John Paulson's 2010 Firm Report: Go Long Stocks

Billionaire hedge fund manager John Paulson wrote in his 2010 year-end firm report that US stocks will continue to rise. A copy of the letter appeared on market folly.

Paulson said the average length of economic expansion after the last two US recessions was 32 quarters. The US economy has grown for 5 quarters so far, so there is certainly room for continued expansion.

Moreover, the equity risk premium, an indicator of investors' risk-aversion to stocks, hasn't dropped much from the height of the recession and remains at a 50-year high.

However, corporate earnings and global growth were quite strong in 2010, said Paulson. This indicates the equity risk premium should fall and stocks should rise.

This is the part of the [economic] cycle where we want to have long event exposure and do not want to be under-invested, he said.

Paulson famously predicted the subprime mortgage crisis in 2007 and made billions betting against it. In 2009, he successfully shifted gears and turned bullish by going long credit. In 2010, his bullish focus turned to equities.

Update: market folly received the file from ZeroHedge.

Email Hao Li at hao.li@ibtimes.com

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