The Greatest Trade Ever

 

















 
It is no longer the USD1 billion that George Soros made in the 1990's...

But the USD15 billion that John Paulson netted in 2008... ( er , how much did Nick Leeson lose? GBP1.3 billion)

Even after adjusting for inflation, USD15 billion is a lot of money!

Better read upthis book if you want to know how to make it big this decade 2010-2020...

Some pointers :

(1) John Paulson was a Merger expert, not a Housing expert but he was willing to learn.
(2) It took him 2 years to make that money.
(3) He was using a negative carry trade, paying insurance for a calamity of a housing bubble bursting.
(4) His hedge fund used USd1 billion to make USd15 billion in 2 years.
(5) His lockup period was 4 years.
(6) Insurance premium was about 1% of value insured.   . For example USD12 billion cover, at 1% means USD120 million in premium. A new fund of USd1 billion would mean a burn out rate of 12% ( 120/ 1000 million ) . To reduce the burn out rate, put the unused money at money market at 5% . Net : 12% premium paid , 5% interest gains, less 1% management fee gives 8% real burn out rate.

Some quotable quotes :

(1) Go for the jugular...
(2) right on investment, wrong on timing...
(3) his job was not to convince...
(4) investments playing mind tricks...
(5) miserable for not getting in when the premium was cheap...