The Greatest Trade Ever

I spent the past few nights reading the book about how John Paulson made his billions, The Greatest Trade Ever. What amazed me the most was how little he had to lose. The CDS insurance he was buying was only costing him 8% of the funds assets a year. Had the trade not worked out all he would have lost was 8% a year.

The other thing I learned was that the reason he bought CDS protection on the banks the following year was because he realized the major banks were his counterparties and they were losing what he was winning. The major banks did not lose money lending. They lost money in a casino, betting against John Paulson and the likes. That is why they had to be bailed out and that is what took down the system.

The book is pretty entertaining and an easy read but there is not much one can learn from it, except how screwed up the system is.

5 comments:

Anonymous said...

So, are you buying any outright puts on the market today? I agree with the 5-10% correction call, I think we have seen the top for the time being. The whole world expects a Monday bounce open but this is the first down expiration day in a long time. Are you waiting for a Monday bounce to increase to a "large" short exposure?

JD

Anonymous said...

Monday mkt is closed.

Open on Tuesday, which is the morning IBM reports.

And it doesn't stop there.

All week long we have all the heavy hitters reporting.

GS, GOOG, BAC, WFC, SBUX, GE, AXP blah blah blah u name it.

And AAPL reports the following Monday, and that's basically it for the earnings season.

Tsachy Mishal said...

I am probably just going to stick with what I have for now. I don't think we should have a Monday bounce(which is actually Tuesday because its a 3-day weekend). If it happens I will make an on the fly decision depending on how the market looks to me.

Anonymous said...

IBM major all history resistance at 140. Alas, I can see it closing in on that market from its current 131.

WTF does IBM make anyway.

I'm an IBMer

Anonymous said...

After INTC numbers reaction I think this season is 'sell the news' on earnings beats.

We had a decent sell-off after an initial pop at the beginning of last quarter's releases (last week of October). We r gonna get the same thing only earlier and deeper this time.

And yes, of course, I meant Tuesday.

Good weekend,

JD