Episode 13: The Big Short with Billionaire Investor John Paulson

GTOAT- The Greatest Trade of All Time.


On today’s episode we have one of the best if not the best hedge fund manager of all time, John A. Paulson. And today we reveal how he pulled off his Big Short during the 2008 financial crisis.

Paulson leads Paulson & Co., a New York-based investment management firm he founded in 1994 and turned his hedge fund into a family office in 2020. He has been called "one of the most prominent names in high finance" and "a man who made one of the biggest fortunes in Wall Street history."

Paulson executed the greatest trade of all time, making $20 Billion off one trade. He was the 100th richest person in the world in 2016 with a net worth of $9.7 Billion. In 2010, he set another hedge fund record by making $5 billion in one year. He was one of the first people to predict The Great Recession in 2004.

Mr. Paulson has only done 5 public interviews in his career. This is the ONLY PUBLIC interview about his Big Short.

Paulson is also known for his philanthropy. He donated $400 million to Harvard University back in 2015 (largest donation in school history), and around $2.5 Billion to other charitable causes. Such as  Between 2009 and 2011 Paulson made several charitable donations, including $15 million to the Center for Responsible Lending, $20 million to New York University Stern School of Business (auditorium now named after Paulson), $5 million to the Southampton Hospital on Long Island, $15 million to build a children's hospital in Guayaquil, Ecuador, and £2.5 million to the London School of Economics for the John A. Paulson Chair in European Political Economy. In October 2012, Paulson donated $100 million to the Central Park Conservancy, the nonprofit organization that maintains New York City's Central Park. And he has put half of his wealth into the Paulson Foundation. 

Today we will talk about how he got into finance, the basics of hedge funds, merger arbitrage, long/short strategy, how he predicated the fall of the mortgage market, his Big Short, his advice for everyone in the world,
how he executed his trade, CDOs, credit default swaps, mortgage backed securities, assets under management used to make his Big Short, risk/return trade off, why he made the trade during a prosperous housing market, his UK and US Stock shorts, his philanthropy career, and more.

Follow the podcast on Instagram @The_finanze_podcast for live updates on new episodes. You can check out our Youtube Channel at The FinanZe Podcast.

Join our email list by emailing us at the.FinanZe.podcast@gmail.com

If you enjoy listening to our episodes and are learning then we’d be extremely grateful if you gave us a 5 star rating on Apple Podcasts.

Enjoy the episode with one of the greats.

Chapters

• 0:00 Intro
• 1:35 Background: How He Got Started
• 4:24 What is a Hedgefun?
• 9:34 Having a 'Hedge': Profit When the Market Goes Down
• 11:43 Investment Strategy: 'Long-Short'
• 17:58 What are Mortgage Back Securities?
• 20:40 What is a Credit Default Swap?
• 23:44 How Can You 'Short'?
• 27:46 How to Place Bets Against Subprime Mortgages
• 33:14 Where to Buy Credit Default Swaps?
• 41:24 The Risks Taken When Trading - The Asymmetrical Trade
• 45:25 Using Management Assets and Leveraging to Boost Trade
• 47:14 How Paulson Predicted the Collapse of the Housing Market 2 Years Before the Collapse?
• 49:07 Why He Shorted Banks During the '08 Crisis
• 53:31 Why Give Back to Society?
• 55:36 The Key to Success
• 59:49 What is the Paulson Foundation?
• 1:00:54 Advice for Students Wanting to go into Investing/ Finance
• 1:02:23 What Do YOU Want to Do? Passion is Important for Success
• 1:03:58 Outro