The Greatest Trade Ever: How hedge fund manager John Paulson bet against the real estate bubble

John Paulson spent a career on Wall Street underappreciated as an investor, in relative obscurity. Only on Wall Street can you be worth about $100 million and still be in relative obscurity. He had slowly built up his hedge fund, and by 2005 or so he started getting nervous about this whole housing market and tried to think, maybe I should bet against it. And he wound up making the greatest trade in financial history. In 2007 alone he made $15 billion for his firm—by way of comparison, George Soros made a billion dollars betting against the British pound [in 1992]—and in the next, in 2008, he transformed the trade into more of a bet against financial firms and made another $5 billion. And yet he wasn't a mortgage expert, or a real estate expert, and didn't have much background in the derivatives he used to make the bets, like credit-default swaps (CDS).