Trader Racks Up a Second Epic Gain - $5 billion

[tabatha]

Hedge-fund manager John Paulson personally netted more than $5 billion in profits in 2010—likely the largest one-year haul in investing history, trumping the nearly $4 billion he made with his "short" bets against subprime mortgages in 2007.

Mr. Paulson's take, described by investors and people close to investment firm Paulson & Co., shows how profits continue to pile up for elite hedge-fund managers. Appaloosa Management founder David Tepper and Bridgewater Associates chief Ray Dalio each personally made between $2 billion and $3 billion last year, according to investors and people familiar with the situation. James Simons, founder of Renaissance Technologies LLC, also produced profits in that range, say investors in his firm.


http://online.wsj.com/article/SB10001424052748704268104576108390332589096.html?mod=WSJ_hp_LEFTTopStories


Disgusting beyond belief

[More_liberal_than_mo]

1. His profit is someone else's

loss. What he's doing doesn't benefit anyone except himself. He's producing NOTHING of benefit to anyone but his GREEDY self. No people are gaining employment from his greed. Most of his profits won't be spent to expand our economy. And the repubs want to change our tax laws so he can keep more of his ill gotten gains!

[dkf]

2. He makes money when his clients make money...probably pension funds

That pay for peoples retirement. Is that of no worth to anyone? You could argue that he is charging too much though and he should be taxed at regular income rates. That is entirely fair.

[More_liberal_than_mo]

4. That's 5 billion $ that

goes in his pocket and not his investors! How much money did he make for his investors? and how many 401k funds are invested in hedge funds? This is pure speculation not normal investing in our economy.

[More_liberal_than_mo]

6. He is a HEDGE Fund Manager.

Look up what a hedge fund does.
"An investment company or portfolio that is allowed to utilize more flexible and aggressive investment strategies that are not allowed in mutual funds or other funds regulated by the US Securities and Exchange Commission (SEC).
A hedge fund is a private, unregulated investment fund for wealthy investors (minimum investments typically begin at US$1 million) specializing in high risk, short-term speculation on bonds, currencies, stock options and derivatives.
As the name implies, hedge funds often seek to hedge some of the risks inherent in their investments using a variety of methods, notably short selling and derivatives."

These people do not run pension funds or invest in long term health of our economy. They are scum that skim off the cream and leave regular investors to fight over the scraps. Most of their "investing" involves short selling which is betting that a particular stock will fall, not rise. They make money when companies fail, not succeed. Hedge fund managers thrive when our economy suffers. They are parasites on our economy.

[dkf]

16. Lots of pension funds invest in hedged funds.

It's typically categorized as an "alternative investment".

Looking at the Hawaii pension I see 2 private equity funds, Abbott capital and metwest talf.

That is the type of thing we are talking about.

[More_liberal_than_mo]

22. Hedge Funds vs Private Equity Funds

I think you are confusing hedge funds with private equity funds. I checked and the Hawaii Employees' Retirement System is looking to invest in private equity-like funds, not hedge funds which are a completely different animal.

Private equity firms tend to invest in private companies that are longer-term, ill-liquid assets with the intent to buy, grow and exit these portfolio companies over a three to seven year period.

In contrast, hedge funds primarily focus on investing in more tradable (and therefore usually more liquid) securities such as equities, bonds, derivatives, futures, commodities, foreign exchange, swaps, etc. As such, hedge funds are likely to hold investments for a much shorter duration, sometimes for merely minutes or seconds with no intent to fundamentally alter the course of direction of a direct investment in a company.

Mr. Paulson is a Hedge Fund manager. The number of investors in Hedge funds are limited to a small number by the SEC and you will not find any retirement funds in them. Hedge funds are only for a few wealthy individuals thus the high buy-in.

[dkf]

24. Paulsons growth was mostly due to institutional clients including pension funds

http://www.pionline.com/article/20080204/PRINTSUB/226004570

For Paulson & Co., it was spectacular returns — helped by a big, dead-on bet on subprime mortgages in 2007 — that ballooned total assets in the second half of the year by a whopping 132% to $29 billion, fueled largely by institutional investors.

James Wong, managing director and head of investor relations, said John Paulson, founder and president, started the firm with institutions in his sights but knew that “there’s a logical time when institutional investors can invest with you. They don’t want (their allocation) to be more than 10% of your portfolio, so hedge funds have to be of a certain size before institutions will look at you for a significant allocation.”

Paulson’s assets totaled just $600 million when Mr. Wong joined five years ago. Mr. Paulson was focused on “being ahead of the curve so we’ve been ready every time for the next phase of growth” — like in 2003 when Paulson became one of the first hedge fund firms to hire a chief compliance officer and in 2004 when it registered with the SEC as an investment adviser.

Mr. Wong said because Paulson does not have a huge investment team — just 20 people, which is in line with the philosophy of Mr. Paulson “to hire quality not quantity” — it’s crucial that investment professionals stay focused on managing money.

“The (investment team doesn’t) have a lot of time to spend with investors, so we have to have very sophisticated, capable investor relations people who straddle client service and marketing and are equipped to answer very complicated investment questions,” he said.

Paulson’s investor relations staff — which includes specialist teams focusing on endowments, foundations and pension fund executives — communicates constantly with clients. “We don’t want clients to be surprised by inevitable down cycles,” Mr. Wong said.

[DirkGently]

8. Yes. Speculation relies on manipulating perceived value. Creates bubbles which burst & damage all.

[dkf]

15. Pension funds...like teachers and unions and state workers and corporate pensions

Not 401ks for individuals. You don't have enough money to invest with him. To invest in these types of funds you need to be worth millions which isnt their requirement but the regulators.

[grahamhgreen]

29. Really, someone still gets a pension?

[SharonAnn]

30. And he pays only 15% income tax on that money. Less than I pay.

Ain't it wonderful to be wealthy and influential?

[cbdo2007]

5. How is his profit someone else's loss?

[More_liberal_than_mo]

7. See my post above.

Sorry I replied to my own post not yours.

[cbdo2007]

12. Any investment person will tell you that short-selling is a necessary part

of the stock market system.

The statement though that "he gains on others losses" or whatever was incorrect. He does gain because of their losses, but their losses aren't coming because of his gains. He is simply good at watching the state of the economy and having his money in the right place at the right time to profit on what the market was going to do whether he was there to profit off of it or not.

[mike_c]

3. only a truly broken society allows something like this to happen....

Words fail me. In a democratic society, few should have too much, and even fewer should have too little. The great disparity we see in distribution of wealth in this country makes a mockery of any remaining semblance of democracy.

[Renew Deal]

11. "Few should have too much"

What do you consider "too much" and how do you propose keeping people under that limit?

[Renew Deal]

36. Funny how no one was willing to answer this question.

It requires more thought than "f*** the rich" platitudes.

[Turbineguy]

9. Good for him

how does that work out in terms of people who get to work until they drop dead instead of the retirement they saved up for, and how many homeless people get to stand by a freeway off ramp with a cardboard sign to make this possible?

[tabatha]

13. See #3.

[JanMichael]

32. Thank you! It shouldn't need explaining. nt.

[Renew Deal]

10. Good for him

Does that make him one of the richest people on the planet?

[tabatha]

14. See #3.

Normally, during war, the whole country makes sacrifices. During the last 10 years, only the military have made sacrifices. Others have made millions.

The flaws and corruption in the real estate business, have allowed people like him to make billions.

Where is the justice for all in this?

[JanMichael]

33. Thank you! It still shouldn't need explaining. nt.

[Renew Deal]

37. It's needs explaining

Please explain

[RandomKoolzip]

17. Hey! He EARNED it!

Why do you want to punish success?

[tabatha]

18. Really? How?

[Gin]

19. question...could we combine our money and create a fund to invest

and make some money....this isn't going to stop... so why not join the club? Sounds nuts I know but as a group there would be power and money.

[jmowreader]

25. It's called an "investment club"

Yes, we could do that. Check this page:

http://www.sec.gov/investor/pubs/invclub.htm

That'll tell you whether the club would have to be regulated as an investment firm...basically, if everyone in the club is participating in choosing the basket of securities and there is no expectation of profit, you can do whatever you like.

[JanMichael]

34. Thank you! It really really shouldn't STILL need explaining. nt.

[More_liberal_than_mo]

20. I can not believe you are

defending one of the worst of the worst Wall Street greed merchants that nearly caused this country to fall in another Great Depression. It was this John Paulson (not the U.S. Treasury Secretary Hank Paulson) who almost single-handley brought down Goldman Sachs:
(from Wikipedia) SEC v. Goldman Sachs
On April 16, 2010, Paulson & Co. was mentioned by the U.S. Securities and Exchange Commission in court fillings when the SEC sued Goldman Sachs and one of Goldman's CDO traders. The SEC alleged that Goldman Sachs materially misstated and omitted facts in disclosure documents for a synthetic credit default obligations (CDO) product it originated. The allegation was that Goldman Sachs misrepresented to investors that an objective third party (ACA Management) had assembled the mortgage package underlying the CDOs when, in fact, Paulson & Co., with economic interests directly adverse to investors, had a major role in assembling the mortgage package.
As a counterparty in the CDO transaction, Paulson & Co. stood to reap great financial benefit in the event of default. (It's alleged that Paulson selected a portfolio of CDOs that were likely to default, against which Paulson & Co. had already sold short or would sell short.) Paulson & Co was not a defendant in the case.

This guy put together mortage backed securities that he knew were going to fail then bet that they would fail by shorting them! He should be in jail for this! His crimes caused such huge losses (and his gains) that instead of charging him for his crimes the US taxpayer (you and me) had to bail out Goldman Sachs. Paulson walked away with $4 billion dollars, money that us taxpayers had to shell out to save Wall Street from collapse!

You and others on this thread seem to think that this crook was just a savy investor who made money the honest way on Wall Street.

[More_liberal_than_mo]

21. I'm on a roll now you got me started.

http://www.philstockworld.com/2010/02/03/john-paulson-and-the-greatest-pump-and-short-fraud-ever/
Please check out the link above for more info on your great investor Mr. John Paulson whose "success" I want to punish.

from the article

.....snip

Paulson asked the banks to create those CDOs “so that they could be sold to some suckers at close to par. That way, Paulson’s hedge fund could approach some other sucker who would sell an insurance policy, or credit default swap, on the newly minted CDOs. Bear, Deutsche and Goldman knew perfectly well what Paulson’s motivation was. He made no secret of his belief that the CDOs subordinate claims on the mortgage collateral were close to worthless. By the time others have figured out the fatal flaws in these securities which had been ignored by the rating agencies, Paulson could collect up to $5 billion.

.....snip
The problem lied not in the loans themselves, but in the fact that the loans had been packaged (apparently, to a large extent, at the behest of John Paulson and perhaps other bearish billionaires) into fraudulent securities that were traded and probably manipulated by a select number of hedge funds and large banks. In a somewhat similar scheme, hedge funds often pump up the stock of public companies before initiating short selling attacks aimed at demolishing those same companies.

The economy was brought to its knees by a few powerful and eminently dirty players on Wall Street, not by poor people who had the temerity to buy themselves houses.

[RandomKoolzip]

23. Wow...people just don't recognize sarcasm unless one labels it as such.

[RB TexLa]

26. Good for him, really.

[grahamhgreen]

27. Really? It's coming out of all our paychecks.

[JanMichael]

35. Thank you! It shouldn't need explaining. nt.

[grahamhgreen]

28. Whatever he's doing needs to be made illegal - if it isn't already.

[More_liberal_than_mo]

38. It actually is illegal

to do what he did during the mortgage based housing collapse. Why he was never charged speaks volumes. I guess if your crime is so outrageous and it takes the US taxpayer to bail out the companies that were going to sink and fuck our economy then you can get away with. He created a new form of security based on sub-prime mortgages that he knew would go into default, then conned the Wall Street houses into buying them, then made side bets that would fail so he could collect the insurance on the defaults.
In the real world that is equivalent to insuring your neighbors house for more than it's worth that you rigged to blow up with explosives with your self as the beneficiary on the property, then wait until your neighbor trips the wire you set set to set off the explosion. You then collect the payout while the homeowner and the insurance company take the hit. It's called FRAUD but the scale of this was so big the government was afraid to charge you with the crime for fear of collapsing our entire economy.
Matt Taibbi did an outstanding job of exposing this fraud in his Rolling Stone piece: http://sites.google.com/site/disclosuredelta/
Mr. Paulson was the architect of this fraud and Goldman Sachs nearly went belly up over this CDO fraud.

[grahamhgreen]

31. Then, he can obviously afford to be taxed at the FDR rate of 94%.

[Donald Ian Rankin]

39. Why is "gambler wins" disgusting?

Would you be similarly disgusted if he'd bet the lot on a horse race and won?

"Succesful gambler does not have to pay much tax" is something I could understand being angry about, but with the state, not the gambler.