Trader Monthly's annual Trade of the Year issue is out, and as you might expect the words “short” and “mortgages” are all over the top trades. The top short equity trade goes to Bill Ackman’s shorting MBIA while the top overall trade goes to John Paulson of Paulson Credit Opportunities for his subprime play, which Trader Monthly says may be the “greatest trade of all time.” (If you don't have a subscription to Trader Monthly, you can read excerpts of the issue at FT Alphaville.)
It’s got some good detail on how Paulson achieved his 590% return by taking position shorting the ABX and shorting individual CDOs. According to Trader Monthly, Paulson bought credit default swaps that required the seller to post cash collateral if the protection premiums hit a certain threshold.
Two sources close to the action describe how, at one point last summer, Paulson put the touch on a major bulge-bracket brokerage for $500 million — a reverse margin call, as it were. A 24-hour tension-filled tussle ensued over whether the brokerage would pony up. Paulson prevailed.
This tale of the hedge funder wrestling down a bulge-bracket brokerage is pretty amazing but we’re disappointed that Trader Monthly plays all coy with the name of the brokerage. Does anyone seriously doubt that we’re talking about Bear Stearns here?
Best of 2007 : The Fourth Annual Trades of the Year [Trader Monthly]
Posted by Free Money , Feb 06, 2008 3:51PM
2008's Best Gamblers Who Wear Suits
doesnt have as nice of a ring to it?
Posted by JMAN , Feb 06, 2008 3:58PM
Magazine is about as reputable as Sykes Hedge Fund. How come no one is talking about the new season of Wall St Warriors? It is absolutely the best unintentional comedy out there right now.
Posted by , Feb 06, 2008 4:10PM
reminds me of the time i threw down a 'nickel' on hard eight and it hit the very next roll.
no luck involved. my model made it quite clear what was about to happen.
Posted by , Feb 06, 2008 4:29PM
talk about a joke of a magazine
Posted by , Feb 06, 2008 4:29PM
That's not true, nothing is as reputable as Timmay's HF. After all, if you can't count on a fund named after an herb used in burritos, what can you count on?
Posted by , Feb 06, 2008 4:30PM
That's not true, nothing is as reputable as Timmay's HF. After all, if you can't count on a fund named after an herb used in burritos, what can you count on?
Posted by DRF , Feb 06, 2008 4:47PM
It's MS. Dumbasses took the other side of the Paulson super senior trade later in the year when they thought they were hedging their bottom tranche shorts.
Posted by Anal_yst , Feb 06, 2008 4:59PM
Wait, you're telling me the magazine who brought us the brilliant trading mind of Zach Michaelson isn't a reputable publication?
(credit to the Forehead Slapper)
Posted by , Feb 06, 2008 5:59PM
paulson is my god
Posted by , Feb 06, 2008 7:08PM
Bear Stearns... try Goldman.
Posted by Prince of Wall Street , Feb 06, 2008 8:25PM
This magazine is completely unreputable. However, Paulson's 590% return and his $4bn payday does blow my mind. Hats off to him.
Posted by Anal_yst , Feb 06, 2008 9:50PM
@ Prince
I'm hoping that was intentional sarcasm, otherwise did you really just call TM out for being full of sh!t, yet at the same time accept their figures for paulson's ridiculous returns?
Posted by holla , Feb 07, 2008 9:09AM
One thing is Ackman has been short MBIA since at least 2002 w/ Gotham Partners. This isn't exactly the kind of brilliant market timing that makes a Trade of the Year in my mind.