How a top hedgie thinks

Part of a Reuters report on John Paulson’s views. He is a billionaire hedge fund manager.

“Given his prescient bearish call on mortgage credits, Paulson’s views are widely watched for what he has in his $33 billion investment portfolio.

‘He highlighted the attractive yields on credit issued by GMAC due in Sept 2011, the former General Motors automotive financing company that the U.S. government propped up at the end of 2008.

‘By Paulson’s thinking, the government involvement is equivalent to an explicit guarantee on GMAC’s finances.

“So instead of buying (a) Treasury bond which yields 84 basis points, I can buy GMAC which is almost, I consider equivalent to a government bond and I can get 11 percent. That is why we have allocated so much money to this particular security,” he said.”

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