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[Suresh]

The Daily Crux: World's richest & most successful speculator warns of great inflation
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At a recent breakfast, John Paulson, the most successful speculator of the last 20 years, explained exactly how the great inflation will come to pass. Says Paulson: The banks will resume regular lending – thereby releasing all of the excess money supply into the system – within six to 24 months. Two or three years after that, we will see 12% annual inflation.

Paulson is recommending investing in gold. He's already placed more than $4 billion of his firm's assets in the metal. Why is Paulson building his position so early if he doesn't expect inflation to kick in for four years? Scarcity. Paulson notes, of the $200 trillion of investable assets in the world, only $800 billion is gold. You won't be able to get much of that $200 trillion into gold at any reasonable price. But that won't stop people from trying.

Here's the part that sent a chill down my spine. At this breakfast, Paulson also gave a rare insight into what he's doing with his personal money. Apparently, his fund offers a special option whereby you can invest using gold. According to someone at the breakfast table, you convert your cash into gold and buy into the fund using bullion. When you cash out, you are paid in gold at the value it is worth that day. Paulson is 100% invested in this style.
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Suresh

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[Suresh]

Wall Street Journal: John Paulson Making Big New Bet on Gold
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John Paulson ... is launching a fund dedicated to buying up shares of gold miners and other bullion-related investments, according to three investors.

Mr. Paulson spoke about the new fund, which will begin on January 1.... The gold fund will invest in gold-related shares and gold derivatives and will aim to outperform gold prices.
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Paulson & Co. already is a major holder of gold shares including AngloGold Ashanti Ltd. and Kinross Gold, doing most of its buying early this year. Mr. Paulson currently has more than 10% of his $30 billion or so under management in gold-related investments, according to his investors.

Mr. Paulson also owns billions of dollars of gold exchange-traded funds and forward contracts that he uses for gold-backed investor classes of his various funds.
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At Tuesday's investor meeting Mr. Paulson argued that the bull run was only beginning for gold; he said he was starting the new fund in part to give himself more personal exposure to gold. Mr. Paulson, who is estimated to be worth about $6 billion, said he would himself invest as much as $250 million in the new fund, according to an investor at the meeting.
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Suresh

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[Suresh]

Of Soros Fund Management' top ten holdings, one is a fertilizer company, five are oil companies, one is a gold company, and three are technology companies. If George Soros is putting his most money with his best ideas, then you might guess that he anticipates a commodity bull market, or fiat currency bear market, in the future. You would be right.

In an interview with Mr. Soros at Davos, he notes, "there is a general aversion to currencies and a flight into real assets such as commodities."
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Minyanville: What Does George Soros Really Think of Gold?

Since December 2009, gold bears have had a ray of hope as gold has corrected (as all bull markets do), and now the bears are keying in on a headline from George Soros today: Gold is the “Ultimate Bubble”.
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Soros said, “When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”

Putting it a little differently, what he's basically saying is that with interest rates as low as they are and central banks printing money, it makes the paper “money” worth less relative to assets that are in shorter supply.
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Today, with no asset bubbles left to blow, money printing will now simply lead to commodity inflation, and as Soros says (but put slightly differently), the ultimate store of value against debasement of paper money is in fact gold.
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Additionally, with respect to Soros, it may surprise gold’s sworn enemies that are looking to Soros now for support in their quest to bash gold, but the gold ETF (GLD) is the fourth-largest single position at Soros Fund Management.
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Soros Fund Management also happens to be the 12th largest overall holder of the GLD ETF, too, behind other well-known smart investors.
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Now, this SEC filing is obviously as of September 30, 2009, but if Soros was long gold at roughly $1000 (where it was at the end of the third quarter), do you really think he sold it after a mere 20% move to $1200 two months later because he considered that 20% too “bubbly”? I doubt it.
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[F]or now, the dollar and other fiat currencies continue to collapse against gold. Until central banks begin to act responsibly again, that trend is going to continue. Unfortunately, with the global economy so warped by 20 years of reckless central banking by the Greenspan Fed, social pressures now prevent such responsible banking at the moment. Soros obviously understands this logic as well, based on how he's positioned.
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Suresh

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[Suresh]

Bloomberg: Soros More Than Doubled Gold ETF Stake in 4th Quarter
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Billionaire George Soros’s Soros Fund Management LLC more than doubled its holding in the biggest gold exchange-traded fund in the fourth quarter after bullion advanced 8.9 percent to a record.

The $25 billion New York-based firm became the fourth- largest holder in the SPDR Gold Trust, adding 3.728 million shares valued at $421 million, according to a filing with the U.S. Securities and Exchange Commission yesterday. Its investment was worth about $663 million, the fund’s largest single investment, as of Dec. 31.

Soros joined China Investment Corp. and central banks including those in China and India in acquiring gold. China Investment, the $300 billion sovereign wealth fund based in Beijing, took a 1.45 million-share stake in the SPDR Gold Trust worth $155.6 million, according to a SEC 13F filing posted on Feb. 5.
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Assets held by the SPDR Gold Trust have expanded 2.2 percent this year after surging 24 percent in 2009. They stood at 1,109.42 metric tons yesterday.

Institutional investor Paulson & Co. held the largest number of shares in the fund as of Dec. 31, with 8.65 percent, or 31.5 million shares.
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_________________
Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

On 15 January 2008, John Paulson & Co. hired Former Federal Reserve Chairman Alan Greenspan "to be their own personal Nostradamus — they're the only hedge fund he will advise on the direction of the economy and for whom he will assess, according to the Financial Times, 'the potential for and severity of a US recession'"

It may be worth rereading Alan Greenspan's 1966 paper entitled "Gold and Economic Freedom."
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Zero Hedge: Exclusive: The Paulson Portfolio Post-Mortem (In Which We Learn That The Maestro Himself Is Advising J.P. On Future Gold Prices)
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Fast forwarding to the only fund of [John] Paulson's that is truly outperforming..., the firm's Gold Fund, which is up 12.5% YTD as of June 30. ... [H]ere is how the Gold fund is positioned in terms of the current portfolio:



Yet, in discussing the gold research expertise that backs up the fund, we read this most curious disclosure: