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Money managers under the microscope

Subprime master Paulson’s Midas touch

March 20, 2009

Hedge fund managers may get a lot of stick in these troubled times, but there are some that more traditional investors may want to listen to.

rtrn02xJohn Paulson, for example.

The 53 year-old American, no relation of Hank, is having a good financial crisis. In 2007 he pulled off one of the most lucrative gambles in investment history — amassing a personal fortune of nearly $4 billion betting against the sub-prime mortgage sector.

We all know what happened next. Millions of small homeowners defaulted on their mortgages, and the world was plunged into financial near-meltdown. Paulson, on the other hand, has bought a $41 million 10 acre luxury estate in billionaires’ playground the Hamptons.

So what is the guru doing now? Well, earlier in the week it was announced that funds controlled by his company Paulson & Co had paid $1.3 billion for a stake in a firm called AngloGold Ashanti.

Ashanti sounds like a chart-topping R&B singer, but is actually a South African gold miner. This move speaks volumes for where we are in the current cycle, from someone who can legitimately stand up and say that he saw the crisis coming.rtr839p

Gold is widely seen as an investment that will always have intrinsic value.  When times are troubled, investors buy into it as a safe haven — a port in a storm.  Unsurprisingly, gold hit all time highs of over $1000 an ounce last year, and could well reach four figure heights again soon.

Two days after Paulson’s interest in Ashanti was announced to the market, gold spiked to a near three week high after the U.S. Federal Reserve revealed plans to spend $300 billion on long-dated Treasuries — a sign there are still serious problems across the Atlantic.

If gold is rising in value, then it’s likely that everything else is struggling. And if John Paulson thinks the crisis still has some way to run, there’s a good chance it does.

Where John Paulson goes, others are likely to follow.


brilliant article… this is the sort of financial analysis that the “laymen” of business need

Posted by dan washington | Report as abusive

this guy has the venerable greenspan on his payroll … and he is a gold bug!

did greenspan tell him something about the central bankers’ plans on the barbaric relic? probably not .. because greenspan is clueless about everything just as he was clueless about the subprime and the derivatives – which he confessed he couldn’t understand but yet never bothered to regulate …

Posted by ron_paulite | Report as abusive

He’s not a miner….will get screwed there! .. & gold will not see $1300 in the next 9 months, Fed will be selling gold!

Posted by ES Sng | Report as abusive

Statistics shows quite clearly that brilliance rarely repeats itself – and almost never consecutively.

Posted by Me | Report as abusive

John Paulson and all the other short players ought called what they are — destroyers of markets. They serve no useful purpose in the important process of building great companies.

Posted by Peter Muer | Report as abusive

It seems insane to me that the financial press would give acolades to this destructive brand of investing. What use to the short sellers and destoyers of value serve. It’s hard to believe that shorting stocks and bonds doesn’t lead to market downdrafts and the eventual destruction of many good companies. Shame, shame!

Posted by Peter Muer | Report as abusive

No, Reuters, somehow this inane whooping up of billionaires sounds false. We can’t all become billionaires, there is not enough money to go around, haven’t you folks figured that out yet? Our capitalist system means that the rich get richer (they really do), the occasional normal guy can make it to the club, and the rest of us just should just plug away at regular life, try to avoid damaging the environment, take care of the kids, avoid debt or buy rubbish you can’t afford.

Why don’t you ask a normal guy or gal about how their recession is going? Mine is fine: I have no lack of work, my car does about 55 mpg, and I followed the golden rule of never investing in get-rich-quick schemes, so I have lost nothing. I own a house without a mortgage for retirement, otherwise I rent something reasonable.

Sorry, that is sooooooo boring.

Finally: Ashanti is actually an ethnic group from Ghana.

Posted by Talleyrand | Report as abusive

not only gold u can buy , there others like renewable energy ,water n food corps and fields that plants foods.

Posted by colvis | Report as abusive

Still do not get it.

What is so valuable in gold? What can you do with this piece of metal? In my opinion it is as useless as a piece of paper, say dollar. It has only imaginary value as all other currencies, so why it should be safer than other investments?

Only thing comes into mind is that gold has no “nationality” or region to be refered with…

Posted by lil john | Report as abusive

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