one of the biggest lessons here is really how he actually shorted those mortgages. He created a situation where the downside was relatively limited. Some people balked at his potential 8% loss on the trade, but it also meant that he was not betting the farm on the trade. At the same time, he had this great optionality in place. If what he predicted did happen, the fund would profit hand over fist, and it did.
If you look at the people who profited from the crisis, they all did a similar play. It was not shorting stocks, it was taking advantage of mispriced insurance.
If you look at the people who profited from the crisis, they all did a similar play. It was not shorting stocks, it was taking advantage of mispriced insurance.