Tough Crowd: Notes from the John Paulson Call

Using my advanced ninja skills I got myself onto the Bank of America Wealth Management-hosted conference call starring John Paulson of Paulson & Co this evening.

The notoriously press- and attention-shy Paulson agreed to be on the call a week after Citigroup pulled $410 million from the hedge fund manager and so at least some part of this was about damage control.  Paulson was quick to point out that Citi’s financial advisors had not pulled their support for him directly, rather it was Citi’s feeder fund.  He also expressed gratitude to the BAML advisors for their longstanding relationship with Paulson & Co.

And then it was game on.

I have a few observations I’d like to make, in no particular order…

First, Paulson was measured during his introductory remarks and did not at all come off as defensive.  He seemed to have kept his cool through a barrage of questions, some smart and some stupid, that were lobbed at him from the brokers.

Also, the fact that he agreed to the call counts for a lot, many upper-tier hedge fund managers would simply say, “they don’t like the performance or the strategy? Let ’em leave.”  Which you can still do when you’re running $19 billion, even if your AUM was double that 24 months ago.

The Merrill guys did not seem to be overly hung up what’s already gone on, although they did reference it in framing their questions.  No, they were much more curious about the current strategy and holdings, which is how it ought to be.

One question concerned the Recovery Fund which over the last three years seemed to have missed out on the recovery, with almost flat performance in the context of the ninth biggest bull market in history.  Specifically, John was asked to defend his overweights to the casinos like MGM and CZR.  The concern seemed to be Macao was cooling off and Vegas was dead – what’s the thesis here?  John made the case that in a truly robust economic recovery (which has yet to materialize) these positions would be highly levered to the upside.

Another advisor asked about the various positions that seemed to contradict each other – “crosscurrents within the portfolio.”  He’s referring to being long gold and short the euro for example, trades that would appear to cancel themselves out.  “How do I frame this for clients and in what environment would this portfolio work?” the perplexed advisor wanted to know. JP’s answer was that a lot of these should be looked at as hedges as opposed to opposing trades.

There were a few questions about personnel at the firm.  One advisor asked about whether it was a coincidence that a bank analyst departed around the same time that Paulson & Co trimmed some of their bank holdings and I don’t recall if there was a straight answer or not.

The real question is whether or not the call did more good than harm.  I truly came away from it with a deep respect for John’s thought process but not a lot of clarity in terms of how this collection of trades is meant to work going forward.  I wanted to be more impressed than I was.

The intro to the call by the Merrill guy was about how Paulson had evolved from an arb guy into an investor who is much more macro-oriented as a result of his experiences during the 2007-2009 Greatest Trade Ever era.  But of all the macro calls I’ve been on – and let me tell you something, I’ve been in meetings with Felix Motherf*cking Zulauf and at dinner with Jim Chanos – this one gave me the least confidence that there is any kind of hidden depth or the potential that the manager is seeing something no one else sees.

So to sum up, I have a ton of respect for John Paulson…but if I were a Merrill broker with a lot of client cash parked in his funds, I might be facing a really tough decision this fall about whether to stick it out.

More color from CNBC’s Kate Kelly here.


Tags: , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. คอนโดเงินเหลือ commented on Sep 18

    … [Trackback]

    […] There you will find 93103 more Information on that Topic: […]

  2. Absolute Vans commented on Sep 20

    … [Trackback]

    […] Find More on to that Topic: […]

  3. how to order marijuana online commented on Sep 23

    … [Trackback]

    […] Information on that Topic: […]

  4. Small child commented on Sep 25

    … [Trackback]

    […] Information to that Topic: […]

  5. confiabilidad net commented on Sep 30

    … [Trackback]

    […] Read More here on that Topic: […]

  6. winnipeg west used cars commented on Oct 15

    … [Trackback]

    […] Information on that Topic: […]

  7. DevOps commented on Nov 18

    … [Trackback]

    […] Read More to that Topic: […]

  8. bmo mastercard online banking commented on Dec 20

    … [Trackback]

    […] Here you will find 68483 more Info to that Topic: […]

  9. cibc online commented on Jan 26

    … [Trackback]

    […] Find More here on that Topic: […]

  10. fake rolex commented on Jan 28

    … [Trackback]

    […] Find More to that Topic: […]

  11. Unicc commented on Jan 30

    … [Trackback]

    […] Find More Info here on that Topic: […]