Itâs one of those headlines guaranteed to make hedgies whoâve had a bad - or even just mediocre - year weep into their balance sheet: âPaulson May Make $428 Million Shorting Lloyds, HBOSâ. As Bloomberg reports on Wednesday: Paulson & Co., the hedge-fund firm that made more than $3 billion betting the US housing market would collapse, may have made £311 million ($428 million) since September by short selling Lloyds Banking Group Plc and HBOS Plc. Paulson, run by billionaire John Paulson, took short positions in Lloyds and HBOS valued at about £367 million in September, based on the holdings and share prices on the dates they were reported. The position equaled 0.79 percent of London-based Lloyds, or 129.1 million shares, after the banks merged and holdings were diluted by a government investment. That position was worth about £56 million on March 9, when it fell below the reporting threshold. Lloyds, which surrendered control to the government on march 7 in return for asset guarantees, is down 82 per cent since Paulson first disclosed a short position in the bankâ¦. And, as the FT reminds us: Paulson made a profit of at least £270m by shorting Royal Bank of Scotland when the fund closed its position in the bank in January after five months. Whatâs more, reckons Bloomberg, Paulsonâs potential profit from shorting UK banks stands at £606 million. Not a bad bit of work in a matter of months, when most other hedge funds fell through the floor. This makes the lament of Zero Hedge on Wednesday all the more striking. In a table showing February hedge fund performance, it notes: âReally just one relevant data point here: all of Paulsonâs funds down in February⦠we have been worshipping false idols⦠Zero Hedge is doubling down on JP being up in March as otherwise the end of the world must be nigh.â But as a savvy (anonymous) reader of Zero Hedge noted on the post, Paulson will âprobably be up big time in Marchâ - thanks largely to Tuesdayâs news that Dow Chemicalââs takeover of Rohm and Haas will proceed. Look at 13F released last week; the biggest chunk - about 18% - of their equity portfolio was Rohm & Haas, which they snagged at an avg price of about $61 per share. Yesterdayâs news that the deal would go through - granted that Paulson doesnât get all $78 in cash - means that this will probably put him up in the 4-5% range for the month. Just a guess⦠Regardless of the March outlook, as far as UK banks go, Paulson - as Leigh Goodwin, a financial analyst at Fox-Pitt Kelton in London, told Bloomberg, âcalled the market rightâ:âThey obviously have decided that the downside is limited, so there is not a great benefit from here on in holding that position.â http://ftalphaville.ft.com/