Stringing together the recent SEC filings of John Paulson, the billionaire hedge fund manager, makes one thing clear: he is betting big on the reflation trade. Paulson’s latest 13-F filing shows large positions in Anglogold, Kinross gold, Gold Fields, market vectors gold ETF and the S&P gold ETF. More interesting is a recent filing by Paulson to start raising money for a hundred million dollar “real estate recovery” fund.
At first, the news of large gold purchases early last month were seen as potential armageddon plays based on Paulson’s big bets on the collapse of the economy last year, but it’s now clear that Paulson is betting big on inflation in the coming years.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
prescient11
Inflation/Deflation is the biggest question around imho. I am betting on big deflation and then obvious inflation two years out. REgardless, they are fucking this up so much that precious metals seems to be a solid play I think.
Cullen Roche
Agreed. Im not sure how inflation picks up without a huge pick up in borrowing and spending. This run-up in commodities is beginning to look entirely season and courtesy of Chinese stockpiling. We could see a repeat of last year with big declines in Q3/Q4….
prescient11
Agreed, only reason I may be a buyer of precious metals at this price point is that they are also a safety play, and with al l the bs going on, what else are you gonna buy.
Onlooker
Inflation, or more pointedly, the devaluation of our beloved dollar as we print our way of this historic debt hole we’re digging. The history books will be interesting when looking back on this era. Methinks they won’t treat us well. Kinda like the Romans.
marketfolly
While I agree that Paulson is setting up for inflation and it makes sense.. his fund has also come out and said that they bought so much GLD as a hedge, because one of their fund share classes is denominated in gold, rather than US dollars, Euros, etc. You have to keep that in mind as part of the equation. But, since he’s also bought so many miners, it’s definitely clear he is wagering on inflation.
I’m Jay btw, pleased to make the acquaintance. I post up hedge fund tracking stuff on my blog (marketfolly) and have read your stuff but have never posted haha. Look forward to reading your insight.
Cullen Roche
Hi Jay,
I’ve been a reader of your site for a while now. Great work.
I agree with your Paulson comment. It’s actually impossible to gauge how some of these guys are diversified. So many of these big hedge funds have currency, futures, short and other positions that the public just can’t track. But based on the small slice we can see he certainly seems to have an inflation tilt or at least a large hedge as you said.
Thanks for the comment. I’ll see you around!