Last year, the highest-paid fund manager in the world was John Paulson. He earned $3 billion by shorting subprime mortgages. But today, he's buying.
"We've been adding pretty steadily to our long distressed positions," Sandra Lee, a senior vice president at Paulson & Co, told a Hong Kong audience yesterday. "Where we shorted the lower-quality subprime securitizations, we're now going long the better-quality jumbo, prime securitizations."
This marks Paulson's third bet on real estate. He previously bought a chunk of CB Richard Ellis and started a real estate fund.
Paulson is buying the debt of banks and other financial institutions, particularly companies that received government bailouts... "That's often space distressed managers traditionally tend to overlook. We've been amassing quite a bit of assets in this area," Lee said.
Once Paulson finishes establishing his real estate positions, his $28 billion fund will be at least 20% concentrated in gold and real estate. Like us, he's expecting a big increase in inflation.
I just finished writing my newsletter, Porter Stansberry's Investment Advisory. I've figured out the perfect way to make money from inflation. Although I can't give away the new recommendation, I can tell you this company's earnings are perfectly correlated to the amount of money in circulation, globally. As long as the money supply continues to increase, this firm will make more money. And right now, its earnings are growing 30% annually. The other inflation-related picks I've made since last December are now up more than 40% on average. There's a lot more to come. Click here for more details.
We got stopped out of my short-sell recommendation of Continental Airlines in early April. It's tough shorting stocks – especially when they're trading for less than $10, because they tend to be very volatile. But in situations like GM, where a company's basic business is unprofitable and when its balance sheet is completely underwater, you know it's only a matter of time. Continental owes $12 billion and isn't cash-flow positive. It doesn't look good.
New high: Allied Nevada (ANV).
In the mailbag... A subscriber complains we've gone too far in our criticism of the U.S. government and says our accusations of torture and murder are unwarranted. Actually, they're quite well documented, as I explain below. Tell us how we've let you down, dear subscribers: feedback@stansberryresearch.com.
"I must say that I agree with about 90% of what you have to say about our government, but you DO occasionally like to make unwarranted accusations. When you mention 'the treatment (murder, torture, denial of habeas corpus) of the prisoners of our armed forces', you really go too far. 'Murder'? I have not heard of a single case of anyone in our armed services 'murdering' a prisoner, ever. The 'torture' you refer to is highly subjective – the only enhanced interrogation technique used on captives that might be argued to be a form of torture is waterboarding, which was used on exactly three terrorists, and was discontinued in 2004.
"This, and other 'enhanced interrogation' methods so blithely called torture are in fact used (or have been used) on our own armed forces during the course of S.E.R.E. (Survival, Evasion, Resistance, and Escape) training. So, does that mean we 'torture' our own troops? And as for habeas corpus, I never realized that the protections of the U.S. Constitution applied to unlawful enemy combatants. I'm pretty sure that the German soldiers sequestered in prison camps on U.S. soil during WWII did not enjoy habeas corpus protections. These combatants are not even deserving of protections under the Geneva Conventions, much less our Constitution. I find it extraordinary that you would think otherwise." – Paid-up subscriber Mark Herzfeld
Porter comment: I don't know for certain what the current tally is, but according to the Army, through 2005, 27 captive deaths had been classified as "homicides." I believe the number is now well over 50.
Most of the people who died were beaten to death while handcuffed to the ceilings of their jail cells. I'm not talking about three extreme terrorists or about a little waterboarding for "fun." Several different Army investigations have documented the systematic torture, beating, burning, sodomy, and even rape of female prisoners in U.S. military prisons. These abuses led directly to the deaths of dozens of detainees. (See the Tugaba Report, for example.)
You can read about the torture and murder of two individual Afghan detainees in this thoroughly documented New York Times piece, using a classified U.S. Army report.
Using much of the same original source material, documentary filmmaker Alex Gibney produced Taxi to the Dark Side, a detailed examination of how torture became institutionalized in the U.S. Army. The 2007 film won an Oscar, but has been almost completely censored in the United States, thanks to the actions of several large media companies. You can buy it yourself here, and you can read about the film here.
Also... I must say... I find your attempts to equate Army training that's designed to help our troops survive torture and torture itself to be disturbing. Clearly, there's a huge difference between training and the real thing. I'm constantly shocked and horrified at how many Americans are willing to endorse the torture of thousands of people, nearly all of whom are innocent of any offense. When they come for you, I bet you'll feel differently.
"I use several of
the newsletters from your publisher and subscribed to your
Penny Trends about 12 days ago. Just thought you'd like to know that with
4 modest 'toe-in-the-water' investments I have made more than double your
subscription price. Good job!" – Paid-up subscriber Ronald V. DeMars
Porter comment: Thanks for the note, Ronald. If anyone else is interested in dipping their toes in, we're offering a 55% discount on charter Penny Trends subscriptions... but only until midnight on Monday. Click here for the details.
"Hey Porter! Don't get me wrong I love a nice truck too, almost as much as a nice boat and your awesome PUT STRATEGY. We took delivery of her 3 weeks ago and are cruising the Bahamas. In October we will take her through the Panama Canal over to the Pacific side since I just bought a home in Mexico, in part due to your and Doug Casey's recommendations." – Paid-up subscriber Ulf Rohde
Porter comment: Sounds like you're ready to join our 400 Club.
Regards,
Porter Stansberry
Baltimore, Maryland
June 12, 2009