Sunday, June 1, 2008

Response to poster James from October 19th 2007

Trader Made Billions on Subprime

James, this chap Paulson put shorts on the ABX (subprime) from 2006 onwards. He made $15billion for himself and his clients. His trades were not dissimilar to ones I had suggested to my hedge fund (and added to that my oil trades would have been profitable too, AND my currency basket trades). Half way through, he was severely "out the money" and he had to fund the positions all the time. Was he right? (Click on image)

Posted by lvmreader @ 05:22 PM (784 views)
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6 thoughts on “Response to poster James from October 19th 2007

  • lvmreader I find your posts normally really interesting but why are you rehashing old posts etc???? Is there still huge money to be made out of shorting the UK housing market and sterling?????? Paulson rode it out and came up green all over, but the very fact that we as a society put people like him, gamblers, up on glorified pedestals, simply because he profited from others misfortunes, as speculators are doing with oiul, soft and hard commodities, is reason enough to be very worried about the future, final days of Rome anyone.

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  • @bystander,

    This proves to newcomers how on the money we were. Every day, new readers will come on here and they will not necessarily have read the previous posts. Most of us humans don’t learn from history because we caanot even remember it. I would encourage any and all posters to repost links when our predictions are proven (and when they are disproven) when relevant.

    Paulson hopefully wiped out some suckers and will redeploy the capital in a way more productive to society. Free Markets only work when we allow people to fail. Bailing out banks makes the problems even more toxic. Let them fail and a new better system will spring up. The only people who will suffer from a bank failure are the egos at the top. Another more sensible bank would buy the failing bank and keep the deposits secure. Shareholders need to know they can lose their money so that they insist on prudent behaviours.

    If we don’t remind ourselves what went on before, in 10 years, you will hear the same sh*te as this time: “House Prices only ever go up”…

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  • lvmreader I agree totally with you and now understand the reason for the posts. Educate, re-educate until the message gets through, spot on.

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  • lvmreader, have you thought about starting a blog to record your predictions and track the outcomes? I’m sure many of us would be interested. There are free sites like blogger, blogspot, typepad, wordpress, etc. It would be good to have a bit more space to flesh out these predictions and for others to comment on them; on HPC the stories are constantly swept away by new posts.

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  • Paulson got it right. He picked the right time to put the short on. You didn’t and housepricecrash in general didn’t. Did you read the article? Did you note where it says:

    “Also key: Mr. Paulson didn’t turn bearish too early. Some close students of the housing market did just that, investing for a downturn years ago — only to suffer such painful losses waiting for a collapse that they finally unwound their bearish bets. Mr. Paulson, whose investment specialty lay elsewhere, turned his attention to the housing market more recently, and got bearish at just about the right time.”

    On the original thread, you say that you’d ‘seen this coming’ since 2003. Your trading “strategy” would have blown up whatever fund you’re claiming to work for.

    http://www.housepricecrash.co.uk/newsblog/2007/10/blog-a-surprise-to-who-the-criminally-insane-7515.php

    Let’s revise why you’re a piker, from the original thread, which you don’t link to. You ‘recommend’ shorting stocks where there is no repo (DFS, MFI and I don’t know what stock you mean by CSL). Your “strategy” would have required huge amounts of capital due to margin calls. You would have shown massive mark to market losses until a few months ago. Why would investors have stayed with you, when there was so much easy money to be made elsewhere?

    The point is, to defer to Keynes, the market can stay irrational longer than you can stay solvent.

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