A must read WSJ article

Discussion in 'Wall St. News' started by nitro, Jan 15, 2008.

  1. nitro


    Imo this article is a must read for every trader. It shows how being right, but being too soon in timing, or timing the market just right, can be tremendously profitable (I forsaw the same problems, but blew my account out on being far too early on the same bet).

    Read all the linked articles too. Fascinating reading. I especially found interesting how a friendship was ruined because of disclosure of a proprietary strategy was "abused". People always ask on ET why don't profitable traders disclose a working strategy. At the highest level, this proprietary information is the currency that traders deal in.


    Killer article(s). MUST READ.

    In the last twenty years, we have had bubbles form and bubbles pop almost continously. Will you be the next billionaire betting right on them as they form, and betting against them as they pop?

  2. Great article. Agreed.

    Cheers, nitro.
  3. Daal


    how much would he lost had the good times extended for a year, thats what I want to know. this guy could easly be a survivorship bias sample being praised as genius
  4. Pekelo


    "He hired former Securities and Exchange Commission Chairman Harvey Pitt to spread the word about this alleged threat."

    It is like me hiring Greenspan to say a few good words about market conditions because I am long.

    "He began using technology that prevented clients from forwarding his emails."

    I guess he never heard of PrintScreen and MS Paint... :)
  5. Interesting article and, retrospectively, an astounding trade.

    Even so, I think it also serves as something of a cautionary tale. Mr. Paulson seems to have made his decision to go short on the basis of fundamentals, before the market actually dropped. I think most reasonable people were suspicious of the housing market, but the "Element X" part was in the timing. Those who preceded him in a similar play faltered due to poor timing. So because he did not appear to be overly concerned with the issue of timing, since he added to a losing position, the question arises: was he smarter than the people who preceded him and faltered, or was he simply luckier in his timing?

    Regardless, it was a helluva trade.

    P.S. No doubt, there is a story somewhere in the news archives about a guy who lived in squalor and bought lottery tickets with his grocery money until he finally struck it rich. However much I would like to win a lottery, I don't plan on following in his footsteps. I think that anyone who bets big, and then bets bigger without regard to timing, is something of a lottery player.

    P.P.S. Regardless, it was a helluva trade.
  6. Pekelo


    That article was probably more interesting. I am not sure abused is the right word because both made out like pirates, so telling the strategy and that being copied didn't hurt the profits. Also Paulson thought Greene can't do it on his own as a private person:

    "The bank would have to be convinced that a mere individual, as opposed to an institution, qualified to be a counterparty in such a transaction. Mr. Greene says he asked Mr. Paulson, "Can I do this trade myself?" and was told, "You'll never get approved.""
  7. Or simply reading the text and typing it into a new email
  8. There are several problems with the article - it doesn't say what his drawdowns were during the lifetime of the trade, doesn't explain if he had any stop or what his risk control was (e.g. if the bubble went 1 more year, would his fund have lost 10% or gone bust?), doesn't say what % of capital was allocated to the various bets. It avoids the most important information which was the risk/reward ratio on the trade. The point of an article like this should be to show how - if you had a similar idea - you would go about trading it, and what sort of returns you could achieve relative to your risk.

    2nd rate journalism IMO.
  9. Daal


    coundn't agree more, the same type of journalists who makes these praises are also the ones who slammed and made fun of soros and tiger when they got outplayed by tech
  10. Joab


    Nice article thanks for sharing.
    #10     Jan 15, 2008