The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History
In 2006, hedge fund manager John Paulson realized something few others suspected--that the housing market and the value of subprime mortgages were grossly inflated and headed for a major fall. Paulson's background was in mergers and acquisitions, however, and he knew little about real estate or how to wager against housing. He had spent a career as an also-ran on Wall Street. But Paulson was convinced this was his chance to make his mark. He just wasn't sure how to do it. Colleagues at investment banks scoffed at him and investors dismissed him. Even pros skeptical about housing shied away from the complicated derivative investments that Paulson was just learning about. But Paulson and a handful of renegade investors such as Jeffrey Greene and Michael Burry began to bet heavily against risky mortgages and precarious financial companies. Timing is everything, though. Initially, Paulson and the others lost tens of millions of dollars as real estate and stocks continued to soar. Rather than back down, however, Paulson redoubled his bets, putting his hedge fund and his reputation on the line. In the summer of 2007, the markets began to implode, bringing Paulson early profits, but also sparking efforts to rescue real estate and derail him. By year's end, though, John Paulson had pulled off the greatest trade in financial history, earning more than $15 billion for his firm--a figure that dwarfed George Soros's billion-dollar currency trade in 1992. Paulson made billions more in 2008 by transforming his gutsy move. Some of the underdog investors who attempted the daring trade also reaped fortunes. But others who got the timing wrong met devastating failure, discovering that being early and right wasn't nearly enough. Written by the prizewinning reporter who broke the story in The Wall Street Journal, The Greatest Trade Ever is a superbly written, fast-paced, behind-the-scenes narrative of how a contrarian foresaw an escalating financial crisis--that outwitted Chuck Prince, Stanley O'Neal, Richard Fuld, and Wall Street's titans--to make financial history.
From the Hardcover edition.
By Kindle Addict - November 25, 2009
This is an incredible book about John Paulson, and in general, the trade against the housing market. This is a great read for anyone who is interested in how an investment thesis is constructed and executed.
There were two pleasant surprises of the book:
1. Cast of Characters - How different investors, besides John Paulson, also saw the similar trade opportunity and went for it. As the crisis unfolded John Paulson, George Soros and a host of other investors were revealed to have been shorting the housing market. The surprise was learning about the host of other, "unknown" investors from a medical school dropout to a cocky Deutsche Bank trader to wealthy real-estate mogul to a recently graduated MBA, each of whom recognized the crisis before most others and were able to trade against the rest of the investment community.
2. The transformation of John Paulson - He was initially described someone who was smart, but not as someone who always "had to be... read more
Greatest Tome On the Subprime Anti-Heroes
By Paige Turner "Paige" - June 2, 2010
"Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally." - John Maynard Keynes.
If "The Big Short" theme was that Wall Street bond traders were corrupt and stupid and it was inevitable that they would blow up, "Greatest Trade Ever" covers the same ground but instead argues that it is nearly impossible to profit from a wildly out of consensus trade. Lewis opens his book with a quote by Tolstoy, which emphasizes that the experts could not be convinced because they know too much. Zuckerman instead opens with the Keynes quote above which explains why there are so few independent thinkers on Wall Street. The amazing thing about the subprime debacle was not that a few smart contrarians figured it out, but rather that so few did, and perhaps most amazing of all, the pain they endured during the process. (Although their massive, deserved riches may be a salve for those wounds).
This book is a 30k foot level view of the financial crisis, poorly conceived, poorly executed. I've read just about all of Michael Lewis's books and articles covering the financial crisis, and he did a piece for Portfolio Mag. before it went under about the same topic. By the end of that article I was on the edge of my seat because he took you INTO the action, you were sitting there making a trade. I still remember Lewis's description of the traders in his article sitting in Sept. 08, shaking, watching traders leave the NY Stock exchange, knowing what they'd just pulled off. Anyway, compare that to this... the whole thing is written with an air of naivete and awestruck envy, like as if Zuckerman asked Paulson to put together a roundup of his accomplishments so the former could introduce the latter at a cocktail party or something, or Zuckerman wants to get invited to the big "bashes" he continually says Paulson hosts.
Zuckerman also looses credibility throughout the... read more
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