Hedge fund manager John Paulson said residential real estate prices could pose a threat to the U.S. economic recovery and that it will be difficult for property values to rebound this year. Paulson made the remarks in an interview with the French financial newspaper Les Echos, according to Bloomberg. Paulson knows a little something about the housing. His firm, Paulson & Co. made billions of dollars betting against the subprime mortgage market before the financial crisis started. Paulson then profited from a rebound in the U.S. economy, in part by loading up on financial services stocks. At the end of 2010, Paulson held stakes in financial services stocks such as Bank of America , Citigroup , Capital One Financial , SunTrust Banks and Wells Fargo . “In my eyes, the major risk for the American recovery is the stagnation of the residential real-estate market,” Paulson said, according to Bloomberg, citing Les Echos. “It will be difficult to have a rebound in real-estate prices this year.” Paulson cited gold as a preferred investment for dealing with the inflationary risks of the next three to five years and the instability of the euro, Bloomberg reported. The Paulson Gold Fund had $900 million in assets under management at the end of last year when the firm held stakes in miners such as Anglogold (AU) and Gold Fields (GFI) and the SPDR Gold Trust (GLD), the second-largest ETF in the world as ranked by assets.
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