The Perils of Paulson

Good look at the pressures faced by hedge fund manager John Paulson as he raises assets in the face of outflows:

Maybe no one single trade has come to symbolize Paulsons bullishness on the U.S. economy more than Bank of America. By August 9, the troubled lenders shares were down 43 percent this year, reducing the value of the 124 million shares Paulson owned as of March 31 by $784 million. Paulson is believed to have sold some of his Bank of America shares as the stock has plunged toward the $7 mark, but the firm has refused to comment on its current position.

The picture isnt much prettier for Paulsons large share holdings in Citigroup, Popular formerly Banco Popular and SunTrust Banks. The value of Paulsons equity stake in those three banks, assuming the funds havent sold any shares since March 31, would have declined by more than $800 million over the past four months.

And then there is Sino-Forest, the troubled Chinese forestry company. Paulson absorbed a $500 million loss on the stock in June after allegations of accounting irregularities at the Hong Kong-based company surfaced earlier in the month.

The series of missteps is tarnishing the near god-like status the former Bear Stearns trader has earned over the past few years.

via Special report: The perils of Paulson | Reuters.


  1. shadenfreude