Gregory Zuckerman wrote an Article in the WSJ titled, “Greatest Trade: How Can you Make $20 Billion” which provides 8 easy steps to become a Billionaire. Where did these steps come? Mr. Zuckerman follows two years of John Paulson’s work.
The article is entertaining, but I’d love to read an autobiography if ever produces it one day.
Who is John Paulson?
According to Wikipedia,
Paulson & Co., Inc. had assets under management (as of June 1, 2007) of $12.5 billion (95% from institutions), which leapt to $36 billion as of November 2008. Under his direction, Paulson & Co has capitalized on the problems in the foreclosure and mortgage backed securities (MBS) markets.
After a quick Google Search it seems like he is a ridiculously smart investor (top 5% in his Harvard MBA Class) who became famous, and beyond wealthy, for betting against the bubble.
Lessons we Can Learn from John Paulson
So what did John Paulson Do? According to Mr. Zuckerman there are a few things that Mr. Paulson did that normal investors may be able to replicate. Please note that I am not advocating any of these ‘lessons’ as I don’t believe I could actually replicate them to the extent necessary.
- Don’t Rely on the Experts
- Bubble Trouble
- Watch the Debt Markets
- Master New Investments
- Insurance Pays
- Experience Counts
- Don’t Fall in Love
- Luck Helps
Mr. Paulson had the conviction to know he was right, when, literally everyone around him was telling him otherwise (Lesson #1).
He watched the unexplainable exuberation of the financial sector (lesson #2).
He studied the backend of the companies he thought were going down (lesson #3) and learned about the new product being produced at record speed (lesson #4).
He then acted on what he had learned (buying cheap put contracts – lesson #5).
Lesson #1 is ironic because I found the article on the WSJ’s Personal Finance Page, which contains article after article from supposed experts telling you what to do. Don’t get me wrong, I love the site and it is one that I check almost daily…just seems a little off.
Actually Applying John Paulson’s Lessons?
I think the biggest lesson to take away would be the studying associated with what your core is telling is correct, and then having the testicular fortitude to move on it.