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Ever since John Paulson bet against the US real estate market over a decade ago, people have asked him about his next big deal.
Having made $ 20 billion for himself and investors when subprime mortgage bonds collapsed and sparked the worst financial crisis since the Great Depression, the billionaire found nothing to compete with this profitable trade.
Today, although it has been over 14 years since CDOs and CDSs last captured everyone’s attention, Paulson is again seeing signs of over-speculation.
Paulson, 65, said he was increasingly concerned about rising prices because he sees rapid expansion in the money supply could push inflation rates well above current expectations, and the gold is about to increase.
He also claimed that cryptocurrencies are a bubble that “will eventually prove to be worthless.” “I would not recommend anyone to invest in cryptocurrency,” Paulson said.
Paulson turned his hedge fund company into a family office last year after assets under management fell to around $ 9 billion in 2019, from a peak of $ 38 billion in 2011, and ended up at mainly manage their own money.
When asked about an opportunity as big as the one he saw during the subprime mortgage crisis, Paulson said I didn’t find anything “skewed” in the sense that you might lose a bit on the downside. , but you would gain 100 times the advantage like betting against real estate bonds in 2008, as he sees it. Most of the transactions are the same. You can earn a lot, but you risk a lot.
But he considers the worst area of pricing today to be credit. “You have current inflation that far exceeds long term returns and there is a perception in the market that this is temporary inflation. I think they bought the inflation target from the Fed as temporary, because the economy is restarting and will eventually calm down. However, if it does not weaken, or if it drops to a higher level From the 2% target by the Fed, interest rates will catch up and bonds will fall. In this scenario there are many options strategies related to bonds and interest rates that can offer very high returns. “
gold
Paulson believes gold does well in times of inflation. Especially since there is a very limited amount of investable gold. “It’s in the order of several trillions of dollars, while the total amount of financial assets is closer to $ 200 trillion.”
“So with the rise in inflation, people are trying to get out of fixed income, out of cash. The logical place to go is gold,” he said. “But because the amount of money that tries to get out of cash and fixed income overshadows the amount of investable gold, the imbalance of supply and demand drives gold up.”
Unlike 2009 with the Fed’s quantitative easing, which relies mostly on printing money, and many thought that would lead to inflation. But what happened was while the Fed was printing money while increasing banks’ capital and reserve requirements.
It is therefore the quantity of recycled money that judges whether there is an inflationary effect, since the Fed bought Treasuries, created money, which ended up in the banks and then deposited back into the Fed. This money never really entered the money supply. So it was not inflationary.
However, this time it entered the money supply, as the money supply increased by around 25% last year and the best indicator of inflation is the money supply. So I think inflation will exceed current expectations.
Best investment advice
In an interview with Bloomberg TV, which was seen by Al Arabiya.net, Paulson said the best advice he received was to invest in areas that you are familiar with.
Anyone can get lucky with a particular investment, but it is not a long term strategy. If you invest in areas that you don’t know about, you won’t do well in the end. The most important thing is therefore to focus on certain areas that you know better than others. This is what gives you an advantage.
double efficiency
When asked what would be the best investment an average person could make with $ 100,000, he replied, “Buy your own home.”
He explained that if you take $ 100,000, drop 10% of the price of real estate, and get a mortgage for $ 900,000, you can buy a house for $ 1 million.
In the past month alone, home prices have increased by 20%. So the return value on a $ 1 million home would be $ 200,000 on a base investment of $ 100,000, or double the amount of the investment, and the longer you wait, the more the home will be worth. is high.
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