Billionaire investor John Paulson hiked his iconic bet against the real estate bubble in a recent interview. Here are the 11 best quotes.
- John Paulson explained his iconic bet against the US housing bubble in a recent podcast.
- The billionaire investor explained in detail how he predicted and profited from a wave of mortgage defaults.
- Paulson also discussed his philanthropy and offered career advice to young people.
- See more stories on the Insider business page.
John Paulson explained his famous bet against the US real estate bubble in a recent episode of Finanze, a podcast hosted by Logan Lin, a 17-year-old college student in California.
The billionaire investor – who converted his hedge fund Paulson & Co into a family office last year – explained how he anticipated the collapse of the real estate market, shorted roughly $ 25 billion in securities and realized a windfall of $ 15 billion. His bet was immortalized in the book “The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History”.
Paulson discussed the short selling of a large number of Wall Street banks, mortgage lenders and rating agencies during the real estate boom of the mid-2000s. He also spoke about his philanthropic activities and offered some advice. to young people who choose a career.
Here are Paulson’s 11 best quotes from the interview, slightly edited and condensed for clarity:
1. “Underwriting standards just collapsed. The terms of the mortgage loan were so ridiculous that a borrower with no credit history, a horrible credit score, a never-repay history and no money to deposit could borrow 110% of the purchase price. of a house. You could actually buy a house with no cash and get 10% of the purchase price in your pocket, crazy as that sounds.
2. “It got to a point where the subprime mortgage lenders were like, ‘No credit, no money, no money, no problem. “”
3. “It was like a very simple physics problem. If the growth in house prices continued to slow down and turn negative, and defaults continued to rise, at some point the mortgage market would s ‘would collapse and those mortgage-backed securities would suffer losses. “
4. “It was not a roll of the dice for us. We understood the trends in the mortgage market so well that we could almost predict with a degree of accuracy when the market would fail.”
5. “Even though the underlying fundamentals were deteriorating, the market price did not adjust. It was an incredible opportunity to buy protection at a very low price, when it seemed obvious to us that these stocks would be lacking. “
6. “The problem was the machinery, the factories that were just prepared to buy mortgages, securitize them, and sell them. The lenders were just oblivious to what was going on and they couldn’t stop the machine.”
7. “We only sold the BBB tranche, where a 7% loss would mean these stocks would be extinguished. We predicted that the losses on these pools would be in the 20% range, so these things were toasted at our opinion.”
8. “It was a very, very skewed trade where you lost a very small amount if it didn’t work, but you made a fortune if it worked. That’s why it’s called the greatest deal ever. We have both the security and the right time and were able to make this comeback 100 to one. ”
9. “We focused on institutions that had large amounts of subprime or poor performing mortgages. We bypassed New Century, Fannie Mae, Freddie Mac, Citibank, Washington Mutual, IndyMac, Bear Stearns, Lehman Brothers, and we were 100% right. “
10. “Americans are a philanthropic people and we care about the well-being of other citizens. I grew up in a family where we weren’t rich, but we have always contributed to causes. – a treat for UNICEF, rather than candy. “
11. “It’s hard to be successful doing something you don’t want to do. Maybe you want to make movies, or maybe you are an artist, or maybe you like medicine, science, physics or math. “What do I like to do? What would I do if I wasn’t working? What am I passionate about?” – this is the field in which you should make a career. “