FUND BETS BIG BUCKS ON HOUSING BUST

If you ever wondered why everyone hates hedge funds, here’s a pluperfect example. A New York hedge fund is betting big time on what apartment-obsessed New Yorkers have been whispering about for months: that the real estate boom is over. In July, Paulson Credit Opportunities Funds raised $147 million in equity and promptly put it to work on a leveraged $1.8 billion bet that home owners are going to have a very difficult time paying their mortgages.

The bet is concentrated on the lower end of the credit world, reckoning that the housing bubble will crack first among borrowers with the worst credit.

Although a Paulson fund spokesman declined to comment, its July letter to investors made clear that when it comes to the housing market, its research team doesn't just see the glass as half-empty, but more likely, as broken.

According to Paulson, their bet is working nicely, the fund's one month of operation has returned 2.87 percent before fees.

"Most recent housing trends continue to deteriorate," the Paulson letter said, citing "the lowest monthly [housing price] increases in 11 years." The letter also pointed to a spike in housing inventory as a sign of what it called "declining fundamentals."

http://www.nypost.com/business/home_fires_dying_business_roddy_boyd.htm