Most people lost money when the subprime market collapsed in late 2006, taking the economy down with it. But Wall Street Journal reporter Greg Zuckerman's new book, The Greatest Trade Ever, tells the story of the handful of hedge-funders who actually made money from the ensuing crisis by betting against a housing bubble that few, at the time, believed was real. It's a great read, not just because our semi-irregular column If We Were Friends With John Paulson is briefly mentioned, but because of the colorful cast of characters, all of whom might have been described as screwups before they executed the trade that scored them billions of dollars in profits. Reading the stories of how this ragtag bunch managed this feat, individually and, in some cases, together, you can't help but root for them, even as you remind yourself that their win was everyone else's loss. Let's take a look at the backstories of some of the eccentrics, nerds, and late bloomers who made bank as the economy burned.
John Paulson
LOCATION: New York
BACKSTORY: Back in 2006, Paulson & Company was "just another ham-and-cheese operation in a crowded space," and its founder was known mostly for the parties he had held back in the nineties at his Soho loft, which featured "good food, plentiful drink; and access to an assortment of recreational drugs for those who chose to partake." Even after Paulson grew out of his bachelor phase, he wasn't taken seriously in his field — and, as the following passage suggests, he knew it.
At times, Paulson didn't seem completely put together. When Brad Balter, a young broker, came to visit, Paulson chain-smoked cigarettes and had spots of blood on his shirt collar from a shaving mishap. Paulson's head of marketing was stretched out in agony on a nearby couch, moaning about his back.
"I didn't know what to think. It was a little surreal," Balter recalls.
At times, Paulson became discouraged. His early investment performance was good but uneven, and he continued to have few clients. He was sure of his abilities but questioned whether he could make the fund a success.
One especially glum day, Paulson asked his father, "Am I in the wrong business? Is something wrong with me? "It was hard to be rejected, it was a lonely period," Paulson recalls.
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