John Paulson Bets On Real Estate

Source: valuewalk.com 

John Paulson, an investor famous for his bet against the sub-prime market in 2008, is now putting his money firmly in the real estate market. An SEC filing made by the investor’s hedge fund, Paulson & Co., revealed the maven has acquired 11% in Realogy Holdings Corp (NYSE:RLGY).

Paulson’s investment in real estate mirrors that of another investor who made his name in the financial crisis, Kyle Bass. I’ve compared these two before, but Bass’ recent advice to invest in mortgage backed securities, mirror’s Paulson’s slightly different Real Estate bet here.

The form 3 filing with the SEC revealed the hedge fund took ownership in the form of A, B, and C class Convertible Senior Subordinated Notes, due 2018. The news was first revealed today by marketfolly.com, who reported on the original filing.

John Paulson has had a rocky relationship with the markets in recent months. After a disastrous year in 2011 for hedge funds, and particularly for John Paulson, the investor has attempted to win back confidence in his skills.

Paulson’s major flaw in 2011 was his bet on a quick US recovery in that year. When the financial stocks began to rise in the early months of 2012, Paulson had pulled out of his major positions in many of the banks, missing the recovery.

Realogy Holdings is a provider of Real Estate services, and owns Coldwell Banks and Century 21 real estate brokerage brand names. The filing revealed that at close of the firm’s coming IPO, Paulson’s notes will be converted into common stock in the firm.

According to marketfolly.com, that conversion will result in Paulson owning about 11.8 million common shares in the public company. Realogy Holdings announced today that it would be pricing that IPO at the high end of its range.

Whether or not Paulson can manage to turn this bet on the recovery of the real estate market, into a win, will depend entirely on the US economy and its fundamentals.

Paulson Advantage Plus Hedge Fund Declines 2% Last Month

John Paulson, the billionaire hedge- fund manager coming off record losses in 2011, posted a 2 percent loss last month in his Advantage Plus Fund, according to a monthly update to investors obtained by Bloomberg News.

The fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, is down 18 percent this year with the July loss. Paulson’s Gold Fund, which can buy derivatives and other gold- related investments, rose 0.2 percent in July and has declined 23 percent this year. Slumping gold-mining stocks have contributed to declines in the Advantage funds and Gold Fund this year.
The firm’s merger arbitrage, credit and recovery funds, which comprise more than 60 percent of the firm’s $21 billion in assets, rose this year on the firm’s “long event positions,” Paulson said today in the letter to clients. Event-driven managers bet on companies facing mergers, spinoffs and bankruptcies....

Read full article on Businessweek.com

Paulson Said to Buy 875 Acres of Land in Las Vegas Area

Paulson & Co., the hedge fund run by billionaire John Paulson, purchased more than 875 acres of land in a resort community in the Las Vegas area, a bet on a housing recovery in the region as the supply of homes shrinks.

The $17 million purchase at Lake Las Vegas in Henderson, Nevada, was made through the Paulson Real Estate Recovery Fund, which seeks to build houses on raw land and resell the properties to homebuilders, said a person with knowledge of the deal.

The fund bought the majority of what remains undeveloped at the 3,600-acre (1,456-hectare) site, said the person, who asked not to be named because the details were private. The deal was among the largest land purchases in the area in at least three years, according to Greg Gross, director of the Nevada region for Metrostudy, a Houston-based firm that tracks new construction. The Las Vegas area has fewer than 13,000 vacant lots for homebuilding, a small portion of which are for sale, he said. Inventories of available properties also have declined in the past year as foreclosures in Nevada slid.

Read Full Article on Bloomberg.com

Billionaire John Paulson Confirms $49 Million Purchase Of Hala Ranch

In 2006, Prince Bandar bin Sultan, a Saudi royal and former ambassador to the U.S., listed his Aspen, Colo. ranch for $135 million. The massive estate, called Hala Ranch, became America’s most expensive home for sale. Then the real estate recession hit and the ranch, failing to lure a wealthy buyer, quietly slipped off the market.
Despite never again gracing the Multiple Listing Services, the 90-acre Rocky Mountain ranch has finally found a new owner.   John Paulson, the hedge fund billionaire worth $12.5 billion by Forbes’ estimate, has just shelled out $49 million for the Saudi prince’s estate, making it Aspen’s priciest home sale this year — and arguably, ever. Paulson, who made his fortune by famously shorting subprime securities in 2007, confirmed the purchase with Forbes, issuing this statement:

Hala Ranch is one of the most beautiful properties in Aspen located on over 90 acres located in the exclusive Starwood community. Initially offered for sale for $135 million the purchase price represents a substantial discount to the asking price. In addition, the purchase also includes the Bear Cabin located on a separate 38 acre parcel that was never previously offered for sale.

For the Wall Street titan, who technically made the purchase through a limited liability company, the purchase likely represents a good deal. Other Aspen property transactions with comparable price tags haven’t boasted nearly as much land or completed house. For example, the  neighboring Star Mountain Ranch, also formerly owned by Bandar, commanded $36.5 million in 2007 for a smaller 15,000-square foot house sitting on 67 acres.
Hala Ranch is tucked away inside the private Starwood community, a gated residential neighborhood on the slopes of Red Mountain. The sale was technically comprised of two transactions: a 90-acre main parcel which fetched $41 million and a neighboring 38-acre parcel called Bear Ranch which fetched $8 million.
The combined property boasts a massive 56,000-square foot main house with 15 bedrooms, including a master suite equipped with a beauty and barber room for massages, pedicures and styling, and 16 bathrooms reportedly finished with gold fixtures. Some of the guest rooms open onto a interior courtyard hosting a waterfall-fed reflecting pool.
Scattered among the property’s tree-studded acreage are several smaller buildings as well as a tennis court, an indoor swimming pool, and stables. There’s also a water-treatment plant and a mechanical shop equipped with its own gas pumps and car wash. As Forbes has reported in years past, the main parcel touts an elaborate, high-tech security system that keeps the entire 90-plus acres protected.
Sale of the mega estate was reportedly brokered by Joshua Saslove, the eponymous founder of Joshua & Co., a Colo.-based luxury realty firm affiliated with Christie’s International Real Estate. Saslove could not be reached for comment at the time of publication.
“This is a unique property… because you just couldn’t build a house that large today in Pitkin County,” says Maureen Stapleton, a real estate broker for Aspen Snowmass Sotheby’s International Realty who was not involved in the deal. Construction in the ski town typically involves carting in materials and labor from other parts of the country, a costly  and time-consuming endeavor that makes high-end inventory limited. Even so, ”I don’t know what the buyer’s plans are but I can’t imagine they won’t renovate the house,” she adds.
Bandar purchased the property in 1989 for a mere $3.5 million. According to the Aspen Business Journal, the Saudi prince built the main house and two other mansions on it over the next two years.
Stapleton, who brokered the 2008 sale of a Wildcat Ridge estate for $36 million to Russian billionaire Roman Abramovich, is well acquainted with the luxury offerings in Aspen and its tony neighboring towns. She says both foreign and domestic buyers have been actively touring properties in the area, noting that another high-end home listed at $29 million just went into contract as well. Pocket listings, or homes like Hala Ranch that are not publicly listed for sale, have been particularly popular among moneyed buyers.
At $49 million, the joint transaction is arguably the most expensive home sale in Aspen. It joins a trove of record-breaking real estate purchases witnessed across the country over the past year. Other recent staggering sales include a $90 million-plus penthouse in New York‘s yet-to-be-built One57 building and the $34.5 million purchase of Beverly Hills’ Wehba Estate.
Paulson, who resides primarily in New York City, is no stranger to real estate, either. Both directly and through his  funds, the hedge fund manager owns property in Arizona, California, Nevada, Florida and Hawaii. Hala Ranch is the second purhcase he has made in Colorado since the recession: in 2010 he spent $24.5 million on a 12,500-square foot home just outside of Aspen. Paulson “continues to be interested in real estate opportunities across the U.S.,” according to his office’s statement.

John Paulson Buys Saudi Prince's Aspen Ranch in $49 Million Deal

June 5 (Bloomberg) -- Billionaire John Paulson bought Hala Ranch, a 90-acre (36-hectare) property in Aspen, Colorado, that belonged to Saudi Prince Bandar bin Sultan, and a separate site in the town for $49 million.

The ranch, built by the prince about 20 years ago, is Aspen's largest residential property and includes a 55,000- square-foot (5,000-square-meter) main house, according to Tim Estin, a broker with Coldwell Banker Mason Morse Real Estate in Aspen. It was initially marketed for $135 million, making it the most expensive U.S. home listing, the Aspen Times said in 2006.

"Hala Ranch is one of the most beautiful properties in Aspen," Paulson & Co., the hedge-fund manager's investment firm, said in a statement. "The purchase price represents a substantial discount to the asking price."

Paulson also bought Bear Cabin, located on a separate 38- acre parcel that was never previously offered for sale, according to the statement.

The statement didn't disclose the exact price. Land records in Pitkin County reflect two sales totaling $49 million to an entity called Starwood Mountain Ranch LLC.

The dollar volume of Aspen home sales declined 27 percent this year through May from the same period in 2011, to $277 million, according to Estin, publisher of the Estin Report, a monthly analysis of the Aspen home market. He wasn't involved in the Paulson transactions.

The dollar volume fell as fewer homes priced above $10 million changed hands, Estin said. The tally doesn't include Paulson's purchase, which was completed in June, according to property records. The deals for Hala Ranch and another $30 million home that went into contract last week will bring sales volume in line with a year ago, Estin said.

Paulson, directly or through his funds, owns real estate across the U.S. including properties in Colorado, Arizona, California, Nevada, Florida and Hawaii, according to the statement.

Paulson's Gold Fund Down In May, But Sees Reversion

NEW YORK--Billionaire hedge-fund manager John Paulson's gold fund declined by 12.7% last month as the price of gold dropped, bringing the fund's losses so far this year to 22.5%, a person familiar with the situation said.
But in a letter that Paulson & Co. sent to investors Tuesday, along with the performance numbers, the hedge-fund manager said the trade has reversed lately.
"Gold equities proved to be a meaningful counterbalance to the market's downward move during the second half of the month and into early June," it said.
Gold futures fell 6% over the course of May, slashing prices by around $100 a troy ounce, in the biggest monthly percentage drop in gold since December 2011.
The sharp gold-price movement came at a time when Paulson & Co. invested in gold-related equities, believing there was "significant undervaluation of gold equities relative to gold prices." That trade contributed to May's decline.
In its quarterly filing on stock holdings for the first quarter, Paulson & Co. said it held stakes in gold-related companies Allied Nevada Gold Corp. (ANV), Anglogold Ashanti Ltd. (AU), Barrick Gold Corp. (ABX) and exchanged-traded fund SPDR Gold Trust (GLD) as of March 31.
Paulson's Advantage fund, an event-driven fund that seeks to profit from takeovers and other activities, has about a quarter of its assets in gold-related investments, including equities, physical gold, and gold-related derivatives. The fund posted a 0.32% decline in May, less than the Standard & Poor's 500 Total Return Index's 6.0% loss for May. Its year-to-date decline stood at 6.27%.
The letter said Advantage Fund's gold exposure helped to mitigate broad market losses during the second half of May. The fund gained 2.1% solely on its gold-related investments between May 15 and June 1, when the S&P index was down 4.5% during the period.

Is Now a Good Time for Annuities?

The No. 1 financial fear that nearly every retiree or near-retiree has is running out of money. Regardless of how big a retirement nest egg you have, there's always a nagging concern that it may not prove to be enough -- and if you hit the wall after you've left your last job far behind, it's often way too late to do anything about it.

You won't find many investments that directly address the threat of outliving your money. But one specialized set of investments -- annuities -- gets at the root of the problem by structuring payouts that are designed to last as long as you live, no matter how long that may prove to be. But is the unique advantage that annuities have over other investments worth the price you'll pay for them? To find out, let's look at the recent history of the annuity industry to see how things are changing.
Annuities under fire Skeptics have argued for years that annuities weren't worth the additional cost that you'll pay for their protection. On top of ordinary fees for money management, annuities typically add on substantial costs related to the insurance element involved, essentially boiling down to your paying extra for the possibility that you'll live beyond your life expectancy. Additional optional fees apply to various guaranteed benefits that many annuities offer, including guaranteed lifetime payouts.
But with perfect hindsight, it turns out that many insurance companies were too generous with their annuities. As a recent Barron's list of 50 top annuities discussed, a combination of rock-bottom interest rates on bonds as well as extreme stock-market volatility forced several insurers to take extreme action in response. Genworth Financial and Sun Life Financial have exited the variable annuity business, while Manulife Financial's John Hancock unit has dramatically restructured its annuity business so that only a narrow group of key partners offer annuities. Hedge-fund manager John Paulson persuaded Hartford Financial to go one step further by getting out of the annuity business entirely
Now, after the dust has started to settle, MetLife and many of the other remaining players in the industry are being more conservative about their promises. That arguably makes annuities less attractive as a long-term investment, but with alternatives looking equally unattractive in many cases, annuities still meet the need of providing more transparency about future payments than you'll get from just about any other type of investment.
What you need The most irritating thing about annuities from a planning standpoint is that they're extremely difficult to decipher. What investors want annuities to do, in contrast, is very simple: in exchange for an upfront payment, you want to get as big a monthly payment as you can get that's guaranteed for the rest of your life.
But the beneficial tax treatment that life insurance policies get under the current tax code lead insurers to offer more than basic annuities. Instead, you'll find complicated riders and additional terms that offer guarantees above and beyond the basic lifetime payment promise. For example, returns tied to -- but not directly matching -- those of the stock market appear to promise the chance at future bull-market riches.

Look more closely, though, and you'll discover catches like caps on returns that compensate for those guarantees. All too often, it's very difficult even for experts to decipher what will happen with a particular annuity until it actually happens.
Get what you pay for If you can get the features you want at a reasonable price, then annuities can make a lot of sense. In particular:

• Immediate annuities are a smart way to create what resembles a do-it-yourself pension, with you receiving monthly payments right away.
• Deferred income annuities, also known as longevity insurance, let you put aside money now in exchange for payments starting at a later age, often 80 or 85. That ensures a stream of income kicking in around the time you'll start to outlive your life expectancy, but it's less expensive than a traditional immediate annuity.

Most importantly, take a good look at the costs involved. With rates as low as they are, you probably can't afford to lose 2% or even 3% of your money to fees each and every year if you expect to do well in the long run.
Annuities aren't inherently bad -- but between a few disreputable salespeople and insurers that reward sales with high commissions, they've gotten a bad reputation. Nevertheless, if you're careful to find low-cost annuities with good terms, you may well find that an annuity addresses your worst fears of running out of money -- and that peace of mind may well be worth the price you pay.
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Analysis: Investors turning to reinsurance for juiced returns

(Reuters) - Investors globally, from hedge funds to retirement systems, are looking to an obscure corner of the insurance industry to boost returns and avoid some of the swings that have plagued stock and bond markets in recent years.

Their attention is focused on the reinsurance sector, which covers insurance companies looking to unload risk, attracted by its market-beating returns and low exposure to faltering economic growth in the United States and Europe.

Big-name hedge fund managers like Dan Loeb, Steve Cohen and John Paulson are putting money directly into the market by setting up reinsurance companies just in the last six or so months, taking on risks with their own capital in a bid to juice their returns.

More conservative investors like pension funds are fueling booming demand for specialized notes called "catastrophe bonds," which offer an income in return for agreeing to pay some of an insurer's claims if a hurricane or earthquake strikes. No less an investor than PGGM, the Dutch administrator with $154 billion in assets under management, is moving into the sector.

Hedge funds have been starting up reinsurance companies for years, but the recent moves by high-profile managers suggest a fresh influx could be on the way.

"You're going to see a lot more funds enter into this space, it's going to be ones with large amounts of capital. This is just a good place to invest money," said Andrew Schneider, chief executive of consultancy Global Hedge Fund Advisors.

RIDING A WAVE

Investors hope to benefit from rises of up to 100 percent in catastrophe reinsurance prices after disasters including Japan's Tohoku earthquake inflicted a $116 billion loss on insurers in 2011, the industry's second-worst catastrophe year on record.

Insurance and reinsurance prices typically jump in the wake of big payouts by the industry as less well-funded players are forced to retrench, freeing those still in the market to charge more.

Past catastrophes like hurricanes Andrew and Katrina and the 9/11 attacks have also spurred hedge funds, private equity investors and investment banks to jump into reinsurance.

"People want to come into the market when premium rates are increasing and there are profits to be made," said Clive O'Connell, head of the London office for the insurance-focused law firm Goldberg Segalla.

Fund manager David Einhorn's Greenlight Capital Re opened shop in July 2004 and went public in May 2007. It has been profitable in every year since its founding except 2008, earning more than $310 million in aggregate.

One extra bonus: hedge fund managers like Einhorn can look after the investment portfolios of the reinsurers they start up, resulting in returns from both successful underwriting, and fees from running the reinsurer's money.

"The stars are aligning for change," said John Berger, the reinsurance industry veteran whom Loeb tapped to run his venture TP Re. He cited past periods like 2001 when the industry was low on capital and weak on pricing, and then a sudden event like 9/11 changed the market radically.

Some are skeptical that new-found enthusiasm will translate into significant long-term investment, though, especially those with a history of seeing interest in the sector come and go.

"There are people having a good sniff around, but that's different from getting out the check book," said Stephen Catlin, chief executive of Bermuda-based insurer Catlin , operator of the biggest syndicate at Lloyd's of London .

PENSION POWER

The publicly traded catastrophe bond market, with a capitalization of about $13 billion, is still tiny. But managers of cat bond funds say it could be on the cusp of dramatic growth, driven by increased interest from the pensions industry.

Insurers issued a record $2 billion of the instruments in the first quarter, and last month, state-backed Florida Citizens placed a $750 million bond, the biggest ever sold in a single tranche.

Billionaire John Paulson Likes Caesar's, AngloGold Ashanti, and CVR

Hedge fund legend John Paulson spoke at the Ira Sohn conference on Wednesday and presented three investment ideas: Caesar’s, AngloGold Ashanti, and CVR Energy.
On the first one, Paulson praised the company’s high option value and suggested the stock could go up to $138.  Because the company had been bought out by private equity, and has recently returned to markets, it is a highly leveraged structure where debt has been restructured in such a way that there are no payments until 2015, Paulson noted.
Caesar’s, as most hotel and gaming stocks, fell with the economy in the financial crisis, but is now at a turning point, Paulson said.  The recovery in its core business, aided by improved revenues in Las Vegas, will be boosted by expansion into Asia and other domestic locations.

Online gaming, which Paulson expects to become legal relatively soon in the U.S., should provide additional upside.  The company’s equity value represents only 7% of its capitalization, and if EBITDA recovers to 2007 levels, and one adds new business, the stock could soar.
Paulson’s second idea was AngloGold Ashanti.  The stock has been a very poor performer when compared to gold, but its earnings are exploding, as it manages to leverage the high price of gold, Paulson explained.
AngloAshanti is trading at its lowest valuation in ten years, and at a substantial discount to gold, despite growing reserves at a rate of 8% over the next couple of years.  He equated it to owning gold for a lot less and also being paid to hold it by receiving a dividend. If the company were trading along with its peers in terms of valuations, there would be about 75% upside for the stock, even in current market conditions, Paulson noted.
His third and last pick was CVR Energy, which he called “a gift from Carl Icahn.”  It’s a merger/arb transaction, which Paulson explained one always should invest in.  “Carl is generous to himself,” said Paulson, adding that in this case, the billionaire activist was also generous to shareholders.
Icahn said he would buy the whole company for $30 a share and, if he managed to sell for $35 a share, he would return most of the increment to shareholders, Paulson noted.  While they initially thought there had to be some catch, they noticed there wasn’t, and bought into the company.  They did get paid, and managed to also benefit from contingent cash payments.
CVR is a refinery play in the mid-West, meaning it benefits from cheaper WTI prices (as opposed to Coast refineries, facing Brent-like prices for crude).

John Paulson’s Detailed Case for his Favorite Gold Stocks

We have obtained John Paulson’s latest letter to investors. Paulson’s letters are great because he goes into great detail. For example,  a letter to investors dated February 2012, was 102 pages, the latest letter for Q1 is 44 pages, and mostly text, not legal jargon. Almost no other hedge fund managers write letters as long as Paulson’s.
Below is Paulson’s macro overview followed by his gold fund holdings:
Macro Overview
While the U.S. economy appears to be doing better than expected and equity markets appear moderately priced, significant risks exist. At the global level, the Euro crisis remains the biggest risk to global activity and global markets. While the ECB has stabilized European credit markets in the short term through the injection of massive liquidity, the ECB maneuvers do not address the fundamental flaw of the Eurozone, a monetary union without a fiscal and political union. An unraveling of the Euro would affect not only European markets but also all markets in which we operate. We are also monitoring other risks, such as rising tensions in the Middle East, the rise in oil prices, and a potential slowdown in China.
In the short term, risks remain with Greece, Portugal, France and Spain.
A Greek exit from the Eurozone remains a concern. Portugal also remains an
unresolved issue, which despite its government’s recent positive statements, is likely to need a second bailout program to avoid a default.
New risks would present themselves if a new French government took a
radically different approach to European policy. The benefits of the LTRO are starting to wear off as Spanish CDS spreads are at all-time highs. Spanish banking stocks are also falling due to concerns about both Spanish sovereign and private sector credit risk. In the intermediate term, Spain will likely require bailout assistance as its deficit remains high, its economy continues to shrink, its unemployment rate continues to rise, and its debt to GDP continues to climb. Spanish Five Year CDS Spreads Above Peak Levels of November 2011 and Spanish Banks Stocks Plummeting Due to Increasing Sovereign Exposure.
Gold Price
The first quarter of 2012 was characterized by continuing volatility in gold and gold equities. Gold started the year at US$1,564/oz, and had risen to US$1,738/oz. by the end of January, driven by news that gold imports into China in the final quarter of 2011 were extremely robust. The rally continued into February, and by February 28th the metal reached US$1,784/oz, a gain
of 14.1%. The following day, however, gold lost almost $90/oz. on the back of comments from Fed Chairman Bernanke suggesting that no further quantitative easing would be required. After starting out strongly, gold shed 2.3% in February and a further 1.7% in March but still posted a positive return of 6.7% for the quarter.
Gold Equities
Although gold prices rose, gold equities fell during the quarter. After rising along with the gold price through February 28, they fell at a more rapid pace for the rest of the quarter, with the gold mining index finishing down 3.7% for the quarter. In fact, the divergence of gold miner equity performance from the gold price has continued to widen since the fund was formed. Since the inception of Paulson Gold, the gold price is up 49%, the Gold Miners Index Market Vectors Etf Trust (NYSE:GDX) is flat and the Junior Gold Miners Index, Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) is down 12%.
Gold equities have been lagging the price of gold since January 2010.  After rising 13.5% in January, the gold fund dropped 4.8% in February and 13.5% in March, closing the quarter down 6.5%.
Outlook
Despite recent negative performance, we believe that the outlook for gold and gold equities remains positive. The improved performance of the U.S. economy is consistent with our view that the Fed’s massive stimulus program is beginning to take effect, and that the effects of quantitative easing will eventually result in higher levels of inflation. We believe this will
ultimately be very positive for gold, even though we are currently in a low-inflation environment. Gold equities are now at historically low valuation levels. An analysis of the trailing 12-month EV/EBITDA ratio for the NYSE ARCA GOLD BUGS INDEX (NYSE:HUI) shows that the gold equities
are trading at their lowest valuation level in ten years, on par with the low point in valuation that prevailed following the failure of Lehman Brothers.
Given the financial performance of the gold mining companies in the current gold price environment, we believe the equities are substantially undervalued and poised for a revaluation. During 2011 the gold producers delivered EPS growth of approximately 50%, compared to an average year-over-year increase in the gold price of 28.2%. In the first quarter of 2012 the gold price averaged 21.9% more than it did in 1Q2011, and we anticipate further growth in earnings and cash flows when the industry begins reporting its quarterly results. In our view, this is a compelling entry point.
Paulson Gold Fund Equities
The gold equities in the Paulson Gold Funds delivered mixed results in 1Q2012. Randgold Resources Ltd. (NYSE:GOLD) (LON:RRS), which was one of the best performing gold equities during 2011, sold off towards the end of March following news that a group of junior officers had staged an unexpected coup in the West African nation of Mali. This country accounts for approximately 45% of Randgold’s gold reserves and 65% of this year’s production. Recently, the leaders of the coup and the Economic Community of West African States (ECOWAS) have brokered a resolution providing for a quick return to democracy. Randgold’s operations were not materially affected by these events, and the company has reaffirmed its
2012 production guidance.
Centerra Gold Inc. (TSE:CG)  also suffered a setback when it announced that its production for 2011 would be impacted by the unexpected movement of waste sitting on the south end of its current production pit. Due to this movement, the company will have to devote its fleet to advancing the removal of waste, and will therefore not be able to access high grade ore that was scheduled for production in the fourth quarter of 2012. The shares sold off sharply before recovering the majority of its losses, once the market recognized that this was a timing issue and production is expected to recover in 2013.
On the positive front, NovaGold Resources Inc. (NYSE:NG) (TSE:NG) shareholders approved the corporate restructuring that was announced in November of 2011. The company will be spinning out a new company called NovaCopper, which has as its sole asset the Ambler project in Alaska, an exciting copper exploration project. NovaGold will sell the Galore Creek copper project, focusing solely on its flagship Donlin Creek gold project in joint venture with Barrick Gold. The company has recently appointed a seasoned and highly regarded executive to lead the company. As a pure play gold company, we believe NovaGold will be attractive to investors and corporate buyers.
Detour Gold Corporation (TSE:DGC) continues to move forward with the development of the Detour Lake gold project. At the end of March, the project was 60% complete and is advancing at about 5% per month. Mining activities have commenced, allowing the company to build a stockpile of ore ahead of the completion of the processing plant. The main critical path item, the connection of the high tension power line, is now scheduled for early August, which should allow commissioning of the plant in the fourth quarter of 2012. When fully complete, Detour Lake will be Canada’s largest gold mine, and we believe that the shares have significant upside potential.
The shares of Osisko Mining Corp. (TSE:OSK) recovered during 1Q2012 as the market recognized that the modifications to the processing plant at the Canadian Malartic mine were being implemented. The first of two secondary crushers began commissioning in mid-March, and the second remains on schedule for delivery in June of this year. This should allow the company to meet its production guidance for 2012 of 600,000oz
Conclusion
Gold equity prices are currently trading at very depressed levels, with the sector now on a valuation not seen since the fall of Lehman. The gold mining companies, however, continue to grow their earnings with the higher gold price, and we believe that it is only a matter of time before the sector re-values. The Paulson Gold Funds are poised to benefit in such an environment.

Some Of John Paulson's Investors Are So Angry At His Gold Bets They Want Out

Closely followed hedge fund manager John Paulson, who famously bet against the subprime housing market in 2007, had a disastrous year during a volatile 2011 with some of his funds falling 30 to 50%.
This year his Advantage funds, which invest heavily in gold, are in the red again.
The New York Post's Michelle Celarier is reporting that some of Paulson's investors are so ticked off over his massive gold positions that they are considering leaving.
Here's why.
His Paulson Advantage and Paulson Advantage Plus funds ($8.5 billion AUM) have a portfolio comprised of about 25 percent in gold bets and both are down in the high single digits, according to the Post's report.
One investor told the newspaper if it weren't for the gold investments Paulson would have been up 4 percent in the first quarter.
What's more is Paulson's huge bet on South African mining company AngloGold Ashanti, which he has a 9% stake in, is down 20% this year.

John Paulson to make first Sohn conference speech

NEW YORK (MarketWatch) -- John Paulson will make his debut at the Ira Sohn Conference on Wednesday, in a rare appearance where the hedge fund manager is expected to publicly discuss his investment view and maybe even dole out a stock pick or two.

His appearance is unusual since Paulson is among a reserved group of hedge fund managers who consider their ideas a "secret sauce" that leads to huge investment earnings. It also comes after his firm Paulson & Co. suffered embarrassing setbacks last year.

The conference, started in 1995 to honor Wall Street banker Ira Sohn, has been a popular venue for savvy investment managers to share their market views and favorite stock picks. Stocks picked by managers often shoot up or plunge within minutes of their mention. The event will be held at Lincoln Center's Avery Fisher Hall in New York City.

Paulson's funds were mostly in the red last year, with one of his largest funds losing nearly 50% on an overly optimistic a view of the U.S. economic recovery. His firm also took a hit from Chinese timber company Sino-Forest Corp., which was accused last June of fraudulently exaggerating the value of its plantation assets. Paulson soon sold the whole stake at a net loss of $100 million to pacify his investors.

So far this year, Paulson--who shot to fame with a $5 billion personal windfall from shorting subprime mortgages--is having mixed results. His Paulson Enhanced fund was up 13.3% in the first quarter, but his main Advantage fund slipped 1.05% on gold's decline, Reuters reported earlier. He manages over $20 billion in assets.

Paulson has been making an effort to explain his investment decisions to investors. Last month, he started sending investors a one-page commentary accompanying the funds' monthly performance numbers.

The Queens, N.Y.-native is also increasingly visible in public.

In February, he jumped onto insurer Hartford Financial Services' HIG +0.52% quarterly-earnings conference call, telling executives they need to "do something drastic" to boost their stock price. The surprise appearance foretold his current push for Hartford to split its property-casualty arm from its life insurance unit.

Paulson's planned appearance at the Ira Sohn conference is another sign that he's trying to salvage his reputation as one of the most celebrated hedge fund managers in recent years.

Even apart from Paulson, this year's Ira Sohn lineup of 14 managers is star-studded.

Pershing Square Capital Management's Bill Ackman, who's enmeshed in a bitter proxy fight with Canadian Pacific Railway Ltd. (CP, CP.T) will attend, so will commodity hedge fund Ospraie Management's Dwight Anderson and Lone Pine Capital's Stephen Mandel.

Making a reappearance at the conference is Greenlight Capital's David Einhorn. His analysis of Lehman Brothers Holdings Inc.'s undercapitalized position in May 2008 were among a few notable events that foretold the collapse of the investment bank later that year.

The Sohn Research Conference Foundation is dedicated to the treatment and cure of pediatric cancer and related childhood diseases. Most speakers at the conference choose to donate to the cause.

John Paulson’s Recovery Fund up 9%: Top Holdings HIG, MGM

We’ve obtained John Paulson’s latest letter to investors detailing some of the positions in his funds and his outlook on future return. The Paulson Recovery Fund is a fund involved in long positions that looks to take advantage of a recovering economic environment to catch returns. The fund has had a rocky existence and reportedly lost almost 28% of its value in 2011. In the first half of 2012 the fund is finally giving returns. It returned 9.24% as of the 30th of March. We examine some of the stocks that make up the recovery fund and Paulson’s outlook for the future.
The Hartford Financial Services Group (NYSE:HIG) has been the subject of some public conflict with Paulson. Earlier in the year the firm was fighting his recommendation that they sell one of their business units involved in life insurance. The bank finally agreed in to that decision in March. That led to a significant rise in the firm’s shares in the first quarter. Paulson suggests a 30-50% upside left in the stock and gives a price target of $26-$32 per share for the company. Over all of his funds Paulson owns 8.5% of the shares in Hartford.
MGM Resorts International (NYSE:MGM) also helped drive the increase in Paulson’s recovery fund. The company’s shares rose 31% throughout the first quarter. Paulson reportedly owns around 9.5% of the Casino giant. Paulson is betting big on a rebound on gambling and it appears he has been vindicated so far. Revenue was up in Las Vegas and the company managed some operational improvements according to Paulson. He expects a continued upside from the company as gambling in the United States continues to increase revenue.
OneWest Bank, which came into existence as a recovery vehicle, is, according to Paulson, a great bet on recovery. The bank has managed an increase of tangible value of around 168% in the three years since it was instituted. The bank was formed to purchase assets from the defunct IndyMac. Paulson points to the bank’s high rate of capitalization as a plus for the company. Despite fantastic past performance the institution only managed to increase its tangible book value by 1% in the first quarter of 2012.
Having started off as a recovery bank it now has the potential to become much more than that. Paulson recommends the acquisition of whole banks as a viable route for the firm. Though it has offered great returns in the past it is slowing. OneWest needs to change its strategy in order to achieve.

What the Big Guns are Doing

Big gun investors John Paulson, Steve Cohen, Anton Schutz and Eddie Lampert all made surprising investment moves this past quarter that investors may want to take note of, according to Wall Street research shop SNL Financial.
While hedge fund manager Paulson ditched financials, we already told you that George Soros is buying them (see Emac’s Bottom Line, “Soros Dumps Google and Apple, Buys Banks”)
Add Anton Schutz's Mendon Capital to the bulls on the banks, as his shop doubled its JPMorgan (JPM: 33.53, -0.44, -1.30%) stake in the first quarter. SNL has more detail you won’t want to miss:
PAULSON CUTS BACK ON U.S. FINANCIALS
Closely watched John Paulson is the hedge fund manager famous for making smart bets against the U.S. subprime mortgages in 2007. He’s hit a rocky patch, with some of his funds dropping by a third to a half, notably due to investments in gold, which have sunk into the red.
And now his fund, Paulson & Co., has taken a big scissor to holdings of U.S.-based financial services stocks in the first quarter, says SNL.
The fund has cut its holdings in SunTrust Banks Inc. (STI: 22.66, -0.01, -0.04%), State Bank Financial Corp. (STBZ: 16.37, 0.00, 0.00%) and Capital One Financial Corp. (COF: 51.25, -0.47, -0.91%). It’s sitting pat on its holdings in Wells Fargo & Co. (WFC: 31.94, +0.14, +0.42%) and Puerto Rico-based Popular Inc. (BPOP: 1.64, +0.02, +1.23%), says SNL.
The research shop says his fund dumped out of mortgage insurer PMI Group Inc., sliced back on reinsurer XL Group Plc (XL: 20.28, -0.16, -0.78%) as well as business development company American Capital Ltd. (ACAS: 9.18, -0.01, -0.11%)
Also, SNL found that Paulson & Co. may have sold off entirely its holdings in Citigroup (C: 26.53, -0.13, -0.49%) and Bank of America. (BAC: 7.18, +0.04, +0.52%) His fund “reported holding about $643.1 million worth of Citigroup Inc. stock and $393.6 million of Bank of America Corp.'s common stock as of Sept. 30, 2011,” SNL says, but “the fund no longer had those stakes by December 2011.”
SNL adds that “Paulson & Co. has, however, held on to its Bank of America warrants, which comprise two classes; one expires in January 2019 and had a market value of $147.1 million as of March 31, while the other expires in October 2018 and had a market value of $13.7 million as of that date.”
Paulson’s fund also “has warrants on a number of other financial institutions, including Capital One and JPMorgan Chase & Co.,” it says.
Which financial name does Paulson really like? The Hartford Financial Services Group Inc. (HIG: 17.38, +0.14, +0.81%), it says, with about 37 million shares worth about $790 million as of March 31. That amounts to an 8.5% stake, which also makes him "a powerful shareholder,” SNL notes, as he has been agitating for spinoffs to pare back its balance sheet.  
And Paulson & Co. kept its 500,000 shares of Walter Energy Inc. (WLT: 50.35, +0.64, +1.29%), which has been the subject of takeover rumors and actively traded by hedge funds, SNL says. Paulson had no other coal holdings as of March 31, it adds. Unlike SAC Capital...
HEDGE FUND SAC CAPITAL JACKS UP COAL SECTOR EXPOSURE
Another closely watched, big investor is Steven Cohen, who runs SAC Capital Advisors LLC, with reported holdings of $22.4 billion.
SAC “greatly increased its holdings of coal company common stock during the first quarter, accumulating 4.5 million shares of Alpha Natural Resources Inc. (ANR: 11.18, +0.01, +0.09%), among other large stake acquisitions,” SNL says.
The move comes after SAC winnowed back its holdings in 10 publicly traded coal producers “by about half in the fourth quarter of 2011,” says SNL. But as the sector got cheaper as the market weakened, SAC jumped back in.
SAC also bought 1.8 million shares of coal and natural gas producer CONSOL Energy Inc. (CNX: 29.63, +0.06, +0.20%) and nearly 1.6 million shares of Canada's Teck Resources Ltd. (TCK: 30.30, -0.09, -0.29%), which like Alpha is a major metallurgical coal producer, SNL notes.
Moreover, SNL says SAC “was the most aggressive in accumulating stakes in coal producers” as of the quarter, based on its analysis of quarterly government filings by seven prominent hedge funds (the analysis did not factor in options held by the funds, SNL notes). The funds' holdings may also have changed significantly since the end of the first quarter.
Chicago-based Citadel Advisors LLC also joined SAC in increasing its holdings of coal company common stock during the period, notably in Alpha and Arch Coal Inc. (ACI: 7.24, -0.06, -0.82%)
Billionaire investor George Soros' hedge fund, Soros Fund Management, reported no coal company holdings in its latest Form 13F. Soros unloaded a stake in Alpha in the third quarter of 2011.
Bridgewater Associates LP, which claims to be the largest hedge fund in the world with $120 billion in global investments, also reported no coal holdings as of March 31 after liquidating one million Alpha shares in addition to stakes in coal giant Peabody Energy Corp. (BTU: 23.96, +0.10, +0.42%) and Cliffs Natural Resources Inc. (CLF: 50.41, +0.66, +1.33%), an iron ore and met coal producer.
Greenwich, Conn.-based Tudor Investment Corp. liquidated its Alpha stake during the first quarter, but took a new 12,700-share position in Patriot Coal Corp. (PCX: 2.46, +0.04, +1.65%), which has recently seen its shares tank after news of a potential default by a key customer.
EDDIE LAMPERT REDUCES STAKE IN CIT BY 87%
Hedge fund manager and Sears Holdings Corp. (SHLD: 56.80, +0.21, +0.37%) chairman Eddie Lampert hasn’t been doing so great overseeing the turnaround of the Sears department stores, which merged with Kmart.
His fund chopped its holdings in financial institutions in the first quarter of 2012, SNL says, citing data from RBS Partners and ESL Investments Inc. shows.
Lampert dramatically cut his stake in CIT Group Inc. (CIT: 34.83, -0.33, -0.94%) by 87.1% from the prior quarter, and slashed his holdings in iStar Financial Inc. by 46.2%, SNL says. This struggling mortgage REIT had a big “short interest as a percent of shares outstanding of 20.4%,” as of April 30, SNL notes.
And Lampert cut his holdings of Capital One Financial by 12.1%, leaving a $249.7 million stake in the bank, SNL says.
Lampert’s fund also sat tight on its stake in Genworth Financial Inc. (GNW: 5.23, -0.02, -0.38%), its largest stake as a percent of shares outstanding at nearly 2%.
Lampert’s fund also cut stakes in the auto retailer AutoNation Inc. (AN: 36.28, +0.40, +1.11%) and auto parts retailer AutoZone Inc. (AZO: 374.74, +5.34, +1.45%). Based on data from RBS Partners, Lampert’s fund “also reported an approximately 67% reduced stake in the shares of discount retailer Big Lots (BIG: 37.63, +1.88, +5.26%) and a little more than 1% reduction in the shares of Gap Inc.” (GPS: 27.23, +0.24, +0.89%)

John Paulson: Laying a golden egg

Investors with legendary hedge-fund manager John Paulson aren’t taking a shine to his gold metal performance — in fact, some are heading for the exits.
Investors are upset over Paulson’s huge gold positions — specifically, his outsize holding of AngloGold Ashanti, down 20 percent this year, The Post has learned.
That has dragged down two of Paulson’s funds.
“I would be happier if he cut the gold position in half,” says one investor who put in a notice to take his money out of the fund in June. “He would have been up 4 percent in the first quarter if it weren’t for the goddamned gold.”

Instead, Paulson’s gold-heavy funds — Paulson Advantage and Paulson Advantage Plus — are down in the high single digits.
Gold bets account for 25 percent of the portfolio in Paulson’s Advantage funds, which are in the red again this year — after tanking in 2011. The concentration is even worrying some Paulson insiders, a source told The Post.
The two funds manage about $8.5 billion, or one-third of the firm’s capital. About half of the firm’s capital is from outside investors.
Paulson made the history books with his 2007 subprime short that turned him into an overnight sensation. Investors in his funds were amply rewarded — and the hoi polloi jumped aboard.
Last year’s gut-wrenching losses tested their resolve but by and large, these investors stuck with Paulson.
Through the first quarter, Paulson has told investors that redemptions were just 2 percent of the firm’s $24 billion of capital. The same amount is expected to come out this quarter, says a source close to the firm.
But industry insiders reckon that Paulson’s inability to turn these two funds around this year could lead many more investors to throw in the towel. One more problem: a reliance on bank platforms.
After his fame rose, Paulson began raising billions of dollars through bank hedge-fund platforms, which allow individuals to avoid the $10 million minimum investment to get into a Paulson fund.
This money could become a problem. Two of these banks — Morgan Stanley and Citibank — have put Paulson on a “watch” list, which means they won’t add any new money for three months. The two have about $500 million invested in Paulson.
One of Citi’s investors has sued Paulson in a Florida court over last year’s losses.
Both banks declined to comment, as did Paulson.
A source close to the firm acknowledges that about 20 percent of Paulson investors are still underwater. Most are in the Advantage funds.
The 56-year-old investor became enchanted with gold — including gold mining stocks and the SPDR Gold trust — after the financial crisis as he became worried about inflation caused by government bailouts.
Paulson’s gold stakes include AngloGold Ashanti, a South African mining company, where his 9 percent stake has long been the biggest single investment. The company accounts for 13 percent of Paulson Advantage’s long positions — huge for a hedge fund.
Investors think Paulson is doubling down on gold in an effort to revive his reputation.

John Paulson's continuing love for one particular shiny object has some of his investors fuming.
Paulson & Co.'s flagship hedge funds have about a quarter of their assets invested in gold and gold-related investments. But those bets aren't paying off, and some investors are lashing out, or pulling out.

The New York-based firm has said that redemptions remain low despite its main funds' dismal performance both this year and last, when they lost between 30% and 50%. Paulson said that net redemptions totaled just 2% of assets in the first quarter, with a similar withdrawal level expected this quarter.

But the New York Post reports that some investors are getting restless, and blaming the hedge fund founder's taste for gold for their troubles. According to the Post, some investors think Paulson's strong backing for gold is an attempt to revive his reputation after last year's disaster.

"I would be happier if he cut the gold position in half," one redeeming investor told the tabloid. "He would have been up 4% in the first quarter if it weren't for the goddamned gold."

Paulson's Advantage Fund is down 6% through April, while the more highly-levered Advantage Plus Fund is down 8.8%.