A must read WSJ article

Quote from Cutten:

There are several problems with the article - it doesn't say what his drawdowns were during the lifetime of the trade, doesn't explain if he had any stop or what his risk control was (e.g. if the bubble went 1 more year, would his fund have lost 10% or gone bust?), doesn't say what % of capital was allocated to the various bets. It avoids the most important information which was the risk/reward ratio on the trade. The point of an article like this should be to show how - if you had a similar idea - you would go about trading it, and what sort of returns you could achieve relative to your risk.

2nd rate journalism IMO.
More...

Of course it´s 2nd rate journalism - as always you have to read between the lines...

Another important part of "the" trade :

The index weakened in the second half. By year end, the new Paulson Credit Opportunities Fund was up about 20%. Mr. Paulson started a second such fund.


How many traders do you know aggressively leveraging a position when resuming "the" trade ? George Soros and others made fortunes being "convinced" of certain assessments but also because they were aggressive and decisive in doing so !

Congrats to Paulson, btw ! :p
 
Phenominal trade, though I think he made a mistake with being so public about his winnings. After all, they were made betting against housing market, and when scape goats will be needed for the whole subprime mess, he might be looked at.
 
Quote from stock777:

This must be the smartest man that ever lived.

I'm in awe.


I mean how could you recognize a bubble when all you could see were bag ladies, tenement trash, and trailer park hobos, getting 500k morts.

This guy must have been psychic.
More...

Not to mention the 150 reality TV shows called Flip this House ! lol

In his defense timing was everything and you have to give him that.
 
one more thing, there were probably many traders that implemented that same stratagy but were early and ran out of funding. this guy Paulson had the advantage of obtaining more money to keep his bet alive.
 
Just a quick side note, Microsoft One note is my favorite product for keeping a complete reseach file on all these types of interesting articles. You can make an exact copy, paste it in your notebook, Label, keep your own notes, shift it into different notebooks as you need to. Paperless, portable, and easy to use! Just an all around great product.

Thanks for the link, Nitro, a great read!
 
Quote from Cutten:

There are several problems with the article - it doesn't say what his drawdowns were during the lifetime of the trade, doesn't explain if he had any stop or what his risk control was (e.g. if the bubble went 1 more year, would his fund have lost 10% or gone bust?), doesn't say what % of capital was allocated to the various bets. It avoids the most important information which was the risk/reward ratio on the trade. The point of an article like this should be to show how - if you had a similar idea - you would go about trading it, and what sort of returns you could achieve relative to your risk.

2nd rate journalism IMO.
More...
True, but when have you ever seen that kind of detail in a newspaper article?
 
It's interesting. I read all the time about cutting losses, but I still have to see a comment about this part of the article:

Housing remained strong, and the fund lost money. A concerned friend called, asking Mr. Paulson if he was going to cut his losses. No, "I'm adding" to the bet, he responded, according to the investor. He told his wife "it's just a matter of waiting," and eased his stress with five-mile runs in Central Park.

"Someone from more of a trading background would have blown the trade out and cut his losses," says Peter Soros, a George Soros relative who invests in the Paulson funds. But "if anything, the losses made him more determined."
 
Mr. Paulson has tried to keep a low profile, saying he's reluctant to celebrate while housing causes others pain. He has told friends he'll increase his charitable giving. In October, he gave $15 million to the Center for Responsible Lending to fund legal assistance to families facing foreclosure. The center lobbies for a law that would let bankruptcy judges restructure some mortgages.
More...

Adding to his suspicions, he heard that Bear Stearns had asked an industry group to codify the right of an underwriter to modify or buy out a faltering pool of loans on which a mortgage security was based. Mr. Paulson claimed this would "give cover to market manipulation." He hired former Securities and Exchange Commission Chairman Harvey Pitt to spread the word about this alleged threat.
More...

This guy is one smart cookie...
 
You must log in or register to reply here.
Back
Top