Matthew's Reviews > The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History

The Greatest Trade Ever by Gregory Zuckerman
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's review
Sep 10, 10

bookshelves: markets, biography
Read in September, 2010

Good, fun read. Zuckerman sketches out the trade without going too far into technical details, which is fine -- he throws enough light on the research process and the push back from investment banks for readers to understand how hard Paulson had to work to get this trade off the ground. It's got some nice biographical sketches of Paulson and various others who also took the same trade, though in less spectacular size. It also shows how important a fund's investor base is -- Paulson managed to make the trade because he had investors who stuck with him; Michael Burry, unfortunately, didn't. One can't help but feel sorry for Burry, who spotted the trade earlier than did Paulson, and simultaneously feel that Paulson did have a bit of luck on his side -- to have arrived at the mortgage market and woken up to the trade not too early and not too late.

It's interesting today to read that his funds aren't doing so well in 2010 to date, after fantastic runs in 2007-9. It sort of makes sense, though -- Paulson wasn't someone who had followed the mortgage market for years/decades, he started learning about it in 2005-6. He recognised clearly the bubble and took advantage of its bursting. But he may have misjudged the bubble's wider significance in context of long term financial history -- and thus misjudged whether the subsequent rebound played out in the last year will turn out sustainable and the first part of the next multi-year bull, or whether it is merely a bull correction in a secular bear market. This remains to be seen -- whether he goes down as a one-shot wonder or a legendary investor with sustainable track record depends on how his funds (which were up some 500% in 2007 -- rather black-swan like) perform over the next 3-5 years.

But absolute kudos to him nonetheless.
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