John Paulson, the head honcho at Paulson & Co. (not to be confused with ex-Treasury chief Hank Paulson), invested $2.2 billion in the bank during the second quarter, at an average buy price of $13.20 a share.
The investment is somewhat shocking, given that Paulson bathed in a significant amount of limelight for making boatloads of money by betting against a host of things related to mortgage, housing, and banking. And I do mean boatloads; reportedly, he personally pocketed $3.7 billion in 2007 as his funds skyrocketed.
Interestingly, while B of A was Paulson's largest banking investment of the quarter (and his second-largest equity investment overall), he also picked up shares of a host of other financial stocks, including JPMorgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Capital One (NYSE: COF), and Fifth Third Bancorp (Nasdaq: FITB).
But there's another twist here. Paulson's investments during the quarter also maintained a healthy amount of exposure to gold-producing companies, including the SPDR Gold Shares (NYSE: GLD) exchange-traded fund, AngloGold Ashanti, and Kinross Gold (NYSE: KGC).
So on the one hand, we've got a big bet on the banking system and financials, while on the other hand we've seemingly got a big bet against the dollar and financial system. Why would Paulson do this? I've got several ideas:
- The financials are a short-term bet, assuming that shares are underpriced and will charge back with the economy, while the gold holdings are a longer-term purchase to profit from inflation and a weak dollar.
- One of Paulson's traders brought her kids to the office and they ran amok, making billions of dollars of random trades.
- Paulson is now bullish on the financial system, and the gold holdings are a hedge on that bet.
- He did this just to mess with all of us.
- Paulson is brilliant, and if he told us the reasoning behind these trades, our lesser brains would implode from the sheer genius.
No comments:
Post a Comment