Outlook for 2015 - learn and duplicate from the very big players in the market:
Forget about all the forecasts being made for 2010. Here's the prediction by Money Morning for 2015: An entirely new name - John A. Paulson - will grace the coveted top of the annual Forbes billionaires list.
And the gap between Paulson and the runner-up billionaire will be huge. Everyone knows that Bill Gates and Warren Buffet are America's - and the world's - two richest men. But the financial crisis of 2008 and 2009 was not kind to either of them, eradicating $17 billion of their combined net worth. On that famed list, at No. 33, is where you'll find Paulson today. The hedge-fund manager's financial acumen led to what is now being called the "the greatest trade ever." By shorting the subprime mortgage market, Paulson & Co. Inc. generated a $15 billion gain. Paulson's personal net worth of $6 billion is impressive in its own right. But over the next several years, I believe that Paulson's trading savvy will vault him into the top spot.
And the vehicle that will take him there is gold.
Paulson's latest foray says a lot about how he intends to further multiply his own net worth, as well as that of his clients.
That foray will focus on gold, he said during an address to the Japan Society in New York earlier this month.
"As an investor, I became very concerned about having my assets denominated in U.S. dollars," Paulson told his audience. "So I looked for another currency in which to denominate my assets in. I feel that gold is the best currency."
As of June 30, gold and gold-related assets accounted for 46% of the Paulson firm's total holdings - a colossal position that flies in the face of traditional portfolio-diversification theory and position sizing. Yet I expect this will help him generate a brand new "greatest trade ever."
It's also worth noting that Paulson recently announced his firm's plan for a Jan. 1 launch of a dedicated gold fund. The fund will invest in gold stocks and gold derivatives in a way that will enable it to outperform the price of gold. Paulson is committing $250 million of his own capital to this new investment vehicle.
This all adds up to one enormous wager on gold. But Paulson's track record and reputation for research diligence make it impossible to ignore.
The story behind the killing that Paulson's company made on the subprime-mortgage crash - and the lengths that Paulson and star analyst Paolo Pellegrini went to create the profit opportunity - is as gripping as any detective story.
Although it's now referred to as the "greatest trade" ever, it certainly wasn't the easiest position to take. Paulson and his cohorts watched from the sidelines as the housing industry zoomed through four years of unprecedented growth. When Paulson bet against the bubble, and continued to increase his position even as housing continued its surge, he found that many longstanding customers that had profited nicely from Paulson & Co. refused to go along.
Paulson, they felt, was flat out wrong.
Is that happening again? After all, there's a long list of pundits who are right now saying that gold is in a bubble that could burst at any time. Ignore them. This array of "talking heads" will inflict irreparable damage on your portfolio.
Besides, Paulson isn't alone in his investment thesis.
In a recent interview, author and global-investing guru Jim Rogers said that "during the course of the bull market [gold] is going to go much higher, it is certainly not a bubble yet." To underscore his point, Rogers said that "I don't think this is the top," and said that "I'm not selling under any circumstances."
Also in this camp is Victor "Trader Vic" Sperandeo, whose 40 years of market experience has included stints with George Soros and Leon Cooperman.
"Well, I'm on record across the world as saying that gold is the best investment in the world for the next two to three years," Sperandeo said. "If you go back to its lows, and you compound where [gold] is today, it's about 6.5% compounded. That isn't a bubble."