The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History Review
"The Greatest Trade Ever" does a terrific job of showing how John Paulson realized in 2006 that the housing market and the value of subprime mortgages were grossly inflated and headed for a major fall. Paulson figured out a way to wager against housing by buying credit default swaps (CDS). In 2007 the markets began to implode and by the end of the year Paulson had pulled off the greatest trade in financial history, earning more than BILLION for his firm. What he did may be entirely legal, but I don't find it particularly admirable.
I wish the author would have provided the following information:
-How much money did Paulson pay for his entire CDS coverage and which firms sold the CDS certificates to Paulson?
-Would Paulson have been able to get the billion for his CDS coverage if the US Government hadn't bailed out so many firms?
-If the US Government had let more firms go bankrupt, would Paulson have received anything?
-Are the US tax payers the people who are actually paying for the billion Paulson received?
The book describes a few other men attempting to do the same thing as Paulson, but no one else did as well. None of them tried to warn the US government of the coming meltdown. Apparently none of those profiting from the crash have done anything with their money except satisfy their own desires.
Ultimately, Paulson was able to get billion because of combinations of greed, incompetence, and dishonesty of the following: people lying to qualify for subprime loans, people encouraging unqualified people to get subprime loans, subprime loans being bundled and rated as safer than they really were, politicians looking the other way as Fannie and Freddie were used to provide subprime loads to all kinds of unqualified people, and the rest of us for trusting all of those listed above.
It is interesting to compare "The Greatest Trade Ever" with a book I am currently reading, "The Dam Busters" by Paul Bricknill (first published in 1951 and again in 1979).
"The Dam Busters" and "The Greatest Trade Ever" describe two completely different groups of men. "The Greatest Trade Ever" men appear to be addicted to acquiring money, without any concern for anyone or anything but themselves. The men in "The Dam Busters" were a squadron of hand-picked fliers who destroyed two of Germany's major dams in the most daring and successful raid of WWII. They put their lives on the line on a regular basis and demonstrated incredicle devotion, self-sacrifice and courage. Most of them lost their lives while they were protecting others and defeating Hitler.
After reading "The Greatest Trade Ever" I felt sad about all the rotten people and policies that contributed to the latest meltdown in the US that damaged almost all of us, but "The Dam Busters" reminded me that there are courageous, honorable men and women whose focus is on helping to defeat evil.
If our society ever has a major breakdown due to some catastrophic event, I think that most of us would prefer to join in survival efforts with people like those described in "The Dam Busters". I suspect that most of us would be afraid that "The Greatest Trade Ever" types would focus on how they could personally benefit from the disaster and not focus on how to help anyone survive.
What do you think?
The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History Feature
- ISBN13: 9780385529914
- Condition: New
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The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History Overview
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 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.
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