena, California.

Anyone who thinks they'll be buying the Sears Tower for a Monster Box will find himself far outbid by Paulson or Jones or Einhorn, etc.  Forget the fantasies.

Small PM holders might end up better relative to other low to medium net worth members of the populace.  That's it.  Paulson is not going to be anybody's pool boy.

Fri, 10/07/2011 - 23:29 | 1752089 Diablo
Diablo's picture

read the foreward of michael lewis' new book for a cool story on kyle bass and gold. 


Fri, 10/07/2011 - 23:51 | 1752122 chindit13
chindit13's picture

I’m looking forward to reading the book.  Lewis always puts together a good story.  Bass is sharp as a tack.

Everybody has an opinion about why Au rose so much from 2000-2011.  Some like to believe it is related to lack of faith in fiat.

I think it is directly related to the massive wealth that was accumulated by the .1% over that period, especially the HF and banking billionaires.  Knowing that most have always diversified by putting 5-10% (some more) in PMs, it is easy to see how people whose net worth grew from tens of millions to tens of billions might have driven the PM rise.

Do they now sell?  Do they just stop buying?  Is there enough CB demand and small buyer demand to make up for any slowdown of buying by ultra high net worth individuals, or absorb their selling if they sell?

Got to look at the whole market.

Sat, 10/08/2011 - 01:37 | 1752260 agrotera
agrotera's picture

Hi Chindit 13!

I am a permagold bug, and think the demand curve for gold shifted from what it was 10-15 years ago as the central banks of emerging countries and the 0.1% you mention bought,  and if the "rest of the world" starts buying because of the the fiat issue this may be the new driver and the demand curve may shift again.  However, if you go exclusively with what the charts say, it is time to bail, but charts have been saying this since $600/oz.

Take good care,


Sat, 10/08/2011 - 12:04 | 1752938 chindit13
chindit13's picture

Greetings! I was just running through some of the ZH ancient history, and there you are....a fixture from Day 1.

I agree that the buyer demographic has shifted, and with good reason.  I'm wondering if there is enough buying power to make up for the fact that natural 5-10% physical buyers like Paulson aren't earning $5 billion a year anymore, never mind if they decide to pare back.

I'm not a "bug", but I don't mind a little diversification.

Hope you make the right choices, and get lucky.  Can't beat that combo.

Sat, 10/08/2011 - 04:18 | 1752371 ffart
ffart's picture

THat doesn't even make any sense. If the top .1% don't want to hold their wealth in dollars any more doesn't that directly imply lack of faith in fiat. And what happens when the other 99.9% catch on that fiat at 0% is a fundamentally bad savings vehicle.

Sat, 10/08/2011 - 09:11 | 1752585 chindit13
chindit13's picture

Makes plenty of sense.  Diversification.  Cash, some equities, some bonds, some land, some cash, some PMs.  Everything in moderation.

The difference between the wealth created in the 1990s and the wealth created in the 2000s, is that the former were largely tech and types, while the huge fortunes made later were traders and bankers who are naturally disposed toward diversification of their holdings.  As I said, holding 5-10% of a ten million dollar fortune creates some demand, but holding that percent of a ten billion fortune creates impact buying. 

The rise in the gold price does not mirror loss of faith in fiat (who thought about it much before 2006?) so much as it does the rise in the fortunes of the HF, banking elite and corporate elite.  Plot the earnings of the top 25 HF managers since 2000 vs. the price of Au.  The HF managers are a good proxy for the wealth increase amongst the top 1% in the last decade.

Sat, 10/08/2011 - 04:55 | 1752392 disabledvet
disabledvet's picture

suspect? he's got so much gold he could be considered a country...and a large one!

Sat, 10/08/2011 - 07:05 | 1752450 Linus2011
Linus2011's picture

paulson is a pretty poor damned fella compared to granma. she's got all the land and a shotgun.

Sat, 10/08/2011 - 10:34 | 1752751 Hulk
Hulk's picture

I figured as much Chindit13, but thanks for putting those thoughts into words. I never really wanted the Sears Tower anyway!  

Sat, 10/08/2011 - 11:53 | 1752909 chindit13
chindit13's picture

But two McMansions, one in Pebble Beach and one in Newport, might be in reach of that Monster Box.  Keep the faith!

Fri, 10/07/2011 - 23:49 | 1752117 zorba THE GREEK
zorba THE GREEK's picture

The forced selling of GLD could explain some of the pressure on the gold price.

I think we may only have a few weeks left of silver and gold price weakness and it's

off to the races. The big money players are going to head for cover when the EZ starts

to implode and at these levels the bond market has a lot more downside risks.

Unlike the 2008-2009 crises, gold will benefit from a Euro meltdown.

Fri, 10/07/2011 - 23:51 | 1752120 drwillia
Sun, 10/09/2011 - 00:44 | 1754079 Money 4 Nothing
Money 4 Nothing's picture

Really nice link Dr. But, IMHO, I don't see that trend alive this comming  trade week. I disagree.

Sat, 10/08/2011 - 00:17 | 1752164 ac3
ac3's picture

Thanks for playing ...clap of the hands and wave at the table.

Sat, 10/08/2011 - 00:23 | 1752174 Goldtoothchimp09
Goldtoothchimp09's picture

a braindead 13-year old pot smoking cat could out-trade this guy Paulson!!

Sat, 10/08/2011 - 01:41 | 1752266 caerus
caerus's picture

au needs imo to hold 1650 if not ag will suffer...i expect a sell off when the ES breaks

Sat, 10/08/2011 - 04:58 | 1752314 FoieGras
FoieGras's picture

When Paulson liquidates and returns all money to his investors.. THAT will mark the market bottom. That's when you buy his top 10 equity holdings with both hands.

Sat, 10/08/2011 - 02:37 | 1752318 DalaiLamaInAShark
DalaiLamaInAShark's picture

Want to see something scary? Here's a little visual aid of Deutche Bank's leverage ratio (35:1)...

ddddddddddddddddddddddddddddddddddE (yes, the E is for Equity)

"The New Feudal Europe" is going down in a massive fire ball.

I sincerely hope that Paulson is ready for THAT trade!

Sat, 10/08/2011 - 19:13 | 1753559 Schmuck Raker
Schmuck Raker's picture

Jimmy Buffet?

Sat, 10/08/2011 - 05:45 | 1752410 love
love's picture

"99% of the population have no idea what is going to happen to them."

even the remaining 1% are unsure of how the cards will fall

Sat, 10/08/2011 - 07:28 | 1752468 Fix It Again Timmy
Fix It Again Timmy's picture

We are all tap dancing in a Cuisinart...

Sat, 10/08/2011 - 07:36 | 1752475 Smiddywesson
Smiddywesson's picture

When you gamble on paper gold, you gamble against the most powerful villains in the world using their dice.

Sat, 10/08/2011 - 08:28 | 1752529 jcaz
jcaz's picture

LOL-  The Hunt Brothers, Part Deux....

Sat, 10/08/2011 - 08:34 | 1752537 overmedicatedun...
overmedicatedundersexed's picture

sold my PM stocks - sit and watch what un folds - it is illogical but the world will run to FRN's when this crisis gets legs...strong dollar king dollar

anything else is waiting the slaughter house..

PM's in hand still may work well 

but I know nothing and am on the sideline


Sat, 10/08/2011 - 09:08 | 1752579 Zeff
Zeff's picture


Sat, 10/08/2011 - 18:23 | 1753497 highwaytoserfdom
highwaytoserfdom's picture

Yea and the kleptocrats stopped my banks shorts in 2008...  while the vampire squid (s) allowed the TBIF that levered the bad government encourged housing/debt slave minuions to pay for there mistakes with protecting there debt deals..         


The idiots that used the 2 and 20 crowds deserve chapter 13 like the TBTF enablers. 


"The Rothschilds, and that class of money-lenders of whom they are the representatives and agents -- men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest -- stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved." Quote by: Lysander Spooner
(1808-1887) Political theorist, activist, abolitionist
Source: "No Treason #6" (1870)
Wed, 11/09/2011 - 11:33 | 1860859 karmete
karmete's picture

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