Jay Yao of Motley Fool:
Very few people can beat the market consistently. Achieving superior returns annually is extremely difficult because the market is constantly changing. Black swan scenarios that should happen once every thousand years occur once every decade or so. In short, asking an investor to beat the market every year is pretty much asking the impossible.
Hedge fund manager John Paulson is perhaps the epitome of how hard it is to beat the market consistently. Paulson, who arguably made the greatest trade of all time by shorting subprime assets in 2006 and 2007, incorrectly became bullish on the economy in 2011. Lately, however, Paulson has regained some of his former luster.
In his gold investment, John Paulson faces a similar situation to what he faced with the subprime trade. His gold investments are not initially panning out the way Paulson had hoped.
Still, Paulson is sticking with his gold trade. Why?
The bottom line
The fundamental story for gold is still intact. The Federal Reserve has a lot of money in circulation. If the economy picks up and the velocity of money increases, inflation will likely send gold prices higher.John Paulson may not be able to beat the market every year, but he is right when it counts. His continual conviction in gold is welcome news for long-term gold bulls.
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