Paulson & Co., a hedge-fund firm run by investor John Paulson that made huge gains by shorting the US mortgage market prior to the subprime meltdown, disclosed today that as of yesterday its short position in UK bank Barclays had declned from 1.7% to below 0.25%. Market watchers are essentially reading this as Paulson having closed out of this position, probably taking a loss of somewhere around $165 million.
The loss was probably made more painful by the announcement today that when Abu Dhabi’s International Petroleum Investment Co. was selling around 1.3 billion shares of the bank. That pushed Barclays stock down by 5% today. Barclays, like many other financials, has crushed the dreams of many short-sellers since the mid-march rally began.
“It goes to show that the sovereign wealth funds can stay irrational longer than the shorts can stay solvent,” one short-seller told us.