Gregory Zuckerman, author of The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History (required reading for myself and next on my reading list, after I finish Confidence Game, great book about Bill Ackman), recently interviewed John Paulson to get Paulson’s thoughts on the equity markets and the overall macro picture of the US and Euro-Zone economies. John Paulson’s funds have overall been having a pretty bad year due to high equity exposure. However Paulson is still bullish on the markets. The full interview is not publicly available, but here are some select quotes, which I found from it and from a recent presentation that John Paulsongave:
“The problems in the U.S. can be solved.”
“The discrepancy between equity earnings yields and Treasury yields is at an all time high.”
“The dividend yield of the S&P 500 equals that of 10-year Treasuries, even though equity dividend yields grow over time while treasury yields are fixed.”
“This summer and similar periods in the past have been used as buying opportunities for savvy investors.”
“Unfortunately, many investors make the mistake of buying high and selling low while the exact opposite is the right strategy to outperform over the long term.”
“The recent volatility in our portfolio has been caused by macroeconomic events that have negatively affected capital markets, such as the recent Standard & Poor’s downgrade of the United States’ credit rating and sovereign debt issues in Europe.”
“Despite this, many event plays across our portfolio have been performing at record levels in terms of earnings, but have not yet been rewarded by the marketplace, resulting in portfolio losses.”
When asked about banks, he is bullish and thinks that the balance sheets of US banks will remain strong, regardless of what occurs in Europe.
When asked why he doesn’t close his hedge fund like Bruce Kovner, George Soros, and Stanley Druckenmiller did recently, Paulson responded ” “Why would I do that? I’m fully focused, this is what I love to do.”
