This post is a supplement, to illustrate the previous post about the cool guys hedge fund scene, in broad outline showing the uninitiated mechanics hedge fund. SO, LET'S GO.
How to earn five billion dollars a year?
"short position", "hedge funds" and "Spread", "liquidation balance sheet," "Execution order" - all these words to ordinary people seem to be financial gibberish. But without their knowledge, as shown by the American John Paulson, it is impossible become the most successful investor in the history of world business. Five billion dollars per year: as Paulson has earned a not very successful for traders 2010.
Some platitudes
In the biography of John Paulson since 1950 (he was born in 1955) and up to 2000's is dominated by platitudes. Hereditary financier from New York with, so to speak, Jewish backgrounds, graduated from Faculty of Management at New York University (New York University's College of Business and Public Administration), and, of course, was the best in the group. Then my turn came up, and an MBA degree at Harvard, then - to work in several financial companies, including bankrupt during the last crisis bank Bear Stearns.
Paulson resigned from Bear Stearns is not something that time, and when a crisis yet no one thought he could not. Own hedge fund he founded in 1994. At the start of running talented Americans were only two million dollars, and worked in the hedge fund only two people.
not to say that in the 1990 case of polsonovskih hedge funds went bad. By June 1, 2007 running from him were 12.5 billion dollars, of which 95 percent contributed by institutional investors. This means that Paulson got the confidence of many financial institutions and was one of the most successful players on Wall Street. But only one. But in 2007 made him a star the global financial world, and it is here that the banality over.
Outsmart market
In 2007, the company Paulson & Co has earned $ 15 billion Paulson and personal income was 3.7 billion dollars. This amount has been particularly impressive against the backdrop of financial "bison": George Soros and his Fund Quantum Endowment Fund earned 2.9 billion dollars, James Simons - 2,8 billion.
Paulson beat the best investors in the world on "short position" - the very ones which in 1990 brought success to George Soros (when he one day has earned 1.1 billion dollars by opening a position in the weakening of the pound sterling).
"Short position "- is such an operation on an exchange, a trader borrows from a loan broker any product, immediately sells it, waiting until prices go down on him, buys his back, giving the broker a commodity and the price difference takes himself. To play on "short position" must be absolutely sure that the goods have a certain category will become cheaper. If he will only get more expensive, the trader will lose heavily.
Paulson in 2007, he was confident that the mortgage market will fall. By this conclusion he has come under considerable experience: in 2005 he played on "short position" in the automotive sector and other industrial areas, but after two years of his choice fell on the mortgage. Paulson played against the market: the other managers thought the mortgage business is quite reliable. The result: up to 590 percent profit on one of Paulson's funds.
| Hedge Fund |
| Hedge Fund - a private investment fund that is managed by a professional trader. As a rule, hedge funds have invested a large amount of money they are not available to investors simply because of the high value of the minimum investment. Hedge funds often result in risky policy that allowed by law. |
From 2011 it is easy to condemn the investors did not think about such apparent things like the mortgage crisis, and to praise the "genius" Paulson. But then, in 2007, predicted the collapse was really difficult, or rather, many guessed that the crisis sooner or later, the bubble burst, but it was unclear exactly when this will happen.
By November 2008, at Paulson was already in the management of 38 billion U.S.: its earnings in 2007, explicitly raised the authority of the manager. In 2008, Paulson continued to play on the "short positions": this time the object of his attack were, in particular, the British banks. In September 2008, during the peak month for the global financial crisis, it had 350 million pounds against Barclays, 292 million pounds against the Royal Bank of Scotland, 260 million against Lloyds. In January 2009, short positions in RBS were closed, resulting in Paulson earned a profit of 280 million pounds.
think if Similar positions were opened on the shares of U.S. banks, Paulson could get more profit. For example, in 2007, Citigroup shares were worth more than forty dollars in 2009 - less than four.
Apparently, the idea of U.S. financial institutions came up with Paulson and himself. As a result, in 2009 he began investing in shares of Citigroup and other banks. This time he put on the increase and has not lost: the securities in the second half of 2009, began to recover after the crisis.
As a result of intelligent action authority Paulson has continued to grow, which, however, is not true of its assets: in 2010 they totaled $ 36 billion. However, with these means American has managed to surprise the market again.
14 billion a day
At the end of last week's newspaper The Wall Street Journal wrote that Paulson earned for the year five billion dollars. True, the profit for the most part, this paper and counted in many respects artificial. One billion of five - this is real money received as commissions from hedge funds, investment of foreign funds. A four billion - open positions Paulson, whose closure at the end of the year would bring him four billion.
This time Paulson as investment picked zoloto.Na background of the global "war of currencies", namely, that virtually all countries of the world are trying to understate the value of their national currencies, investment in precious metals were again very proper and logical investment.
Critics, however, are the actions of Paulson's flawed. They note that American does not know how to choose any one paper for their investments, and invests in a wide range of shares to one sector. Thus, it loses part of the profits, as some "chips" are the best market.
In addition, it is believed that the result of five billion dollars is actually much less "cool" than the more modest results in 2007, as volumes investment in Paulson's growing, and consequently, so does the amount of commissions charged. But despite all the criticism, Paulson is the main star of the financial market in the U.S. - remains already for several years.
Billions profits of hedge funds against withdrawal from the global crisis shows that No crises were not able to wean investors to invest in potentially risky operations. In this sense, stock markets are not similar to roulette (with her game on an exchange like to compare people who never traded securities), and the poker game: the cards picked jackpot depends not only on luck but on skill. If we continue this comparison further, the achievements Paulson will seem even more surprising: in poker is extremely difficult to find a player who would year after year, regularly won some prestigious tournament.
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