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The Greatest Trade Ever
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mac



Joined: 07 Mar 1999
Posts: 5143

PostPosted: Fri Sep 03, 2010 2:04 pm    Post subject: The Greatest Trade Ever Reply with quote

I can't remember who recommended this book, I think it was Boggsman, and I think he told me it would make me angry. Finished this morning, and wanted to shout out thanks. Didn't really make me angry. For those of you in the dark, the book covers the hedge fund bets against, at first, junk bonds that were based on sub-prime loans, and later against the banks that had been peddling them.

I don't really object to people like Paulson, who saw that the housing market had accumulated a bubble, betting against that bubble. After all, someone sold the insurance, the bonds, the CDO and the CDS's. The lessons learned are:
1. greed may not be the best thing in the world because it blinds you to what might be going on--ie, housing will go up forever. I've been involved in California real estate for over 30 years, my house is fully paid for, and I've seen the lemmings go over this cliff 4 times in my 30 years. Duh.

2. The heads of these banks weren't really that smart, and didn't deserve the huge bonuses they made.

3. We can't prevent bubbles, and shouldn't go back to the 1930's thinking about regulating financial institutions, but if we don't have the nerve to let them fail, we have to regulate them. Will any Republicans sign up?

The only significant issue I have with hedging, ethically, is when a company tells its "B" list of investors to buy something, and then has its "A" list bet against it. As best I can tell, Paulson didn't do that.

Paulson was only the biggest winner, there were a handful of others smart enough to see the cliff, the lemmings, and how high low interest rates that resulted from Greenspan's policies had built up that cliff. I'll leave you with the pithy quote from Andrew Lahde to think about the free market. If you want to read the whole thing is starts on page 275 of the book.

Quote:
...I was in this game for the money. The low-hanging fruit, ie idiots whose parents paid for prep school, Yale, and then Harbard MBA, was there for the taking...Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. On the issue of the U. S. Government...legislation was repeatedly brought forth to Congress over the past eight years, which would have reined in the predatory lending practices of now mostly defunct institutions. The insitutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage...George Soros [should] sponsore a forum ... to create a new system of government that truly represents the common man's interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without havint to rely on corruption...the system is clearly broken.

Lahde made $10 million for himself and $100 million for his clients.

Thanks for the tip!
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boggsman1



Joined: 24 Jun 2002
Posts: 3512
Location: at a computer

PostPosted: Tue Sep 07, 2010 10:59 am    Post subject: Reply with quote

If you're still hungry for more John Paulsen, you can read Berkely resident, Michael Lewis' latest, "The Big Short".
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stevenbard



Joined: 11 Nov 1993
Posts: 4058

PostPosted: Tue Sep 07, 2010 7:32 pm    Post subject: Reply with quote

Precisely why I wonder why you guys supported any of the bailouts. We should have let all those bankers go broke. So broke they'd have been pushing shopping carts today. 450 out of 500 s&p companies would have been fine, and guys like Paulson would have been buying assets at 40c on the dollar.

It would have been a much quicker process than this slow burn into marxism....
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boggsman1



Joined: 24 Jun 2002
Posts: 3512
Location: at a computer

PostPosted: Tue Sep 07, 2010 8:16 pm    Post subject: Reply with quote

Sorry wrong bard. We've been over this before. The week Lehman failed, triggered the Reserve fund to break the buck, then money markets would have gone next, then savings accounts, then I grab my 9mm and come down to Malibu to get some lunch money. The US system is quite intertwined, and the failure of the big banks would have made today's "Marxism" look like childs play.
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stevenbard



Joined: 11 Nov 1993
Posts: 4058

PostPosted: Tue Sep 07, 2010 9:19 pm    Post subject: Reply with quote

Let those assholes push shopping carts. Now we will have the most painful tax. First deflation, next hyper-inflation.....then we're all poor.

The irresponsible monetization of our debt will be our downfall. Print it, sell it, and buy it back? Print some more? WTF??
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mac



Joined: 07 Mar 1999
Posts: 5143

PostPosted: Wed Sep 08, 2010 1:19 am    Post subject: Reply with quote

stevenbard actually has a coherent argument. Unfortunately, life is not so simple. The idiots in banks that marketed sub-prime loans, the politicians that cleared the path (McCain's first campaign manager), and the wall street firms that sold them were the culprits, assisted by essentially fraudulent underwriting. If they could all have been fired, and the damage limited to their assets, it would have been poetic justice. But trillions more go down, with a recession that, in my opinion and those who I trust, would have been much worse. They'd have dodged the bullet, and main street would have suffered even more. Doesn't fit neatly into the Tea Party ravings, but hard times require hard thinking.
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mrgybe



Joined: 01 Jul 2008
Posts: 2612

PostPosted: Wed Sep 08, 2010 10:44 pm    Post subject: Reply with quote

March 9, 2010 ........Pearls of wisdom from the left side of Wall Street exactly six months ago

boggsman1 wrote:
Keep yakking nw30. The S&P is up 35.6% since inauguration, next up will be employment, tech is 20% underemployed, then a full blown recovery, and then a dramatic surge in tax revenues, lowering the Fed debt, and shutting up the Tea Baggers.


.........and more on the same day
boggsman1 wrote:
The risk trade is in full force right now, with low interest rates and corporate balnce sheets in the US getting better every day, this will fuel a powerful recovery later this year. If we see a 7handle on GDP this year and the S&P is at 1250, Im going to need some props from you, G Man.


Uniformed response from the right of center on March 9...

mrgybe wrote:
The best we can reasonably expect over the next several years is relatively volatile markets and high unemployment levels. It would not surprise me at all to see the stock market give up a lot of the gains to which you refer over the next 12 months or so..........stocks are likely to swing up and down for a number of years with limited net gains. The credit markets are also likely to be volatile as the mortgage mess continues to unwind and we beg other countries to buy our massive debt..........and the value of the dollar will depend somewhat upon where we rank relative to the plethora of other bad actors. The only dramatic surge in taxes would come from large tax increases..........


.........even more uneducated drivel..........

mrgybe wrote:
Your view is that there will be a full blown recovery, accompanied by strong employment growth and a surge in tax revenues..........I hope you're right but I don't think so. I think, at best any recovery will be slow and weak......and there is a distinct possibility that we will slip back into negative growth.


S&P 500 March 9, 2010................1140
S&P 500 Sept 9, 2010 open.........1098

GDP Boggsy estimate...................7% plus
Actual latest GDP.........................1.6%
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boggsman1



Joined: 24 Jun 2002
Posts: 3512
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PostPosted: Thu Sep 09, 2010 8:45 am    Post subject: Reply with quote

We will see a 7% GDP figure , certainly I didnt think it would be Q2. The 1250 S&P in April almost happened, so I do need props, and I believe we will eclipse the 1250 mark before the end of the year. In terms of the economy , Im wrong at this point , I underestimated how broke the average American really is. Mr. G, thinks are raging out here in private sector land. Take a look at AAPL, GOOG, NFLX, NTAP, CRM, the tech economy has me jaded in terms of the economic outlook.
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boggsman1



Joined: 24 Jun 2002
Posts: 3512
Location: at a computer

PostPosted: Thu Sep 09, 2010 8:56 am    Post subject: Reply with quote

Mr. G. we had a great year last year, and we're up a lot this year, why dont you wire a couple of bucks into the house of Morgan, and we'll get started.
Boggsy
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jpbassking



Joined: 19 May 1998
Posts: 2362
Location: Leo

PostPosted: Thu Sep 09, 2010 10:27 am    Post subject: Reply with quote

boggsman1 wrote:
.. then I grab my 9mm and come down to Malibu to get some lunch money....


Laughing Laughing Laughing

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