Gold's fundamentals "uniquely positive," says billionaire Paul Singer's hedge fund - Wealth Managers

Elliott Management sees potential inflation -- or worse -- ahead from Fed QE

Despite all the negative press from the mainstream financial media, gold still has some high-powered fans in the professional investing world.

Billionaire John Paulson is sticking to his golden guns as the largest stakeholder in the biggest gold ETF, telling theDelivering Alpha conference in mid-July: "If you're looking for a hedge against potential inflation in the future and have a longer-term view, I continue to believe that it's an important part of anyone's portfolio."

And earlier this month, Frank Giustra -- billionaire mining mogul, Lion's Gate Entertainment founder, and BFF of ex-President Bill Clinton -- also came out swinging for gold at the 2013 Canaccord Genuity Global Resources conference in Miami: "All the reasons gold went from $250 to $1,900 are still. In fact, they've been amplified tenfold," he said. Washington faces a choice, he added. "They can either default, or print money. ... And they'll never default."

And now billionaire Paul Singer's firm, Elliott Management, is staking out a gold claim to offset potential inflation. "TheFederal Reserve's easy-money policies have distorted the economy and created big risks for markets and investors alike, prompting the hedge fund firm to add to long gold options to protect against inflation," Reuters reported, citing an Oct. 28 letter to investors. "Elliott is adding to its bullish gold option holdings that aim for limited downside risk with a large upside potential, saying it still feels that fundamentals are 'uniquely positive for gold.'"

Singer made some rather dark pronouncements in the letter, as reported by Zero Hedge.
On QE: "The recent trading environment has felt something like walking into a place and having a sense that something is wrong and dangerous but not knowing exactly what will happen or when. 'QE Infinity' has so distorted the prices of stocks and bonds that nobody can possibly determine what the investing landscape would look like, or what the condition of the economy and financial system would be, in the absence of Fed bond-buying."
On bonds and interest rates: "$3.8 trillion of bond-buying since 2008 by the Fed has had only a temporary effect on medium- and long-term interest rates. It is impossible to predict the prices of bonds in the event the Fed stops buying, or actually starts to sell off its massive portfolio, although it is a decent bet that prices would be much lower than current levels."
 On stocks: "It is also not clear whether stock prices, which are still on a tear and at all-time nominal highs, are at these levels because of optimistic economic prospects, QE, or the beginnings of a loss of confidence in paper money causing a shifting of capital out of fixed income and into purportedly 'real' assets. However, the fragility of capital markets, so reliant on zero percent interest rates (ZIRP) and QE Infinity for their equilibrium, is clearer. The markets' ability to withstand any adversity is highly questionable, and it appears to us that the Fed is basically paralyzed." 
On federal debt and fiscal irresponsibility: "We are talking about the underlying structural issues of the federal budget deficit, economic growth, the deeply contentious Affordable Care Act, and the long-term insolvency of the country due to the government having made (and continuing to make) massively unpayable promises for the future. As we have pointed out, the current annual federal deficit, so ballyhooed to be 'coming down nicely,' is actually catastrophically out of control. It is not a trillion dollars. The true figure is more like $7 trillion (and growing!) after accounting for unfunded liabilities, which are mounting at a fantastic pace. It is not an exaggeration to say that America is deeply insolvent, and for that matter, so are most of continental Europe, the U.K. and Japan. No combination of achievable growth rates and taxes can pay for the promises that have been made. The numbers are clear and inexorable. ... What has been happening with the U.S. federal government in its recent highly-theatrical phase, as contentious and difficult as it has been, is merely a precursor to much bigger events."
 
On tapering: "If QE loses effectiveness now and the plug is pulled, the economic consequences could be disastrous, because the Fed didn't force the President and Congress to adopt progrowth policies when it had the chance. At the same time, if the current course is maintained, the ultimate results are likely to be much worse."
No wonder Singer and his firm are seeking shelter in gold!

More information can be found online at http://www.goldbullionadvisors.com