Most hedgies will declare “inflation” is on the rise and it is worth it to own gold as portfolio diversification has almost thrown in the towel by now and moved on. Recall how Paulson lost $736 million in Q2, which raises questions: How did he manage to make the greatest trade ever yet not continue his winning streak again thereafter? (As of the recent quarter though he had outperformed his peers.)
No other hedgies run the world’s greatest hedge fund than Ben Bernanke. There are a few schools of thought that i) inflation will rise thus compelling almost every money manager to chase for yields ii) inflation will not see an uptick too soon since there is a slack in productivity and excess capacity in production
Witness the inflation chart here (Inflation print at 1.2% as of September 2013):
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