You think that Soros shorting the British Pound was a big trade?
Check out Paulson:
The Biggest Trade of All Time
by Justice Litle, Editorial Director, Taipan Publishing Group
A nondescript man named John Paulson has made the biggest trade of all time.
Mr. Paulson started getting bearish on the housing bubble about two years ago, The Wall Street Journal reports. Digging into the data convinced him that the boom would be a bust.
Paulson showed a knack for timing and a good nose. What really impresses, though, is the size of the trade. Paulson made $15 billion for his funds and an estimated $3 to $4 billion for himself -- the largest one-year payout in Wall Street history.
Now that’s a trade.
How did he do it? With a combination of guts, determination and creativity. Paulson saw the writing on the wall before others did, but that was only the first step. He also maintained discipline, refusing to make big bets too early. (If he had put on large positions from the start, he might have been shaken out before the market turned.) He showed conviction, holding onto the trade when it initially went against him. He showed guts, increasing the size of the trade as it started to work. And he showed innovation, figuring out unconventional ways to bet against the mortgage boom. (“You can’t short houses,” he says.)
Paradigm Shifts
A quirky magazine called n + 1 (N Plus One) sheds further light on how Paulson did it.
The January 2008 issue contains an enlightening article titled “Interview with a Hedge Fund Manager.” In this interview, the nameless hedgie sheds some insight on how fortunes are made.
The way that you make a ton of money is calling paradigm shifts, and people who are real finance types, maybe they can work really well within the paradigm of a particular kind of market or a particular set of rules of the game—and you can make money doing that. But the people who make huge money, the George Soroses and Julian Robertsons of the world, they're the people who can step back and see when the paradigm is going to shift… I think that comes from having a broader experience, a little bit of a different approach to how you think about things....
It’s Official: Greenspan Is a Jerk
John Paulson (he of the bearish megabet) must also have a sense of humor. This is evidenced by his decision to hire Alan Greenspan. His firm, Paulson & Co., will be taking on the maestro as an official adviser.
One has to wonder, Is this a tongue-in-cheek quid pro quo or what? You scratch my back, I scratch yours? After all, it was Greenspan’s relentless flood of cheap money that got the bubble started in the first place.
Perhaps Mr. Paulson felt a debt of gratitude. After a multibillion-dollar score, throwing Greenie a few bones is the least he can do.
If Greenspan had any sense of decency, though, he wouldn’t take the dough. (But then again, if he had that he wouldn’t be making his successor’s job harder by running his mouth nonstop.)
For nearly two decades, Greenspan was a Delphic oracle. He practically spoke in hieroglyphics -- except when he was shifting blame. Then he retires, the spotlight moves away, and presto! The maestro can suddenly speak English. And so what does he do with this newfound ability? He says whatever comes into his head, brags about being indecipherable all those years before, and directly profits from the mass destruction he had a hand in creating.
If there was a “Jerk of the Decade” award, the maestro would be the front-runner. |
