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The Thesis
After his legendary subprime short, Paulson pivoted to gold, arguing that massive government stimulus and money printing following the financial crisis would inevitably lead to inflation and currency debasement.
The Story
Fresh off his historic subprime mortgage short, John Paulson made another bold macro bet in 2009: he went massively long gold. His thesis was straightforward — the unprecedented government spending and Federal Reserve money printing in response to the financial crisis would eventually lead to inflation and dollar weakness. Gold, as the traditional hedge against currency debasement, would benefit enormously.
Paulson launched a gold-denominated share class at his fund and built one of the largest gold positions in the world, including a major stake in the SPDR Gold Trust ETF and gold mining companies. As gold surged from around $850 per ounce to over $1,900 by September 2011, Paulson's gold-focused investments generated approximately $5 billion in profits. While the timing of the subsequent gold decline meant he didn't capture the peak perfectly, the trade demonstrated his ability to identify macro themes and position aggressively — twice transforming macroeconomic insight into billions.
Key Insight
When governments print unprecedented amounts of money, traditional stores of value benefit — and the best investors position for the inevitable consequences of policy actions.
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See how Glen Bradford applies these principles to his own investing. Long Fannie Mae & Freddie Mac junior preferred — conviction meets patience.