What is the Greatest Investor in the World Doing Right Now?

Mr. John Paulson, bet that the housing market would collapse and risky mortgages would tumble in value. The moves put the fund manager from Queens, N.Y., alongside Warren Buffett, George Soros, and Bernard Baruch in Wall Street’s pantheon of traders. And as one rival fund manager later would say, with equal parts envy and respect, “Paulson’s not even a housing or mortgage guy…. Until this trade, he was run-of-the-mill, nothing special.”

Mr. Paulson’s tally for 2007 was nearly $4 billion. It was the largest one-year payout in the history of the financial markets. The next year, he made another $5 billion for his firm by betting against financial companies with exposure to housing.

As Mr. Paulson and others at his office discussed how much was being spent by the United States and other nations to rescue areas of the economy crippled by the financial collapse, he discovered his next targets, certain they were as doomed to collapse as sub prime mortgages once had been: the U.S. dollar and other major currencies.

Mr. Paulson calculated the supply of dollars had expanded by 120% over several months. That surely would lead to a drop in its value, and an eventual surge in inflation. “What’s the only asset that will hold value? It’s got to be gold,” Mr. Paulson argued.

“Three or four years from now, people will ask why they didn’t buy gold earlier,” Mr. Paulson said.

Paulson is starting a new gold hedge fund.  It will open on January 1, 2010 and Paulson will put up to $250 million of his own money into the fund, Zuckerman reported on The Wall Street Journal Online. He purchased billions of dollars of gold investments. Betting against the dollar would be his new trade.

Every quarter, hedge fund managers are required to file a 13F with the SEC detailing their holdings. It reveals that of the $20.5 billion in securities held by Paulson’s hedge fund, $5.8 billion are in gold and gold equities.  30% of Paulson’s $20 billion in securities is in gold.

We are not advising to rush out and buy gold.  But it is time to start putting together a plan for accumulating it when the market gives you an opportunity.  When it does, it won’t last long and you want to be ready.  We sure will be.

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