When Words Bite You In The Ass: John Devaney

Author:
Bess Levin
Updated:
Jan 14, 2019
Original:
Aug 3, 2007

We hate to kick a man when he’s down, and on the brink of homelessness, but we haven’t been this grateful for the existence of the internet since we discovered the Cats ‘n Racks section of Cuteoverload.com (hat tip: James Simons). Soon-to-be former yacht/ski lodge owner John Devaney, whose United Capital Markets Asset Management restricted investor withdrawals after some bets didn’t exactly go as planned, booked a 30.4% loss for June, and is expected to match or exceed those losses in July, had some interesting things to say about subprime bonds (of which he is a victim) at the ASF 2007 conference in Las Vegas last February. To wit: “I personally hate subprime—and I’m kind of hoping the whole thing explodes. You are just dancing on the edge of a razor blade. They just fall off a cliff. They are awful investments.” Ah, well. Hindsight—it’s 2/20. (I’ll be here all day—meaning I’ll be here ‘til 1).
Anyhoo, let's do a poll:

Opinion Polls & Market Research

As Paulson and Co employees, clients, and people named John Paulson do not need to be told, the past year and half has not been the most joyous of times for the hedge fund giant. After making billions shorting subprime mortgages, the firm ended 2011 down 55 percent, was down 16 percent through the first half of 2012, and as of July, saw assets under management decline 44.9 percent to $21 billion from $38.1 billion, due to a combination of unfortunate performance and redemptions by investors so angry at the fund that they've felt the need to repeatedly tell anyone who will listen that parting ways with P&C was among the best if not the best decision they've ever made. One investor that hasn't had to consider voicing its unhappiness to the press or even worry about losing money at all? The 92nd Street Y. Last November Paulson guaranteed that he would personally cover their losses, whatever they turned out to be, come year-end. And the generosity did not stop there: for this one investor only, Paulson offered his services pro-bono, waiving all fees. So while he probably didn't expect representatives of the Y to rent a skywriting plane to proclaim their love and appreciation for him over midtown, lobby the city of New York to get 92nd renamed Paulson Street, or have his face tattooed to their chests, he probably also figured they wouldn't turn around and hit him the mother of all slaps in the face. In this case the declaration that despite the highly favorable terms of their arrangement, any involvement with P&C still felt a tad too risky for everyone's comfort level. In the midst of the financial crisis, the 92nd Street Y came up with a sweetheart deal for its endowment: investments in funds run by the likes of John Paulson, Marc Lasry, and other hedge-fund luminaries that were fee-free and guaranteed against losses. The strategy performed well for several years, said people familiar with how it worked, as the Y benefited from risk-free investing in some of the fund industry’s most successful strategies. But, concerned about the impact of a catastrophe in which a money manager couldn’t repay losses and eager to construct a more diversified portfolio, the Y recently opted to redeem its hedge-fund investments, these people said, and rebuild its financial strategy from scratch. Paulson himself is worth $15 billion, so a catastrophe in which he couldn't repay the Y's losses would have to be a big one. And don't give him some line about how you're pulling out of all hedge fund investments and it's not personal. You could have let him have this. Despite Sweet Deal, 92nd Street Y Redeems Paulson Money [CNBC] Earlier: John Paulson: I’ll Get The Losses This Year, Next Year We Go Dutch?

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