John Paulson is a former hedge fund manager and founder of the Paulson & Co. investment firm. He is also the man who managed to make $15 billion in less than 18 months by betting on the collapse of the U.S housing market back during 2007-2008, an act that earned him a spot as one of Time Magazine’s “100 most influential people in 2009”.
Having made a fortune by short-selling subprime mortgages before the 2008 financial crisis, he turned his way back into the spotlight by successfully betting against Goldman Sachs and other prominent Wall Street banks with similar “dead cat bounce” strategies during last year’s global financial crisis.
As always, he has been known for his unorthodox approach to investing. Two years ago, the famous hedge fund blog Zero Hedge described him as one of the people who would “break the social norm of how an investment works” because he borrows heavily to profit from negative corporate fundamentals.
In 2006 John Paulson started the investment management firm Paulson & Co. with $1 billion of his funds. He correctly predicted that the subprime mortgage crisis would lead to the collapse of millions of U.S. home values and then proceeded to short various financial instruments in 2007-2008, making a profit of $3.2 billion. Paulson told the “Wall Street Journal” in an interview published on January 20, 2008, that he bet against the subprime market and banks that made loans to people who couldn’t afford them.
Paulson’s primary strategy was to short credit default swaps, a type of insurance policy that kept investment banks from taking losses on risky housing investments. In an interview with “The Wall Street Journal,” Paulson said his initial $125 million short position was so successful other hedge funds asked him how they could do the same thing. Paulson has said he is taking a more cautious approach with his money after making such a big payout in 2007-2008. Still, in January 2010, Paulson and Co. launched two new funds totaling $2 billion to invest in European banks and distressed debt.
In January 2009, Paulson was named one of Time Magazine’s “100 Most Influential People” and the “Most Influential Person in the World Today.” In March 2009, he was named one of the “25 Most Intriguing People” at Spike TV Guys’ Choice Awards. In March 2010, he was named to Fortune Magazine’s “The Most Admired Men in Business” list. CNBC (TV) ranked him in the #1 spot as a Top Ten Business Tipster for April 2008.