I am always astounded when Big Firms lose money in the markets. Goldman Sachs had 15 trading loss days in Q2. John Paulson’s two Advantage funds were down 31% and 21.5% for the year as of last Friday.
GS has access to Fed Funds, or at least to overnight repo money, at less than 1% rates. How can you lose money with that? Unless … you bet the wrong way on Treasury’s, currencies, futures, options, and eurodebt? They had one day with a more than $100MM loss, and only 4 days with $100MM+ gains (vs. 32 in 2010).
Paulson lost big on BAC and Citigroup. I think I recall an old maxim that says, just because a stock is cheap, it doesn’t mean … He’s had some bad deals lately (Sino Forest). This would shake my confidence in his judgement. But I guess if you manage $35BB you obviously know more than almost everyone else. Or do you? I don’t mean to disparage Mr. Paulson. He bought gold, and has sunk a lot of his personal fortune in gold. But, if you invest in gold, and you make a bullish case for gold it has to be based on negative economic and political fundamentals, which would make me very wary of Bank of America and Citi. But, what do I know.
My advice: take what these guys say with a grain of salt.