Morning Line: Hedge fund guru calls bottom of market. Well, sort of....

New York hedge fund guru John Paulson pocketed nearly $4 billion in 2007 by betting that millions of low-income Americans would lose their homes.

Paulson's clients, meanwhile, are estimated to have earned a further $8 billion last year after his Credit Opportunities fund created to short the subprime market returned a startling 590%. The same fund was also up 10% in the first half of 2008.

Like many on Wall Street, Paulson had become convinced as early as 2006 that the markets were under-pricing the risks inherent in subprime mortgage lending, and that they were therefore headed for an almighty collapse.

However unlike the vast majority of doomsayers, Paulson was prepared to put his money where his mouth was, taking massive short positions in key financial instruments such as collateralised debt obligations and credit default swaps.

In effect, Paulson was betting that subprime homeownerswould default on their loans,andthat big financial institutionswould therefore hit the skids. Which of course they subsequently did, and in a spectacular way.

Whatever you think about the vast amounts of money Paulson has made and many argue that it has been at the direct expense of millions of ordinary Americans there is no doubt that he was way ahead of the game. And it is this fact that makes today's news that he is planning the launch of anew fund particularly interesting.

According to the reports the new Paulson fund will be launched by the end of the year, and will look to invest directly in cash-strapped banks. Paulson's reasoning seems to be that banks have been hit so hard by the subprime crisis they will be increasingly desperate for cash investors over the next year or so.

Of course there aren't many such cash-rich investors around these days, and certainly not many that are willing to pump their precious billions into banks. Paulson therefore appears to figure he might be able to pick up some bargains in the sector.

Punch-drunk investors have perhaps a little predictably interpreted the news as Paulson preparing to call the bottom of the market. And it is certainly an interesting development from the man widely considered to be the 'greatest' financial speculator since George Soros.

Some words of caution, though. All of today's reports explicitly stress that the launch of the fund is not yet a forgone conclusion a deliberate message that almost certainly emanates from the great man himself.

Like many others before him, Paulson appears to be using the media to test investor appetite for such a fund (so much cheaper and quicker than marketing or one-to-one meetings).

Indeed, the provisional nature of the news suggests that Paulson himself is not yet convinced that the worst is over. Like other older, wiser, investment heads, Paulson is no doubt wary of calling an end to a crisis that has consistently surprised us in its severity.

'John has kept it very clear that he is no rush to buy', an investor is quoted as saying in today's FT.

And finally, before we take this as a signal to plough our own hard earned money back into the markets, we might also want to remember that Paulson and his clients live in a very different world to our own.

As a multi-billionaire cash-rich investor Paulson would be able to negotiate terms way better than those available to you or me on the open market. Plus as a hedge fund manager Paulson is able to exploit a handy tax loophole that allows him to effectively dodge capital gains tax on his profits. Nice work if you can get it.

Still, if he does launch it, and if you're feeling brave, and have a spare few million dollars lying around in your offshore bank account, then go for it. And the very best of luck to you.