THE GURU OUTLOOK

We’re starting a regular new feature at TPC in which we’ll summarize some of the most recent macro and micro outlooks from so-called investment gurus.  This week’s edition will start with two investors who have handled the crisis (and recovery) remarkably well:  John Paulson and Marc Faber.   Both have similar macro outlooks:

John Paulson: Paulson made waves in 2008 with his billion dollar gains from the sub-prime crisis.  The master wave rider was short all the way down and then reversed his bearish course in stunning fashion as he went long the very same things he made so much money betting against.  In late February he referred to the market as the “buying opportunity of a lifetime”.   Paulson’s reflation trade is turning out to be another home run.   Paulson clearly believes in the Fed’s ability to reflate us out of this mess.  In the last 6 months he has made massive bets on gold and gold related equities.  In addition, Paulson has put his money on the opposite side of the trade he made a killing in last year – he now owns massive stakes in several large banks including Bank of America as well as the toxic Capital One Financial.   Paulson is even putting together money for a “real estate recovery” fund.

His latest 13-F shows an interesting mix of financials, gold and healthcare related names.  The hedging behind this allocation is quite brilliant.  He owns massive stakes in defensive healthcare names, large stakes in the full blown recovery names (banks) and the gold positions will serve as a hedge against inflation and/or the doomsday scenario.  Paulson, clearly believes inflation is likely to occur in the coming years as his bets on hard assets and real estate show.

Marc Faber: Faber has been remarkably prescient over the course of the last few years.  He was very bearish throughout all of 2008 and turned bullish on March 9th of 2009 – the day the market bottomed.  He even said the market was due for a 6 month rally.

He has a very similar outlook to Paulson (though his long-term outlook remains somewhat different).   Faber is very bullish on hard assets and emerging market equities.  He believes the Federal Reserve is in the process of causing horrible inflation and even refers to Ben Bernanke as a “criminal”.   Faber is bullish on gold, gold stocks and foreign equities (primarily emerging market equities) in the long-term and remains bearish on paper assets such as the dollar and bonds in the long-term.  Faber does maintain that the dollar is oversold in the very near-term and that the Euro is overbought.  He also believes stocks may be near their peak for 2009.

Faber is particularly bullish on Thailand and Singapore where he sees continued value.  In Thailand he likes the following companies: Tipco Food, Samui Airport Property Fund, Thai Tap Water and in Singapore he likes Design Studio Furniture.   In terms of hard asset related equities Faber likes Newmont Mining, Novagold and Sprott Resources.

In the long-term Faber believes the Fed is simply reflating the bubble that helped cause this mess to begin with.  He believes it will result in a total unraveling of the capitalist system.

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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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