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Wednesday, June 18, 2008

Paulson & Co. Says Writedowns May Reach $1.3 Trillion

By Tom Cahill and Poppy Trowbridge
June 18 (Bloomberg) -- John Paulson, founder of hedge fund Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund's $945 billion estimate.
``We're only about a third of the way through the writedowns,'' Paulson, 52, told the GAIM International hedge fund conference in Monaco today. ``There are a lot of problems out there and it will continue to be felt through the year. We don't see any signs of stabilizing.''
Paulson, whose company manages about $33 billion, shorted subprime-mortgage debt after he noticed ``bubble like'' prices that made a collapse ``inevitable.'' His Paulson Partners fund has risen about 18 percent a year since it was founded in 1994, while one of his main funds for betting on declines in subprime debt rose 591 percent last year.
The U.S. is heading into a recession as falling home prices weigh on consumer spending, Paulson said. The second half of this year will be worse than the first as the economic slowdown continues into 2009, he said. Signs of stress are ``accelerating'' in the housing market.
``I don't consider myself a bull or a bear,'' he told the audience at Monaco's Grimaldi Forum. ``I'm a realist.''
Ambac Financial Group Inc., the second-biggest bond insurer, is ``the most leveraged, troubled company out there,'' Paulson said. It is at risk of being downgraded to non-investment grade, Paulson said.
The housing and credit-market slump pushed Ambac to three straight quarterly losses after more than a decade of profit. It has written down $5.2 billion since the collapse of the U.S. subprime mortgage market last year.
A spokesman for New York-based Ambac couldn't immediately be reached for comment.

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