John Paulson Lecture: "Bonds Are Wrong, Stocks Are Right"

The guy who bet big against subprime (and cashed out bigtime) and has put most of his money on gold is basically arguing there will be a big time inflationary outcome. He is essentially saying stocks are signalling this.

For my part, (as I wrote a few weeks ago), I think the reason stocks and bonds are selling conflicting signals is because the Fed (and other surreptitious forces) are bidding up both markets. So in a sense Paulson is right, this is inflationary, but because it's an artificial "push" into both markets, I would counter that both are destined to crash hard in the short- to medium-term.

In the long term, as the federal government prints (not so much the Fed) and the world adjusts to the inherent weakness of the dollar, of course general inflation will cause stock and home prices all to rise (bonds however are likely to stay in a bear market, except TIPS inflation-protected bonds).

But I think it says it all that Paulson has "80% of his personal assets" on gold. You don't have to be right about the timing of reflation when you own gold, since gold will also benefit from financial panic as stocks and bonds collapse the next go-around.