

The Man Who Made Too Much - ojbyrne
http://www.portfolio.com/executives/features/2009/01/07/John-Paulson-Profits-in-Downturn

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tokenadult
"If he saw all of this coming, was it right for him to keep his own counsel,
quietly trading while the financial system melted down?"

If he was trading with real money, he was giving quite enough of a signal to
the market. Plenty of people were writing about the possibility of the housing
bubble popping, and about derivatives being "financial weapons of mass
destruction." The people trading as if those warnings weren't important threw
caution to the winds, and have no one but themselves to blame if they didn't
learn from the behavior of the counterparties to their trades.

From farther down in the linked article: "By 2005, the amount of money he
could make on the riskiest securities was not enough to justify the risk he
was taking. Pricing, in his view, made no sense. Paulson concluded that he
could do better on the short side--wagering that prices of risky securities
would fall."

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gruseom
_Left unexamined is the uncomfortable moral dimension of Paulson’s
achievement. If he saw all of this coming, was it right for him to keep his
own counsel, quietly trading while the financial system melted down?_

Give me a break. He should have gone on Faux News to be shouted down and
laughed at? Who would have listened to this guy?

This line is so indicative of bad journalism (practically a tautology, that
phrase) that even though I want to read the rest of the article and am
interested in the topic, I think I'll pass.

~~~
arockwell
I agree, arguably betting real money that the system was going to meltdown was
the absolute best way to tell others he thought the system was fucked.

Its not like anyone would have listened to him if he played the whistle blower
roll. The recent Madoff debacle is proof of that.

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quellhorst
I don't see this person doing anything wrong. People are envious of someone
else doing well.

~~~
mdasen
I don't care that much, but I can see why people might. He didn't create
value. Like, when PG creates something, it adds a certain value to society.
Even when PG puts money behind a firm like Disqus, he enables value to be
added. This guy didn't create any value or enable value creation. He just saw
a situation he could take advantage of.

The banks had created value, but not as much as everyone had thought and he
took advantage of that. It's part of our system and that's fine and all, but
it certainly isn't something I'm going to be all, "that's the way to do it!"
He didn't do anything wrong. He played by the rules from what I know.

However, he really took advantage of something in a way that raises moral
questions. Remember the valentine's episode of Futurama? Bender is selling
roses and when he knows that Fry is over a barrel he hikes the price
incredibly saying that demand just skyrocketed. Yeah, it's how our system
works and I don't really disagree with your sentiment, but it still leaves me
feeling a little gross about him as a person. Capitalism allows you to act
without regard for morality so long as it's within the law and that's fair
game. Doesn't mean we need to like the people who do act that way.

~~~
whacked_new
I'm not the trader type and I don't like the idea of such extreme income
disparity, but to say that Paulson didn't create value is factually incorrect;
he created it in the same way as the banks you mentioned did: by exposing and
exploiting a market inefficiency and causing it to patch itself up.

The reasons behind his actions can make him a saint or an asshole, but the
fact that people like him exist just reveal properties of an imperfect system.
And he won't be the last.

~~~
rockbilly
Banks can make money by exploiting market inefficiency but banks also create
real value. A loan to start a business creates value if the business works.

~~~
skalpelis
By the same logic he kept the market in check so that it wouldn't implode
catastrophically, therefore allowing banks to exist and continue their
business giving loans to start a business.

~~~
whacked_new
The market probably wouldn't have imploded one way or another; just that if it
was more stable, the risky earnings would either be smaller, or take longer to
materialize. (as before, I'm treading in a sea of assumptions)

But once the market does calm down again, there will be a new Paulson. Perhaps
the day this is ever fully prevented is the day that humans become permanently
immune to all possible diseases.

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ph0rque
What a whiny tone in the article... the man made money on people's downfall;
why doesn't he repent? He must be punished!

~~~
JoelSutherland
Agreed strongly:

 _One reason for this is that Paulson was able to recognize and act on the
unimaginable—that the banks, which took on most of the subprime risk, had no
clue what they were holding or how much it was worth._

More Paulsons and maybe the banks might have 'imagined' this possibility. How
is it possible to be morally outraged with the irresponsible banks _and_
Paulson.

~~~
mynameishere
You agree strongly that it's whiny then quote something not in the least
whiny?

~~~
JoelSutherland
You're right -- the part quoted is not whiny in tone, but it is whiny when
taken into the larger context of the article. I find the blame game that has
come with the financial collapse to largely be "whiny". I hear the following
complaints repeatedly:

* The greedy banks were giving out loans to people they knew couldn't afford them.

* The greedy people were taking loans on homes they couldn't afford.

* (Now) Paulson was greedy to profit on the system collapsing.

Of course everybody was acting greedy! That is the idea behind capitalism.
Complaining about greed in a system based on greed is unproductive and whiny.

------
mistermann
"Left unexamined is the uncomfortable moral dimension of Paulson’s
achievement. If he saw all of this coming, was it right for him to keep his
own counsel, quietly trading while the financial system melted down? Do
traders who figure out a way to profit from our misery deserve our contempt or
our admiration, however grudging?"

Please. There were thousands of people, and hundreds of very prominent
bloggers shouting as loud as they could that this was going to happen, and no
one listened. No one wanted to listen. So, now, instead of blaming the people
that caused the problem, they demonize the sensical people, who should have
been listened to all the time.

Seriously, how big of an explosion do we need before we start listening to the
people that predict the explosions accurately. This world is starting to get
surreal.....in the past (maybe a year or two ago), one could pass this off as
ignorance, but what we are seeing lately just can't be ignorance. Is this
writer for portfolio.com really this uninformed? Has the _entire_ financial
commentary industry been poisoned by deliberate hiring of clueless people?
They seem to only read each other and watch CNBC rather than reading bloggers
who have had this all figured out with very high levels of accuraqcy for
literally years.

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dantheman
The article was interesting but I really didn't like the tone, it was almost
as if the author was sneering at the man. He tried to make him seem all
sheepish and quiet, then try to lay guilt on him for doing his job well, and
then mocking him for making a bad housing investment.

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Dilpil
Ironic that he of all people ended up buying a house at the height of the
bubble.

~~~
run4yourlives
When you make 15 Billion, you probably don't care too much about the price of
the house you bought last year was. Especially since you most likely don't
have a mortgage.

~~~
coliveira
I would question his financial acumen if he _doesn't_ have a mortgage. Houses
(specially the expensive ones) are a bad place to have money parked. Although,
it doesn't make any difference in his fortune, anyway.

~~~
run4yourlives
You're still viewing the house as an investment and not a purchase.

You're not parking money, you're buying a house, the same way you don't worry
about the resale value of your TV, you won't worry about the resale value of
your home. If you manage to sell the TV at a gain, wonderful, if not, no
worries.

