Hedge fund director John Paulson bet in opposition to the health of the United States real estate industry by funneling money into credit default swaps in opposition to subprime mortgages, which effectively made certain that as homeowners defaulted he would receive a huge cash loan on his investment in failure. Because of the bursting of the United States housing bubble and some shrewd choices with U.S. financials, John Paulson is a billionaire. He will not be taking out a payday loan to cover his home mortgage anytime soon.
Betting for the U.S. this time, Paulson puts money into Citigroup
John Paulson is anything that is wrong with Wall Street, according to many. After earning approximately $15 billion betting in opposition to the U.S. real estate market in 2007 – and being labeled a "guru" for doing so – John Paulson moved to the other side of the investment speculation fence. He bet the U.S. economy would soon rebound. He bet on high gold prices and rebounding house prices with his "after the fall" outlay while also putting investments into several indexes. About $1 billion was earned this year by Paulson's stake in Citigroup using Paulson & Co. Over the past year, Citigroup’s share price shot up 50 percent.
About $35 billion in investments are owned by Paulson & Co. right now. In the beginning of 2010, John Paulson and business took small lump gains while getting to the double digit gains later even though most hedge funds avoided the volatile market, reports Reuters. The Paulson Advantage Plus Fund rose 17 percent for the year, while Paulson’s gold investments jumped 35 percent this year.
How good is 17 percent?
When it comes to John Paulson being successful, the Globe and Mail points out the 15 percent gain that the S&P 500 had is not much farther down than the 17 percent the Paulson Advantage Plus Fund gained. But the Canadian newspaper’s viewpoint could just as easily be considered sour grapes. Nobody can really be upset with John Paulson for making millions betting "against-the-bubble" and making the market crash even harder. The federal regulators failed to do their job as well. The majority are upset about this though. They say it isn't an excuse to do what he did.
Articles cited
The Guardian
guardian.co.uk/books/2010/mar/07/the-greatest-trade-ever-by-gregory-zuckerman-review-heather-stewart
The Globe and Mail
theglobeandmail.com/globe-investor/markets/markets-blog/paulsons-5-billion-haul-big-deal/article1886319/
Reuters
reuters.com/article/2011/01/25/us-hedgefunds-paulson-idUSTRE70O4G820110125
Wikipedia
en.wikipedia.org/wiki/Credit_default_swap
John Paulson and Joe Stiglitz on the mispricing of risk
youtube.com/watch?v=l8G-b315B6E
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