Hedge Fund King John Paulson "Disappointed" By His Bio

Posted by: Spencer Ante on November 2, 2009

One of the most anticipated books of the global financial meltdown just got a bit of public relations problem. The book, The Greatest Trade Ever, written by Wall Street Journal writer Gregory Zuckerman, due to hit bookshelves tomorrow, details the story of hedge fund operator John Paulson’s now legendary trade against the housing market and how he made billions in the process betting against subprime mortgages.

Although the book is based on extensive interviews with Paulson, Paulson is releasing a statement that disses the book, calling it a disappointment. The statement goes on:

“It contains numerous inaccuracies and fails to capture the essence of the credit bubble. The writing style is indicative of a gossip tabloid rather than respected financial journalism. Unfortunately, the opportunity to create a meaningful documentation of an important time in financial history was lost.”

Now, it is not totally surprising that the subject of a book would be disappointed. That is the nature of biography writing. But Paulson’s criticism seems to run deeper, and is even more surprising given that the book is largely laudatory to Paulson, describing how a “renegade” made financial history.

My main problem is that Paulson does not specify the “numerous inaccuracies.” If he is serious about this criticism, he should detail the instances so the writer has a chance to defend his work. Providing further details would also help readers judge whether the alleged inaccuracies are minor mistakes or major lapses in reporting or judgement.

As for the gossip tabloid style, that claim seems to be a bit overstated. I have already read the first 100 pages of the book, and if that is any indication of the tone of the rest of the story, it does not read like a trashy tabloid, though there are a few parts where Zuckerman throws in unnecessary details about the personal problems of some characters to spice up the tale. For example, Zuckerman devotes a substantial amount of space chronicling the marital problems of one analyst who worked for Paulson, which didn’t add much to the story.

It will be interesting to see how the publisher and the author react to Paulson’s statement. They can’t be entirely happy about it.

— Spencer Ante also publishes the Creative Capital blog. Click here to see more.

Reader Comments

ns

November 3, 2009 12:48 PM

Definately not on my list of books to read.

Nails

November 3, 2009 4:34 PM

I am curious if the book will detail any relationships that Paulson had with Goldman Sachs and or AIG. How is it that John Paulson's team saw the mess brewing and no one else did? It has to be that John Paulson may have had direct contact with the insiders, like Hank Paulson & Goldman. Goldman knew they would lose money on the CDO's to some extent, so they installed a stooge to approve 100% insurance coverage at AIG. Had Hank Paulson and the FED not stepped in and saved AIG, Goldman Sachs would have likely filed for bankrupcy. And the mess would be way worse globally. See Matt Tiabbi's article from RollingStone, all to interesting. But my point is that how did a relatively unknown west coast hedge fund manager know the precise exposure of Bear sterns, Lehman Bros, and Meryl Lynch? Then Strategically hedge against them? How is that possible without having direct inside understanding of the internal business practices of each company and level of exposure? Sounds like the SEC should be involved...

MrBlue

November 7, 2009 6:47 PM

Nails, you really have no clue of which you speak. 1.You refer to Paulson as being a west coast hedge fund manager, ummm....his offices have been in mid-town Manhattan for 15 years. 2. Paulson had virtually no business with Goldman Sachs, his prime brokerage business went through Bear Stearns and Morgan Stanley. 3. Paulson did not make his money betting against financial companies like Bear, Lehman, or Merrill. He made his money betting against financial products like mortgage backed securities. Got it? Surely you have better things to do with your time than look like an idiot on a public forum.

RB

November 7, 2009 9:48 PM

Nails,

The question isn't whether John Paulson saw the mess and no one else did. The question should be why more people didn't do something about the mess, even when it was playing out. It's unfair to say no one else saw the mess brewing. By mid-2007, you could watch business television on any day and see it happening. By July, you could see Bear Stearns funds collapsing.

In July and August, and even later, you could still short financial stocks, buy protection on mortgage-backed debt, even in the midst of a clear threat to the system. It seems pretty clear that John Paulson wasn't getting inside information at that point - at least nothing that you couldn't have figured out by, say, watching television, or calling a mortgage broker, or watching home price data.

observer

November 10, 2009 11:10 PM

Today markets are explained mostly based on Efficient Market Hypothesis. Many of the tools used in markets today are the products of EMH. Based on this, no one can beat the market and the ones who beat the market are just lucky.

Now Mr.Paulson can be lucky since it took a very short time for him to make around $4 billions but after soros, madoff, galleon , stanford; I don't trust anyone who constantly beats the market. The trick is insider trading... Simple as that! Wall Street runs the world and these people feed each other essential information. That's the reason why they are so successful.

And to be honest, I don't think Paulson was different too. He did know what was coming. He did not guess!

Bull-oney

November 13, 2009 7:02 AM

Observer,

EMH is a load of crap. The markets do not wildly gyrate up and down because they are efficient, but because of fear and greed that take markets from underpriced to overpriced and everywhere in between. You need to have your head examined if you think the only way people can consistently make money in the markets is to either be lucky or have inside information. Do you think Warren Buffett gained his wealth as a Wall Street insider? You should learn more about investing before you post that kind of nonsense on the Internet.

index1000

November 15, 2009 8:57 PM

Bull-Oney. Well said. Social mood is the only driver of financial markets. If you need evidence watch the cocks on CNBC trying to explain market movement when their favourite fundementals are wildly contradictory. It made me laugh to hear one of them stating that 'the fundementals were back' Really? where had they been, Vacation?
If you learn to read market sentiment you can trade these markets.
Observer you are an idiot.

Nails

November 16, 2009 6:35 PM

Nails:
Why do you speak in public?

Observer

November 17, 2009 8:26 PM

Bull-oney, Index1000: What I said was that you can't beat the market without luck. Let me explain;

Behavioral finance is also an important theory to explain the markets but it is just a complimentary approach. You have to add EMH and behavioral finance together to have something that makes more sense. However, I dont believe that the EMH is as bad as people think. I think it deserves some more credit than people realize. Between your investment and your profit there can be thousands of events that could wipe you out! If it doesn't then you are just lucky.... You are always gambling. Don't forget this!
Otherwise everybody knows about behavioral side of finance and how it affects the markets and how not everything can be formulated like we have seen in Long Term Capital Management.

But at the same time, all the formulas that you use to create your portfolios are from EMH, isn't it? Portfolio Theory, CAPM, CAL etc. So you might not believe it but you are using it...

Buffet is not a trader. He just buys good businesses. Did he make money from CDS' or CDOs? He can go terribly wrong, too. He can't predict the systemic risk!
His portfolio lost some serious money during the crisis too.

I think you need to look at the financial systems -especially the american one since it is less regulated-
as a complex adaptive ecosystem. A Darwinian approach... When you look at the system like this; a habitat where there can be countless numbers of entities born and die almost freely with their unpredictable behaviors and with their complex relationships with each other, you will realize that you are in savannas! Even if predatory wars, lack of nutrition or diseases can't kill you, an earth quake or fire might kill.... Got it?

An one more thing, in a savanna, you will see EMH and Behavioral theories together in play.

So if you think that those wall street guys knowingly or without knowingly don't feed each other with critical data, I recommend that you stay away from investing. You will be ripped of.

NOTE: I will skip the insulting part you guys enjoyed. I am sure, this way, you will try behaving like decent people which I am sure you are...

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