Trader John Paulson
John Paulson is a dark horse in the world of investments and hedge funds, but it was he and his fund who managed to earn the largest capital from the 2008 crisis, ahead of such market tycoons as Soros and Buffet.
After all, when the mortgage market collapsed and the inflated soap bubble burst, John earned more than 15 billion dollars. Paulson managed to make money where everyone else had lost, which gave rise to many rumors about state patronage and insider information.
However, even after the crisis, John Paulson maintained the fund’s profitability at a very high level, earning enormous amounts of money for his investors.
Many are looking for mysticism in Paulson’s life, when in fact the secret of success was determination, which allowed him to earn huge amounts of money.
Paulson's love for the stock market was instilled in him by his father, who provided him with money to buy shares starting at the age of 14. His first shares were LTV, which John purchased for $66.
Within a short period of time, the company was bankrupt, and the share price dropped to $3. However, Paulson was in no hurry to get rid of the unprofitable asset and by the time he graduated from university, the value of his assets reached 18 thousand dollars.
Thanks to the restructuring of the company's debt, the share price not only returned to its previous price, but also reached new heights.
Education and career
After graduating from school, John entered one of the local colleges, and at the age of 19 he dropped out and tried his hand at business. John's successes allowed him to accumulate good initial capital, and he sold his own production of children's clothing to the successful company Bloomingdale's.
After selling the business, he finished his studies at college and then entered one of the universities in New York to study management. Having received his diploma, two years later in 1980, John entered Harvard Business School and received an MBA degree.
After completing his education, John got a job at the financial company Odyssey Partners, and then worked for a long time as a manager at Bear Stearns bank. However, the crisis hit a huge bank, so it had to go through a takeover procedure, and John had to say goodbye to his position.
Own fund
Having gained extensive experience as a bank manager and becoming far from a poor man, John Paulson, at the age of 39, creates his own hedge fund with a capital of $2 million. As Paulson himself recalls, he had to send out his proposal to invest in 500 different companies.
However, fundraising was very slow, and the fund practically existed for a whole year without investor support.
A year of successful work increased not only the capital of relatives, but also the first investors. Thus, the successful years of 2001 and 2002 brought in $300 million, and by the end of the famous 2006, the fund’s capital was more than 6 billion.
Actually, such capital growth was ensured due to the successful and stable long-term profitability of the company.
The collapse that brought great wealth
In early 2006, John Paulson ordered his two subordinate analysts to investigate the mortgage market. Seeing the weakness of the mortgage market, John began selling government bonds and managed to earn more than $15 billion in 2007.
After making huge profits from the mortgage crisis, the hedge fund's capital grew to 38 billion and became one of the four leading companies in terms of capital. After the crisis, John Paulson began actively buying shares in the banking sector, whose companies were subject to debt restructuring.
The correct approach to undervalued stocks with huge potential allowed us to increase the fund's capital by more than 20 percent. Speaking of errors, at the end of 2011 the fund recorded a loss of 24 percent due to the crisis in Europe.
However, such a loss did not stop Paulson, and the Paulson&co hedge fund operates to this day.