|
Meta Description: Editorial
Director Justice Litle tells readers John Paulson now quite bullish on gold
and the Reserve Bank of India may have just made him look like a prophet...
Keywords: Gold, Banks,
Paul Tudor Jones, John Paulson, Reserve Bank of India
Justice Litle bio: Justice
Litle is Editorial Director for Taipan Publishing Group. He is also a regular
contributor to Taipan
Daily, a free investing and trading e-letter and editor of Justice Litle’s Macro Trader.
Link to original
article: http://www.taipanpublishinggroup.com/taipan-daily-110409.html
Taipan
Daily: The Best Trader in the World Is Wildly Bullish on Gold
Justice Litle, Editorial Director, Taipan Publishing
Group
The “Michael
Jordan of trading” is now table-poundingly bullish on gold. And the
Reserve Bank of India may have just made him look like a prophet...
John Paulson (no
relation to Hank) is widely viewed as the most successful money manager of
our times. Paulson made billions of dollars for himself and his investors by
finding an obscure, non-public way to bet against the housing bubble. In
terms of absolute dollar profit, his subprime crisis score is the largest
ever.
Given his success, it
is notable that Paulson is now quite bullish on gold. The Paulson Funds have
heavy exposure to gold and gold stocks, and even offer an investment vehicle
with payouts denominated in gold.
But, for all that, John
Paulson is more of an investor than a trader. A trader, in the purist sense
of the word, is an opportunistic mercenary type... someone who can raid most
any asset class – stocks, bonds, commodities, currencies – and
walk away with armloads of cash.
A
Trader’s Trader
That is what it makes
it even more notable for Paul Tudor Jones – the ultimate trader’s
trader, and arguably the most successful pure trader alive today – to
be wildly bullish on gold.
Your editor has long
been a fan of PTJ (Jones’ initials), seeing him as a sort of market
mentor from afar. In the 80s and 90s, PTJ was known as the “Michael
Jordan of trading.” After cutting his teeth in the commodity pits,
Jones went on to trade most every asset class under the sun in his futures
trading fund.
The track record is
legendary. PTJ started out with multiple consecutive years of triple-digit
returns in the 1980s. He then reputedly made $80 million to $100 million in
the 1987 stock market crash... nearly doubled investors’ money again in
the 1990 Nikkei crash... and went 20+ years overall with no losing years.
While some fund managers
are happy to chat with the press, PTJ prefers to avoid the spotlight as a
rule of thumb. After a documentary came out in the 1980s (appropriately
called Trader),
PTJ decided he didn’t want it out there and bought up all the copies.
(You will never see him embracing the public eye.)
A
Strong Vote for Gold
Hence the surprise when
PTJ came out in his recent quarterly letter pounding the table for gold.
“I have never been a gold bug,”
Jones writes to his investors. “It
is just an asset that, like everything else in life, has its time and place.
And now is that time. The economic and political comparisons to the late
1970’s are too numerous to ignore.”
The argument is backed
up with chart comparisons like the one below (click to enlarge):
The top chart shows the
dollar value of international reserve assets – that is to say, the
total worth of central bank holdings around the world – in billions of
dollars since 1970.
Over the past 39 years,
international reserve holdings have skyrocketed from practically nothing to
more than $8 trillion. Meanwhile, the percentage of those holdings counted as
gold went from a whopping 70% or so in the late 1970s to near single digits today.
India
Lights a Fire
Perhaps fitting, then,
that the Reserve Bank of India (RBI) lit a fire under gold and gold stocks
yesterday, sending the yellow metal to nominal record highs. (To break the
inflation-adjusted high, gold will have to crack $2,000 per ounce.)
“Gold jumped to a
record,”
Bloomberg reports, “after
India’s central bank bought 200 metric tons of the metal from the
International Monetary Fund, heightening speculation that there may be more
official purchases.”
The RBI’s actions
call to mind a Taipan
Daily missive written back in February, “Why the IMF and Fort Knox Won’t Put
the Hurt on Gold.”
You can reference the
data table in that piece to get a sense of just how much buying the likes of
India, China and other major players have left to do if they hope to bring
their gold holdings up to snuff.
When asked to describe
his competitive edge as a trader, Jones described it this way:
The secret to being
successful from a trading perspective is to have an indefatigable and an
undying and unquenchable thirst for information and knowledge. Because I
think there are certain situations where you can absolutely understand what
motivates every buyer and seller and have a pretty good picture of what's
going to happen...
With the yellow metal
storming the barricades as I write, it appears PTJ’s instincts have set
him in good stead once again.
Warm Regards,
Justice
Litle
Taipan Publishing Group
Justice
Litle is the Editorial Director of Taipan Publishing Group
|
