Paulson Gaga over Gold and Housing

 

By Vince Chiofolo

It’s not often that John Paulson, hedge fund manager extraordinaire, publicly voices his market insights. But when he does, he has a tendency to induce rigorous head-scratching perplexity throughout Wall Street.

The multibillionaire investor, founder and president of New York-based Paulson & Co, had knees shaking at the University Club in New York recently as he aggressively spoke to the standing audience of vast changes in the economic environment in the near future, particularly concerning two areas of great debate and uncertainty: gold and housing.

Gold has been dubbed as the current over-inflated bubble in today’s market by most experts. But Paulson expressed his judgment to the crowd that the gold bubble has yet to meet its full capacity. Double-digit inflation, he explained, is likely to make an ugly appearance by the start of 2012. This will, in his opinion, inevitably slaughter the bond market and, as a result, further beef up both gold and equities.

The investment genius, #45 on Forbes’ latest World’s Billionaires list, projected that “the price of gold could hit $2,400 based only on monetary expansion, and as high as $4,000 per ounce based on a projected overshoot,” according to the Financial Times. The article reveals Paulson’s practice-as-you-preach positions, 80% of which are now denominated in gold.

His forecast for 2011 and 2012 gross domestic product growth is 2%, while stating that the Federal Reserve’s pledge of quantitative easing will contribute to the nail-biting, double-digit inflation over the next few years, Forbes reported.

Paulson broke the bank a few years ago shorting subprime mortgages and has recently made his bullish take on the real estate market quite apparent. But this time he seems to have entered rabid-bull mode, proclaiming his bold advice that: “If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home,” the Forbes article stated.

Paulson explained his real estate rational plainly; the bond market is depleted, commodities (like gold) are on the rise, and home prices are excellent.

Time will tell if Paulson’s estimations materialize and escalate him from #45 to #1 among the world’s billionaires, or if he is off base and succumbs to a part-time job delivering pizzas.

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