We just reported that John Paulson’s gold hedge fund isn’t doing so well in its first month.
But remember that Paulson devoted an entire fund to betting against housing (Credit Opportunities Fund), just like he now has a fund focused entirely on going long on gold.
And – it took almost a year for his strategy in the CDS market to seriously pay off.
Paulson started investing in CDS bonds in the summer of 2006.
The Credit Opportunities Fund was up that year, but only 19%.
Then it was up 66 per cent in February of 2007. His investors were so surprised, they called thinking the report of the gains was a misprint.
His biggest gains actually weren’t until later that winter and in spring of 2007. In the first nine months of 2007, Paulson’s Credit Opportunities Fund rose an average of 340 per cent.
He made $15 billion that year and $5 billion more in 2008.