He bought a large stake in the gold exchange-traded fund (GLD – commentary – Trade Now) as well as several gold stocks including AngloGold Ashanti (AU – commentary – Trade Now). He is the single largest shareholder of the gold ETF. He is worried about eventual dollar weakness and inflation as a result of U.S. budget deficits.
He appears to have put his money where his mouth is with gold and related securities now making up 30% of his fund. He joined Daniel Loeb and David Einhorn by establishing a merger arbitrage trade in Wyeth (WYE – commentary – Tr=). He also purchased shares another pharmaceutical blue-chip involved in a merger, Schering-Plough (SGP – commentary – Trade Now).
In his year-end letter, Paulson noted that he thought merger arb spreads were the best since 2000 and remain a core part of his approach to investing. Pualoso is also opening a new fund to bet on recosvery in the real estate market. Since he clearly had the mortgage meltdown correct, it will be interesting to track his moves in that fund.