Paulson and how he earned his billionsSubmitted by SHannonO on February 2, 2011 - 08:17. |
Paulson made billions of dollars betting against the United States real estate industry, receiving a cash advance each time a homeowner foreclosed. Thanks to the bursting of the United States real estate bubble and some shrewd choices with United States financials, John Paulson is a billionaire. He will not be taking out a quick short term loan to cover his mortgage anytime soon.
Citigroup investment John Paulson made
To some, hedge fund director John Paulson represents all of what's wrong with Wall Street. Paulson has been considered a “guru” as he earned $15 billion in 2007 simply betting against the United States real estate market. Now, he is changing his mind on what to do. He bet the U.S. economy would soon rebound. Part of this meant he invested in different indexes. Part of this “after the fall” outlay he put down was a bet on high gold prices and a bet on rebounding house prices. Paulson's stake in Citigroup earned his hedge fund investors utilizing Paulson & Co. about $1 billion in 2010. Citigroup had a 50 percent increase in price within the past year.
Paulson & Co. is currently responsible for $35 billion in investments. In the beginning of 2010, Paulson and business took small lump gains while getting into the double digit gains later even though most hedge funds avoided the volatile industry, reports Reuters. There was a 35 percent jump in 2010 in Paulson’s gold investments while the Paulson Advantage Plus fund went up 17 percent.
How good is 17 percent?
When it comes to Paulson being successful, the Globe and Mail points out the 15 percent gain 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. While it may be true that John Paulson's “against-the-bubble” investing strategy undermined the economy at the expense of millions, the investments were made in a Wild West-style climate where federal regulators were about as effective at cleaning up the town as the milk-and-cookies sheriff who hesitates before firing. Many are upset about this though. They say it isn’t an excuse to do what he did.
Citations
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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