New investor Paulson rides into town with hope for gaming

Who is that masked man who invested $480 million in the MGM Mirage and another $39.5 million in Boyd Gaming? Well obviously, this Lone Ranger has access to more than a few bucks. Actually, his personal wealth is an estimated $12 billion, and he controls $32 billion.

John Paulson is the hedge fund investor whose firm, Paulson & Co., made $15 billion in 2007 by betting correctly that the housing market would collapse because of subprime loans.

He personally made $4 billion that year, which The Wall Street Journal described as the largest one-year payout in the history of financial markets. Paulson was earning an average of $10 million a day for himself.

Paulson, 54, made his reputation by predicting Las Vegas and other boomtowns would bust in the long run. This, of course, earned him the reputation as a smart investor, one worth watching and following.

Mandatory filings with the Securities and Exchange Commission revealed Tuesday his hedge fund bought 9.06 percent of MGM Mirage's stock and 4.6 percent of Boyd Gaming during the first quarter of the year. It seemed like a ringing endorsement of the gaming industry as a wise investment.

Sure, there was speculation he's already dumped the MGM Mirage stock, basically taking the money and running, but if he did that, it's not reported until later. Right now, he looks like a guy who is sold on the future of gambling in Las Vegas.

The stock of both companies went up based on Paulson's investments, which made his company the second-largest investor in MGM Mirage, right behind Kirk Kerkorian, and the fourth-largest investor in Boyd Gaming.

Many colorful characters came to Las Vegas to make their fortunes. Benny Binion. Steve Wynn. Jackie Gaughan. William Boyd.

Others already had their fortunes and were looking to become richer. Howard Hughes. Barron Hilton. Sheldon Adelson.

Paulson falls in the second category. Born in Queens, N.Y., he graduated among the top 5 percent of his class when he earned his M.B.A. at Harvard Business School.

He worked on Wall Street and started his hedge fund in 1994 with $2 million of investments when he was 39. The Wall Street Journal said he invested in corporate mergers, a safe form of investing. Then in 2007, he looked at the housing market boom and thought it was unrealistic. So he created a hedge fund essentially to profit from people defaulting on their mortgages.

He started a gold fund in 2009, which some experts view as a hedge against inflation, a lack of confidence in the U.S. dollar. Yet now he's taking a more positive approach, investing on the basis the economy will do better. Let's hope he's right.

Besides investing in gold and gaming, Paulson's name may be familiar in another context. When the SEC sued Goldman Sachs on April 16, Paulson's company was named as having a "significant" role in creating the Abacus investment at the heart of the civil lawsuit. The SEC hasn't said Paulson's firm did anything wrong.

Paulson doesn't look or act like a Vegas kind of guy. Known as J.P., he wears dark suits and ties and has a limp handshake, wrote Gregory Zuckerman, who authored "The Greatest Trade Ever" about Paulson.

Yet obviously, Paulson is a gambler at heart. In 2008, Zuckerman asked Paulson why he kept investing. Paulson compared it to winning tennis championships at Wimbledon. "When you win one year, you don't quit, you want to win again," he said.

Suddenly, there's a new player whose investment decisions might make a difference in the lives of Las Vegas gaming employees and investors worldwide. Presuming Paulson came here to kick the tires before making his decisions, it's unlikely locals would have given him a second glance.

Jane Ann Morrison's column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call (702) 383-0275. She also blogs at lvrj.com/blogs/morrison.