John Paulson, the hedge fund manager who made billions betting against the U.S. mortgage market in 2007, has found something new to bet against.
Paulson told investors on a recent conference call that he is betting against European sovereign debt, citing fears about the over-dependence of Spanish banks on support from the European Central Bank, according to Bloomberg News.
Paulson told investors that he is also buying credit-default swaps on European debt, according to Bloomberg, which act like insurance policies that pay out if borrowers fail to pay their bonds.
One question for Paulson’s clients could be the bet’s timing: Though Spain has recently moved to the center of the European debt crisis, replacing Greece, the crisis has been going on for years, and prices for insurance policies on European debt, including Spanish government bonds, have soared during that time. Some might argue that the easy money in Europe has already been made.
Paulson rose to prominence and exorbitant wealth after making billions of dollars betting against the U.S. market for subprime mortgages, while most of Wall Street was still in the midst of a feeding frenzy over mortgage bonds.
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