When investors who once predicted financial bubbles speak, the market listens.
John Paulson, the billionaire hedge fund manager and founder of Paulson & Co, became famous for shorting subprime mortgage bonds ahead of the 2008 financial crisis. When subprime bonds collapsed Paulson made $20 billion.
Now, Paulson is bullish on gold.
The reason for this is that Fed’s money printing will inevitably cause inflation.
“The best indicator of inflation is the money supply,” Paulson said and pointed out that the money supply increased by 25% in 2020.
As inflation increases, gold is expected to move higher, he explained.
“As inflation picks up, people try and get out of fixed income. They try and get out of cash. And the logical place to go is gold,” Paulson explained.
Paulson: Crypto Is Worthless – And A Bubble
However, Paulson does not think that cryptocurrencies are a viable store of value.
“…I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing,” Paulson told Bloomberg.
“Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero,” he continued.
Nontheless, Paulson will not be shorting crypto any time soon. The risk, he explains, is much greater than shorting bonds.
“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,” Paulson explains.