6 ms·

The Man Who Made Too Much

36 points by ojbyrne 18y ago

ph0rque 18y ago
What a whiny tone in the article... the man made money on people's downfall; why doesn't he repent? He must be punished!
- JoelSutherland 18y ago
  Agreed strongly: One reason for this is that Paulson was able to recognize and act on the unimaginable—that the banks, which took on most of the subprime risk, had no clue what they were holding or how much it was worth. More Paulsons and maybe the banks might have 'imagined' this possibility. How is it possible to be morally outraged with the irresponsible banks and Paulson.
  - mynameishere 18y ago
    You agree strongly that it's whiny then quote something not in the least whiny?
    - JoelSutherland 18y ago
      You're right -- the part quoted is not whiny in tone, but it is whiny when taken into the larger context of the article. I find the blame game that has come with the financial collapse to largely be "whiny". I hear the following complaints repeatedly: * The greedy banks were giving out loans to people they knew couldn't afford them. * The greedy people were taking loans on homes they couldn't afford. * (Now) Paulson was greedy to profit on the system collapsing. Of course everybody was acting greedy! That is the idea behind capitalism. Complaining about greed in a system based on greed is unproductive and whiny.
- gaius 18y ago
  Quite. If the downturn hadn't happened, people would have been happy enough to take his (and his investor's!) money.
- Rod 18y ago
  You clearly have no clue about trading. Though short-sellers are hated, they are necessary. For every trader who goes short, there's a trader who goes long. No one is forcing them to enter this trade. They do so because they want to. Banning short-selling would be a disaster because prices would stop reflecting reality. Paulson may have made money in an "unethical" way, but he played by the rules. I didn't hear any investment banks complaining about short-selling when they were making money. They were dumb. They lost. They won't be missed.
quellhorst 18y ago
I don't see this person doing anything wrong. People are envious of someone else doing well.
- eru 18y ago
  And short sellers are the defense of capitalism against bubbles. (Not always working --- but at least they have an incentive to pop bubbles.)
  - Rod 18y ago
    Exactly. Some comments on this: http://www.automatedtrader.net/announcements-1748.xhtm http://www.automatedtrader.net/announcements-1748.xhtm
- mdasen 18y ago
  I don't care that much, but I can see why people might. He didn't create value. Like, when PG creates something, it adds a certain value to society. Even when PG puts money behind a firm like Disqus, he enables value to be added. This guy didn't create any value or enable value creation. He just saw a situation he could take advantage of. The banks had created value, but not as much as everyone had thought and he took advantage of that. It's part of our system and that's fine and all, but it certainly isn't something I'm going to be all, "that's the way to do it!" He didn't do anything wrong. He played by the rules from what I know. However, he really took advantage of something in a way that raises moral questions. Remember the valentine's episode of Futurama? Bender is selling roses and when he knows that Fry is over a barrel he hikes the price incredibly saying that demand just skyrocketed. Yeah, it's how our system works and I don't really disagree with your sentiment, but it still leaves me feeling a little gross about him as a person. Capitalism allows you to act without regard for morality so long as it's within the law and that's fair game. Doesn't mean we need to like the people who do act that way.
  - whacked_new 18y ago
    I'm not the trader type and I don't like the idea of such extreme income disparity, but to say that Paulson didn't create value is factually incorrect; he created it in the same way as the banks you mentioned did: by exposing and exploiting a market inefficiency and causing it to patch itself up. The reasons behind his actions can make him a saint or an asshole, but the fact that people like him exist just reveal properties of an imperfect system. And he won't be the last.
Dilpil 18y ago
Ironic that he of all people ended up buying a house at the height of the bubble.
- run4yourlives 18y ago
  When you make 15 Billion, you probably don't care too much about the price of the house you bought last year was. Especially since you most likely don't have a mortgage.
  - coliveira 18y ago
    I would question his financial acumen if he doesn't have a mortgage. Houses (specially the expensive ones) are a bad place to have money parked. Although, it doesn't make any difference in his fortune, anyway.
    - run4yourlives 18y ago
      You're still viewing the house as an investment and not a purchase. You're not parking money, you're buying a house, the same way you don't worry about the resale value of your TV, you won't worry about the resale value of your home. If you manage to sell the TV at a gain, wonderful, if not, no worries.
dantheman 18y ago
The article was interesting but I really didn't like the tone, it was almost as if the author was sneering at the man. He tried to make him seem all sheepish and quiet, then try to lay guilt on him for doing his job well, and then mocking him for making a bad housing investment.
gruseom 18y ago
Left unexamined is the uncomfortable moral dimension of Paulson’s achievement. If he saw all of this coming, was it right for him to keep his own counsel, quietly trading while the financial system melted down? Give me a break. He should have gone on Faux News to be shouted down and laughed at? Who would have listened to this guy? This line is so indicative of bad journalism (practically a tautology, that phrase) that even though I want to read the rest of the article and am interested in the topic, I think I'll pass.
- arockwell 18y ago
  I agree, arguably betting real money that the system was going to meltdown was the absolute best way to tell others he thought the system was fucked. Its not like anyone would have listened to him if he played the whistle blower roll. The recent Madoff debacle is proof of that.
tokenadult 18y ago
"If he saw all of this coming, was it right for him to keep his own counsel, quietly trading while the financial system melted down?" If he was trading with real money, he was giving quite enough of a signal to the market. Plenty of people were writing about the possibility of the housing bubble popping, and about derivatives being "financial weapons of mass destruction." The people trading as if those warnings weren't important threw caution to the winds, and have no one but themselves to blame if they didn't learn from the behavior of the counterparties to their trades. From farther down in the linked article: "By 2005, the amount of money he could make on the riskiest securities was not enough to justify the risk he was taking. Pricing, in his view, made no sense. Paulson concluded that he could do better on the short side--wagering that prices of risky securities would fall."
deleted 18y ago
[deleted]
mistermann 18y ago
"Left unexamined is the uncomfortable moral dimension of Paulson’s achievement. If he saw all of this coming, was it right for him to keep his own counsel, quietly trading while the financial system melted down? Do traders who figure out a way to profit from our misery deserve our contempt or our admiration, however grudging?" Please. There were thousands of people, and hundreds of very prominent bloggers shouting as loud as they could that this was going to happen, and no one listened. No one wanted to listen. So, now, instead of blaming the people that caused the problem, they demonize the sensical people, who should have been listened to all the time. Seriously, how big of an explosion do we need before we start listening to the people that predict the explosions accurately. This world is starting to get surreal.....in the past (maybe a year or two ago), one could pass this off as ignorance, but what we are seeing lately just can't be ignorance. Is this writer for portfolio.com really this uninformed? Has the entire financial commentary industry been poisoned by deliberate hiring of clueless people? They seem to only read each other and watch CNBC rather than reading bloggers who have had this all figured out with very high levels of accuraqcy for literally years.

36 points by ojbyrne 18y ago

What a whiny tone in the article... the man made money on people's downfall; why doesn't he repent? He must be punished!

JoelSutherland 18y ago
Agreed strongly: One reason for this is that Paulson was able to recognize and act on the unimaginable—that the banks, which took on most of the subprime risk, had no clue what they were holding or how much it was worth. More Paulsons and maybe the banks might have 'imagined' this possibility. How is it possible to be morally outraged with the irresponsible banks and Paulson.
- mynameishere 18y ago
  You agree strongly that it's whiny then quote something not in the least whiny?
  - JoelSutherland 18y ago
    You're right -- the part quoted is not whiny in tone, but it is whiny when taken into the larger context of the article. I find the blame game that has come with the financial collapse to largely be "whiny". I hear the following complaints repeatedly: * The greedy banks were giving out loans to people they knew couldn't afford them. * The greedy people were taking loans on homes they couldn't afford. * (Now) Paulson was greedy to profit on the system collapsing. Of course everybody was acting greedy! That is the idea behind capitalism. Complaining about greed in a system based on greed is unproductive and whiny.
gaius 18y ago
Quite. If the downturn hadn't happened, people would have been happy enough to take his (and his investor's!) money.
Rod 18y ago
You clearly have no clue about trading. Though short-sellers are hated, they are necessary. For every trader who goes short, there's a trader who goes long. No one is forcing them to enter this trade. They do so because they want to. Banning short-selling would be a disaster because prices would stop reflecting reality. Paulson may have made money in an "unethical" way, but he played by the rules. I didn't hear any investment banks complaining about short-selling when they were making money. They were dumb. They lost. They won't be missed.

quellhorst 18y ago

I don't see this person doing anything wrong. People are envious of someone else doing well.

eru 18y ago
And short sellers are the defense of capitalism against bubbles. (Not always working --- but at least they have an incentive to pop bubbles.)
- Rod 18y ago
  Exactly. Some comments on this: http://www.automatedtrader.net/announcements-1748.xhtm http://www.automatedtrader.net/announcements-1748.xhtm
mdasen 18y ago
I don't care that much, but I can see why people might. He didn't create value. Like, when PG creates something, it adds a certain value to society. Even when PG puts money behind a firm like Disqus, he enables value to be added. This guy didn't create any value or enable value creation. He just saw a situation he could take advantage of. The banks had created value, but not as much as everyone had thought and he took advantage of that. It's part of our system and that's fine and all, but it certainly isn't something I'm going to be all, "that's the way to do it!" He didn't do anything wrong. He played by the rules from what I know. However, he really took advantage of something in a way that raises moral questions. Remember the valentine's episode of Futurama? Bender is selling roses and when he knows that Fry is over a barrel he hikes the price incredibly saying that demand just skyrocketed. Yeah, it's how our system works and I don't really disagree with your sentiment, but it still leaves me feeling a little gross about him as a person. Capitalism allows you to act without regard for morality so long as it's within the law and that's fair game. Doesn't mean we need to like the people who do act that way.
- whacked_new 18y ago
  I'm not the trader type and I don't like the idea of such extreme income disparity, but to say that Paulson didn't create value is factually incorrect; he created it in the same way as the banks you mentioned did: by exposing and exploiting a market inefficiency and causing it to patch itself up. The reasons behind his actions can make him a saint or an asshole, but the fact that people like him exist just reveal properties of an imperfect system. And he won't be the last.

Dilpil 18y ago

Ironic that he of all people ended up buying a house at the height of the bubble.

run4yourlives 18y ago
When you make 15 Billion, you probably don't care too much about the price of the house you bought last year was. Especially since you most likely don't have a mortgage.
- coliveira 18y ago
  I would question his financial acumen if he doesn't have a mortgage. Houses (specially the expensive ones) are a bad place to have money parked. Although, it doesn't make any difference in his fortune, anyway.
  - run4yourlives 18y ago
    You're still viewing the house as an investment and not a purchase. You're not parking money, you're buying a house, the same way you don't worry about the resale value of your TV, you won't worry about the resale value of your home. If you manage to sell the TV at a gain, wonderful, if not, no worries.

dantheman 18y ago

The article was interesting but I really didn't like the tone, it was almost as if the author was sneering at the man. He tried to make him seem all sheepish and quiet, then try to lay guilt on him for doing his job well, and then mocking him for making a bad housing investment.

gruseom 18y ago

Left unexamined is the uncomfortable moral dimension of Paulson’s achievement. If he saw all of this coming, was it right for him to keep his own counsel, quietly trading while the financial system melted down? Give me a break. He should have gone on Faux News to be shouted down and laughed at? Who would have listened to this guy? This line is so indicative of bad journalism (practically a tautology, that phrase) that even though I want to read the rest of the article and am interested in the topic, I think I'll pass.

arockwell 18y ago
I agree, arguably betting real money that the system was going to meltdown was the absolute best way to tell others he thought the system was fucked. Its not like anyone would have listened to him if he played the whistle blower roll. The recent Madoff debacle is proof of that.

tokenadult 18y ago

"If he saw all of this coming, was it right for him to keep his own counsel, quietly trading while the financial system melted down?" If he was trading with real money, he was giving quite enough of a signal to the market. Plenty of people were writing about the possibility of the housing bubble popping, and about derivatives being "financial weapons of mass destruction." The people trading as if those warnings weren't important threw caution to the winds, and have no one but themselves to blame if they didn't learn from the behavior of the counterparties to their trades. From farther down in the linked article: "By 2005, the amount of money he could make on the riskiest securities was not enough to justify the risk he was taking. Pricing, in his view, made no sense. Paulson concluded that he could do better on the short side--wagering that prices of risky securities would fall."

deleted 18y ago

[deleted]

mistermann 18y ago

"Left unexamined is the uncomfortable moral dimension of Paulson’s achievement. If he saw all of this coming, was it right for him to keep his own counsel, quietly trading while the financial system melted down? Do traders who figure out a way to profit from our misery deserve our contempt or our admiration, however grudging?" Please. There were thousands of people, and hundreds of very prominent bloggers shouting as loud as they could that this was going to happen, and no one listened. No one wanted to listen. So, now, instead of blaming the people that caused the problem, they demonize the sensical people, who should have been listened to all the time. Seriously, how big of an explosion do we need before we start listening to the people that predict the explosions accurately. This world is starting to get surreal.....in the past (maybe a year or two ago), one could pass this off as ignorance, but what we are seeing lately just can't be ignorance. Is this writer for portfolio.com really this uninformed? Has the entire financial commentary industry been poisoned by deliberate hiring of clueless people? They seem to only read each other and watch CNBC rather than reading bloggers who have had this all figured out with very high levels of accuraqcy for literally years.