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John Paulson – The Sequel to the “Greatest Trade” Flops

June 29, 2012 | About:
One hit wonder, or temporarily outperforming? Paulson’s huge bet against the American housing market resulted in billions in profits for himself and for his hedge fund’s investors.

Bloomberg takes a look at Paulson since the financial collapse of 2008 that vaulted him to the head of the hedge fund world:

John Paulson, founder of Paulson & Co., one of the world’s largest hedge funds, has close-cut black hair, dark eyes and a soft voice. There’s a fuss when he arrives, befitting a man who made one of the biggest fortunes in Wall Street history, as his general counsel and PR consultant jostle for seats next to him.

Paulson’s decision to buy credit-default insurance against billions of dollars of subprime mortgages before the market collapsed in 2007 earned him almost $4 billion personally and transformed him from an obscure money manager into a financial legend, Bloomberg Businessweek reports in its July 2 issue. Then came the kind of disastrous run that can unmake a career. In 2011 he lost billions.

“We clearly stumbled last year,” Paulson says. “We became overconfident as to the direction of the economy and took a lot of risk.”

On this June afternoon, Paulson, 56, sits in his midtown Manhattan offices, surrounded by his dozen or so Alexander Calder watercolors, which serve as a kind of millionaires’ wallpaper in primary colors. The space isn’t the high-tech cockpit one imagines for a financial wizard at the levers of the world’s money flow.

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