Billionaire John Paulson Who Shorted Subprime, Calls Crypto ‘Worthless’ Bubble :
1.Ever since John Paulson bet against the U.S. housing market more than a decade ago, making $20 bn for himself and investors,people keep asking him about his next big trade. 1/n
2. Paulson is again seeing signs of excessive speculation and is increasingly concerned about rising prices.Rapidly expanding money supply could push inflation rates well above current expectations,he said, and gold, which he’s backed for years, is primed for its moment. 2/n
3.His harshest words are for the hottest investments of this era.SPACs, on average, will be a losing proposition,while cryptocurrencies are a bubble that will “eventually prove to be worthless.”
“I wouldn’t recommend anyone invest in cryptocurrencies” 3/n
4.Paulson’s dismissal is sure to attract critics after digital assets vastly outperformed gold in recent years. His record since the “greatest trade” has also been mixed.His funds' assets dropped to about $9 bn in 2019 from a peak of $38 bn in 2011 4/n
5.Paulson on his Gold bet: We believe that gold does very well in times of inflation.The last time gold went parabolic was in the 1970s, when we had two years of double-digit inflation. 5/n
6. The reason why gold goes parabolic is that basically there’s a very limited amount of investable gold. It’s on the order of several trillion dollars, while the total amount of financial assets is closer to $200 trillion. 6/n
7. As inflation picks up, people try and get out of fixed income and cash. And the logical place to go is gold. But because the amount of money trying to move out of cash +fixed income dwarfs the amount of investable gold,the supply and demand imbalance causes gold to rise. 7/n
8. His 2009 bet on Gold did not work out, as the QE money stayed between the Fed and the Banks , who had to maintain higher capital and reserves.
9. And the money never really entered the money supply. So it wasn’t inflationary.
8/n
10. In 2020 QE has expanded the money supply by about 25% last year and the best indicator of inflation is money supply. "So I think we have inflation coming well in excess of what the current expectations are."
9/n
11.What about cryptocurrencies? Are you a believer?
No, I’m not. And I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing. So to the extent there’s more demand than the limited supply, the price would go up. 10/n
12.But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.
Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. 11/n
13. "Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies. "
14.Based on what you’ve just said, why not put a big short of some type on cryptocurrencies? 12/n
15." In crypto, there’s unlimited downside. So even though I could be right over the long term, in the short term, I’d be wiped out. In the case of Bitcoin, it went from $5,000 to $45,000. It’s just too volatile to short." 13/n
16. (Summary of John Paulson's interview on Bloomberg . He also spoke about Interest rates,the Fed , where to invest now and the best advice he has ever got . Will summarise that in another thread later on . Best wishes.) 14/14 End.

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More from @Ajay_Bagga

13 Sep
Do fundamentals even matter?
We may be near to, or ,many years away from,/ a reality check .
Wakeup calls are met with " This Time Is Different" insults.
Still lets try...Howard Marks had called a Dot Com Bubble in 1997. It took 3 years more to come true.
Lets see 1/n
Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue. Do Fundamentals even matter ?
2/n
In January Tesla was worth more than the next nine car manufacturers combined. Now its market cap is higher than only the next six. Do Fundamentals even matter ?
3/n
Read 16 tweets
11 Sep
Saw an IPO filing in an industry where my friends created a fantastic business and sold it to a Japanese conglomerate.
The claims in the filing seemed outlandish so called a few veterans of the market. 1/n
One " Story tellers have taken over fund raising.On the other side, beneficiaries of Note printing are over eager to colour the stories these imaginative,creative artists have spawned.Some will deliver good business performances,most will become giant regrets " 2/n
Second:"Its worse than 2000. In 2000,companies went public early so the retail investors lost a lot,but at initial levels of valuation. Now PE funds are dressing up companies for years & then palming them off at fantastic valuations.The losses will be much larger.Unfortuante."3/n
Read 6 tweets
9 Sep
El Salvador’s new bitcoin wallets could cost Western Union $400 million a year: In 2020, El Salvador received nearly $6 billion in remittances, which accounted for about 23% of its gross domestic product.
1/n
President Nayib Bukele estimates that money services providers like Western Union and MoneyGram will lose $400 million a year in commissions for remittances, thanks to the country’s bitcoin adoption.
Some 70% of the Salvadoran population receives remittance payments. 2/n
Remittances are one area where the status quo in the legacy financial system is terrible, with extraordinarily high fees leveled at populations that can ill afford them 3/n
Read 9 tweets
9 Sep
Ukraine is the latest country to legalize bitcoin as the cryptocurrency slowly goes global .Ukraine is the fifth country in as many weeks to lay down some ground rules for the cryptocurrency market 1/n
In a nearly unanimous vote, the Ukrainian Parliament adopted a law that legalizes and regulates cryptocurrency.Until now, crypto in Ukraine has existed in a legal gray area. 2/n
Unlike El Salvador’s move this week to adopt bitcoin as legal tender, Ukraine’s crypto law does not facilitate the rollout of bitcoin as a form of payment, nor does it put it on an equal footing with the hryvnia, the country’s national currency. 3/n
Read 4 tweets
29 Aug
Impact of Powells Jackson Hole Speech on the markets:
1. Still in consideration on Taper of USD 120 bn of monthly purchases by the Fed.
2.Many Wall Street strategists have December as their baseline Taper start-date, so that is the neutral scenario going ahead. 1/n
3. Powells speech was seen as Dovish by the markets, in that there was no nasty surprise as given in the prior Fed meeting .Sep Fed meeting may lay down a time table..
4. The three main scenarios then are: December lift off (neutral), earlier (hawkish) and later (dovish).
2/n
5. Gold bounced over 1% on Friday after Federal Reserve Chair Jerome Powell stopped short of signaling when the U.S. central bank would start withdrawing its economic support and reiterated his view that current price spikes are transitory. 3/n
Read 23 tweets
25 Jun
Stripe’s John Collison: The Best Of The Connected Future Is Still To Come. After 16 months of hyperactive change and adaptation, Collison points to the big picture that will emerge as a result of jamming 10 years of progress into a year and a half. 1/n
“We saw two million new businesses created on Stripe since the start of 2020.That's more than the number created in Stripe’s lifetime up to this point. I think what those two million businesses do will surprise us.” 2/n
Many of the businesses are from verticals that were slow to digitize. Healthcare is one striking example, as necessity pushed the long-reluctant segment to embrace technology that it has spent the better part of the last decades avoiding. 3/n
Read 8 tweets

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