InvestIdeas

Another hero in the making. Very long article and I have attached the link below.

Pellegrini 80% Return Proves Paulson Protege No Fluke at Fund By Richard Teitelbaum

Oct. 2 (Bloomberg) -- Paolo Pellegrini has a nose for trouble. He saw it in rising housing prices in early 2006, when he cranked through decades of home price data and concluded the bubble was poised to burst. Pellegrini then helped engineer a massive bet against subprime mortgages that catapulted Paulson & Co. hedge funds to 2007 gains of as much as 590 percent -- and firmwide profits of more than $3.

He also shorted exchange-traded funds that held financial stocks and, later, those that track the Standard & Poor’s 500 Index.

Then, at the end of 2008, as panicked investors stampeded into Treasuries, sending the yield on the 30-year bond down 184 basis points to 2.52 percent, Pellegrini covered his ETF shorts and began betting against U.S. Treasury futures with underlying maturities of 15 to 30 years. (A basis point is 0.01 percentage point.)

Today, Pellegrini’s economic outlook for the next 5 to 10 years is a sobering one. He says the U.S. economy will groan under the weight of budget deficits, increased regulation and household debt. Europe will perform only slightly better, and Asian economic growth will outstrip that of the developed world. “There are going to be huge shifts in wealth around the globe,” he says. “I want to invest in that.”

Pellegrini says the U.S. stock market is likely to generate negative returns when adjusted for inflation. And the U.S. dollar will flag as an unrestrained Federal Reserve dispenses more money.

“In the U.S., there is limited interest among those in power in the stability of the dollar,” he says.

Meanwhile, the price of scarce commodities such as oil will surge as global competition for them heats up, Pellegrini says. Accordingly, he expects U.S. Treasuries to fall in price in the long term, and he’s buying oil futures. In September, he owned Norwegian kroner and said he believed the Australian dollar would benefit from that resource-rich country’s geographic proximity to Asia.

http://www.bloomberg.com/apps/news?pid= ... ryRHYHS0Sg

GURU OUTLOOK: PAOLO PELLEGRINI

This week’s Guru Outlook brings you Paolo Pellegrini. Although he is not the most well known of investment gurus Pellegrini has built quite a name for himself in recent years. Before founding his own hedge fund PSQR (a play on PP Squared) Pellegrini was John Paulson’s right hand man at Paulson and Co (see Paulson’s guru outlook here & most recent strategy comments here).

Of course, Paulson and Co. made waves during the sub-prime crisis when they made billions shorting the market during the crisis. Pellegrini was instrumental in devising the strategy. Like Paulson, however, Pellegrini wasn’t a one trick, short the market, pony. In 2009 he crushed the market with a 61.6% return in his fund after he made big bets on a rising oil market and a tanking treasury market.

So where does Pellegrini see the market going now? In a recent letter to shareholders he said:

“the structural problems that precipitated the Great Recession around the globe remain unresolved”

He says we are essentially papering over the problems with more debt. We are simply adding more debt to a debt-laden world while China adds more exports to a saturated market. He says the problems in Europe are a harbinger of these continuing issues. Thus far the massive stimulus has been successful in jumpstarting the global economy, but is nothing more than a temporary respite from the longer-term structural problems that remain.

Pellegrini’s favorite trades in 2010 are the following four:
Short US fixed income
Short US equities
Short US dollar
Long commodities

http://pragcap.com/guru-outlook-paolo-pellegrini

One year wonder ?

Hedge fund manager Pellegrini to return money

BOSTON (Reuters) - Disappointed with heavy losses this year, hedge fund manager Paolo Pellegrini plans to return his investors' money next month, a source familiar with his plans said on Friday.

After gaining more than 60 percent in its first year in 2009, Pellegrini's fund fell on hard times this year, chalking up an 8 percent drop in July which left it off 11 percent for the year, a person familiar with the fund said.

Pellegrini, who was instrumental in helping John Paulson earn more than $15 billion by betting against the U.S. housing market, set up his own fund firm, PSQR Capital, in 2009. He notified his investors of his decision on Friday.

The news was first reported by AR Magazine.

Pellegrini will continue to manage his own money and left open the possibility of relaunching this fund or another portfolio in the future.

http://www.reuters.com/article/idUSTRE6 ... Name=usdai