John Paulson’s take on markets

By Prieur du Plessis, on May 12th, 2011 posted in: Investment, Markets, Money Leave your comment

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John Paulson, hedge fund billionaire of Paulson & Co that capitalized on the problems in mortgage backed securities, a few days ago addressed a Global Financial Services Conference hosted by UBS. The notes below are being circulated among traders. The original source is not known, but this version comes courtesy of Business Insider – Clusterstock.

In short, Paulson is bullish on financials and gold, confident about the recovery, and thinks housing will be stable by 2012.

The following are a few bullets on his talk:

• Believes financials are under-followed at present whilst earnings are recovering.

• Confident US recovery is going to continue. One weak segment impeding growth is housing. However transition rate of delinquencies has dropped, i.e pool of delinquent mortgages is declining.

• Expect normal housing market by 2013.

• Assuming 7% S&P earnings and a normalized market PE, there is 34% upside.

• Financials’ earnings expected to recover strongly as provision expenses decline.

• Sees 40–60% upside in bank stocks.

• Sees US banks as better capitalized an over-reserved vs European once, hence only European holding is Lloyds.

• Doesn’t see any good shorting opportunities in financials.

• Expect to see pick-up in M&A in financials, particularly cross-border.

• Doesn’t think gold is a crowded trade. Only a small portion of pension fund assets held in gold.

Source: Business Insider – Clusterstock, May 10, 2011.

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