I don't believe shorting the dollar is ever mentioned in the book, except possibly in the afterword. The book is about how Paulson and a few others figured out a way to short the housing market w/a massive amount of leverage and made billiions. Before we start trashing Paulson's latest moves, don't forget that he followed up shorting the housing market by shorting the investment banks and other financials here and in the UK, making more huge gains. He followed that by buying financials fairly close to the bottom. He followed that by buying gold before its latest $200 move. I would say for the moment that he is in pretty good rhythm w/the markets.
It seems that the guy is 100% hedging his USD with gold(I got that from a quote from him). That strikes me as a crazy move, even though I believe it will work and he will get MUCH richer over the coming years. Yet, it is still nuts, he is risking huge, gold could drop 20% at the blink of an eye. I'm personally using 1/6 of my hedges in gold and 5/6 in other currencies correlated with my home currency. Furthermore I live outside the US. He is rich already, it just seems crazy to be that long of gold
Paulson in the book is quoted as having kind words for Alan Greenspan. I agree, Greenspan is a smart man, his book is excellent. I have listened to the audio version many times. Yes he is wrong in somethings, so what, everyone is. Yes maybe one could have made the case he could have hiked rates earlier and faster, but if one thinks 200bps of overnight rates would have been the difference between a bubble and no bubble they are likely being delusional. Furthermore the bubble was global The growth in the monatary base during his tenure was quite contained specially when compared to other chairmans, so the idea that he is a 'money printer' doesnt stand to the facts
US real estate could be a good investment right now, not in the buy and hold sense but in the fishing for arb opportunities sense, I just read a report where someone is saying government auctions of homes are a nice opportunitiy as they giving away houses(although I'm sure the guy is exagerating a bit given that he bought there and wants to rationalize his decision) But in theory that would make sense, liquidity demands are high, credit is tight so there are probably more opportunities than usual in properties that are highly undervalued but which are not being arbed due liquidity/credit/financial stresses I cannot take advantage of this type of thing however as the brazilian real estate market seems to be doing well and credit is flowing but there could be an opportunity down the line when the commodities boom ends and brazil goes bust
I personally know two guys who are making a killing in Detroit RE right now. They are buying rental properties for next to nothing in decent neighborhoods. They are generating ridiculously high IRR.
I dont follow much the euro zone situation but I find the bank lending standards survey interesting http://www.ecb.int/stats/pdf/blssurvey_200910.pdf?88a07cf7f461281f94a3b59d06c105d5 Two things seem to stand out -Their infamous 2008 rate hike come in during a period where banks were tightening lending stantards at a very high pace and loan demand was collapsing -Credit is still being tightened, and yet the ECB seems quite worried about exits.(Although it could be a bluff) I'm not in the japan camp for the future of the US but I would think the euro zone has a better chance of being a mini version of Japan(weak growth, price stability issues) given their demographic issues and apparently overly hawkish central bank
The ECB doesn't have a dual mandate like the Fed, so "inflation is the only needle in their compass" (say it with your best nasal French accent). Their stance also makes a bit more sense in the European context, as the labor mkt is structured quite differently. All taken together, it generally makes for shallower, but longer downturns. The issue with Europe, IMHO, is not so much the demographics/CB, but rather the different fiscal situations that different countries face. The PiIGS have real structural issues that they need to deal with. At the moment, the core countries are happy to pay for it, for the sake of a stronger, more diverse union. However, if costs spiral out of control, all bets are off.
I'm not sure the I understand the theory that the Fed's interest on reserves can be used to prevent banks from lending out excess reserves. If the fed were to hike IoR to 1%, banks would keep cash sitting at the fed only to the extend that other market interest rates did not go up by similar amount, if market rates went up by more than the jump in fed funds(a resonable scenario as the market tries to price in future tightening), then margins for lending would expand and banks would lend more I suppose the bank would like keep the cash sitting IF they were getting decent real returns there, but that begs the question, if the real returns are high on reserves at the fed, that means inflation is low(possibly close to 0%), which case that fed would not be hiking. Also the real returns on lending would also be quite high There is little historical connection between the fed funds rate and bank lending, I'm not sure there will be one between IoR and lending http://www.hussmanfunds.com/html/fedirrel.htm This is an interesting article by hussman, where I disagree with hussman is that even though the fed cant control bank lending they can control the overall level of short-term real interest rates which have an actual impact in the economy. The fact that the fed 'follows' the market simply shows that the fed is behaving well and is not trying to overly stimulate or break the economy(although they do that on occasion). They dont have to follow the market, if they wanted 0% rates for eternity they could do it but after the short-term boost and a long refusal to 'follow' the market, inflation would pick up. So would the needed amount of monetary base created to keep overnight rates at 0% Or, as Henry Kaufman said, in a deregulated world, the Fed rations credit not by restricting supply, but rather bankrupting the borrower by jacking the price
Blowout jobs number today. GE futures have been getting hammered the past couple of days and now we know why. Turns out that fake panic over Dubai last Friday was a GREAT opportunity to get out of the Eurodollar position.