John Paulson’s Hedge fund made 20 billion from disaster. 8 tips how you can do that next time.
Greg Zuckerman of the WSJ has written a book on how hedge fund manager John Paulson made $20 billion in the housing collapse (”The Greatest Trade Ever”).
It can be thought out as 8 great tips:
- Don’t follow the crowd. When everyone else is buying something (housing, mortgage-backed securities), start looking the other way.
- Have an exit strategy. Bubbles burst because everyone exits at the same time.
- Focus on the debt markets. They’re better at predicting the future than the stock market.
- Take the time to figure out how fancy new investment products like CDSs work. Paulson made his bet using credit default swaps.
- Buy insurance. Out of the money puts on the housing market were cheap…and almost no one bought them.
- Remember the past. Some of the big winners in the housing crash were those dismissed as out-of-touch dinosaurs…because they’d seen it all before.
- Remember that no trade lasts forever so don’t fall in love with your investment. After making his $20 billion, Paulson reversed course and went long banks at the bottom.
- Timing is everything and luck helps. Investors had been carried out on stretchers for years by betting against the housing market.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=59415dc6-ce0f-4d2e-bda9-8d0d5c13bbf9 "John Paulsons Hedge fund made 20 billion from disaster. 8 tips how you can do that next time.")
Related posts:
- John Paulson, Carl Icahn, George Soros and Eddie Lampert ups Financial Stocks
- Did Paulson and Soros follow this man to invest in Novagold
- Hedge fund legends hit by financial crisis
- John Mauldin on the Bernie Madoff Ponzi Scheme
- JP Morgan Chase going to modify 70 billion of mortgages
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
I bought Starhub at a time where many of...
RSS
Twitter
Buzz
Comments
No comments yet.
Leave a comment