Monday, November 2, 2009

Greatest trade ever

Zuckerman, Gregory. (2009),
The greatest trade ever : the behind-the-scenes story of how John Paulson defied Wall Street and made financial history.
New York: Broadway Books.

Housing prices had climbed a puny 1.4% annually between 1975 and 2000, after inflation. But they had soared over 7% in the following five years, until 2005. The upshot: U.S. home prices would have to drop by almost 40% to return to their historic trend line. Not only had prices climbed like never before, but Mr. Pellegrini's figures showed that each time housing had dropped in the past, it fell through the trend line, suggesting that an eventual drop likely would be brutal.

By the middle of 2009, a record one in 10 Americans was delinquent or in foreclosure on their mortgages. U.S. housing prices had fallen more than 30% from their 2006 peak. In cities such as Miami, Phoenix, and Las Vegas, real-estate values dropped more than 40%. Several million people lost their homes. And more than 30% of U.S. home owners held mortgages that were underwater, or greater than the value of their houses, the highest level in 75 years.

John Paulson was among the executives testifying on hedge fund regulation before the House Oversight and Government Reform Committee last November. From left, George Soros of Soros Fund Management, James Simons of Renaissance Technologies, Mr. Paulson, Philip Falcone of Harbinger Capital Partners, and Kenneth Griffin of Citadel Investment.

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