The billionaire John Paulson is chasing gold. After gold has already ran up 70% over the last 12 months, he’s starting a mining company fund where he will invest $250 million of his own money. What a n00b (n00bs are arrogant traders who know little and have no will to learn any more. They are usually rich and they expect other people to do the work for them and then expect to get praised about it).

This n00b is buying gold at $1,200 to $1,250 an ounce, after it has already spiked up.

I’m no Einstein economist but didn’t anybody see what happened on Friday in the stock market?

Here comes the rich dummy talk…

When the economy starts to improve as hiring increases and unemployment claims decrease, the dollar will strengthen and gold will go in the toilet as money exits gold and goes back into stocks.

What about gold acting as an inflationary hedge as we come out of this economic bear market?

The dollar gaining in value will not make gold rise as it did a few years back. At least not at first. The reason, the dollar has taken such a beating and is down so low that inflation will not be a threat for many years. The dollar could easily go up 10, 15, even 20 points and more before inflation becomes a threat and money moves into gold as an inflationary hedge like we saw years ago. Gold acting as an inflationary hedge comes into play at the end of an economic bull market (when the FED has artificially raised interest rates to high levels in order to slow down economic growth), not at the beginning!

The n00b Paulson is not only chasing gold, but he thinks gold will go to $2,000 to $5,000 an ounce.

What does this all mean? It means the buy gold mania, or buy gold frenzy is close to coming to an end.

John Paulson is another one of those one hit wonders that eventually crash and burn.

As Saijel Kishan of Business Week writes, “The founder of Paulson and Co. doesn’t even look average this year. His biggest portfolio, Advantage Fund, has returned 15% vs. 17% for peers.”

History is littered with these n00bs.

So here’s the word those with gold clap are spreading on the street: John Paulson made millions shorting the housing market and so you should listen to him about chasing gold at these levels.

So what.

Hundreds of thousands of small traders made money shorting the housing market. For every buyer there had to be a seller and there was more sellers than buyers. That’s WHY it went down.

It’ll be good to see another guy who thinks he poops gold bricks buy the ticket and take the ride in the stock market.

History is filled with people smoking the one hit wonder weed like Paulson who, after a great call on shorting the housing market, have turned into just another mediocre investor looking for the next crapportunity.

Take Benjamin Graham, arguably the greatest investor of all time, Graham was wiped out personally in the stock market crash of 1929.

What about the stock trader murderer Warren Buffett who has averaged less than a 15% return a year for the last 20 years and would have lost everything in October of 2008 when be bought banks too early and told everyone else to do the same. Had you followed Buffett, and many traders did, the coroner would be picking up your stiff body from the corner of Wall Street and HeroWorship.

Then Buffet Molestor left rich man’s land and ran to the government and lobbied hard, and with some behind closed door deals, got the tax payor to bend over and give billions of tax dollars to invest in his companies. A good chunk of his fortune is dependent on taxpayers. Were it not for government bailouts, for which Buffet Molestor lobbied hard, many of his company’s stock holdings would have been wiped out.

What about the icon cow Jack Bogle who created Vanguard? After having a good early strategy of buy and hold, his company Vanguard has some of the worst performing funds over the last 10 years. The average fund at Vanguard has only achieved a 6% gain per year over the last 10 years.

I could go on with those down on the rap sheet for smoking the one hit wonder weed.

The truth is that people want heroes, they want to engage in hero worship, it’s part of being human.

The reality is that no one should be chasing gold above $1,200.

And before you engage in hero worship, just remember the old Wall Street adage, “You are only as good as your last trade.”