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Big Billionaire Investor Paring Long Positions in Stock Market

If the momentum in the market is any indication, you’d think his bias would be long. Yet a very smart money investor is paring his positions.

John Paulson Turns Bearish

According to a report from CNBC partner Reuters, billionaire investor and top hedge fund manager John Paulson has reduced his net long position - and is looking to cut further.

Specifically, Paulson has gone from 81% net long to 60% net long, but "I'd like to bring the risk down further to about 50%," he says.

CNBC Contributor Ron Insana thinks Paulson is looking for something, the quesiton is what.

“By pulling his net long position in his main fund to 60%, (and saying he intends to reduce it further) that is a distinctly bearish bet on the stock market," Insana says.

However, Insana is hard pressed to find signals that suggest a correction or something worse lies on the horizon.

"I don't see technical deterioration, or fundamental deterioration or black swan events that might derail the stock market," Insana adds. "I don't see it."

Keith McCullough of Hedgeye Risk Mgmt may know what Paulson sees. When looking at global equity markets, he says, "when you line up the ducks of the top 60 countries -- about 45 are down year to date. You can't be running even 60% long."

Although Paulson wasn't specific, according to Reuters, he did cite global economic factors for his change in allocation; explaining that they have made this year's ride bumpier than he is willing to stomach.

John Paulson on Banks

Digging down into Paulson’s portfolio, the desk is perhaps most intrigued by the way he's repositioned in the financials.

According to reports, Paulson has grown rather critical of the bank stocks citing the magnitude of the mortgage crisis.

To mitigate that risk, Paulson has diversified into stocks with less exposure to mortgage loans, noting that he liked Capital One and Wells Fargo, two names he owned at the end of the first quarter.

”I like what Paulson is doing here,” says Trader Joe Terranova. “If financials appreciate I think all boats will rise," he says, but it makes sense in the near-term to play it long Wells and Cap One.

* You can find our conversation on this topic about 11 minutes into the video clip above.


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Trader disclosure: On July 21, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Finerman's Firm And Finerman Own (AAPL); Finerman's Firm owns (BAC) leaps and Finerman Owns (BAC); Finerman's Firm owns (JPM) leaps and Finerman Owns (JPM); Finerman’s Firm and Finerman own (MSFT); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (MDY); Finerman's Firm Is Short (SPY); Finerman's Firm Is Long S&P 500 Putsl Finerman's Firm Is Long Russell 2000 Puts; Terranova owns (XOM); Terranova owns (HAS); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (F); Terranova owns (CVI); Terranova owns (IBM); Terranova owns (FCX)

For Brian Kelly
Accounts Managed By Brian Kelly Capital Own (TOL) calls
Accounts Managed By Brian Kelly Capital Own (MCP) calls
Accounts Managed By Brian Kelly Capital Own (INTC)
Accounts Managed By Brian Kelly Capital Own (QCOM)
Accounts Managed By Brian Kelly Capital Own (GDXJ)
Accounts Managed By Brian Kelly Capital Own (SLV)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of Building Materials Holdings
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LHO)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (RLI)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of Domino's Pizza UK & IRL PLC




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