LEARN FROM GENERALS OF THE MARKETS - PART 27
“Work actively and constantly on turning a correct idea into a useful action which will then become an unconscious habit – if you do, you can manage to be a successful trader, too.” – Norman Waltz
John Paulson was born in December 14, 1955, to Alfred G. and Jacqueline Paulson, who both immigrated to the US from different countries (Alfred came from Ecuador and Jacqueline came from Lithuania). He’s the 3rd of the 4 children born to the couple. Growing up in New York, and spending some of his time in Ecuador, he eventually received his first degree in finance from New York University Stern School of Business (then the New York University's College of Business and Public Administration). He was advised to apply to Harvard Business School – something he did, and he was admitted. After this, he earned the Sidney J. Weinberg/Goldman Sachs scholarship, and at last, bagged his MBA in 1980 (being in the top 5% of his class).
Paul first served as a research analyst at Boston Consulting Group in 1980. He was very good at his job but he was not yet trading or investing. He quit that company to work at Odyssey Partners. He also had some work experience at Bear Stearns and Gruss Partners LP. With $2,000,000 and one worker, he started Paulson & Co. (his own fund) in 1994, based in New York. This American hedge fund manager went short on subprime mortgages in 2007 and earned profits totaling $3,700,000,000 in the same year. In the year 2010, he earned a salary of almost $5,000,000,000. The windfall was realized when the bubbles of mortgage backed securities market went burst. The bet against the subprime mortgage bubble was one of the best trades in human history. He’s long invested his personal fortune in gold, and as a result of this, additional $3,100,000,000 was made between the year 2010 and the year 2011. In the year 2012, with a net worth of $12,500,000,000, Forbes ranked him 61st on the list of the richest individuals the world over. He’s spent hundreds of millions of dollars in buying several homes. He’s also spent hundreds of millions of dollars for various causes and charities.
Lessons:
What can you learn from John Paulson?
- It’s common for many seemingly indigent people to be jealous, envious, livid, and become forlorn when they read how seriously affluent some are. You’re not really forlorn as you thought – only that you let great opportunities pass under your nose without capitalizing on them. There are many great opportunities in trading, but you don’t want to be a trader because you know some people are losing, and because those who’re not interest in trading have told you not to do it. You see, they aren’t doing it, and they’re telling you not to do it (simply because they lack the knowledge that can really make them winners in the markets). Some people don’t want to do it, while some do it in the face of recalcitrant hurdles and obstructions. When those who push ahead in spite of the challenges end up attaining financial freedom, then others would begin to be jealous, envious, livid, and would feel forlorn. Whereas those who’ve become rich as traders have done what you didn’t want to do: they risked their heads, necks, sweats, and socks. Now, they are rich, and you’re furious and envious. When some Occupy Wall Street protesters were picketing his area, the angry John Paulson was reported as saying: We pay a lot of taxes, especially living in New York ... Most jurisdictions would want to have successful companies like ours located there. I’m sure if we wanted to go to Singapore, they’d roll out the red carpet to attract us. ... We choose to stay here and then, you know, get yelled at. I think that’s misdirecting their anger at the wrong place.” (An interview with Bloomberg BusinessWeek magazine, 2012).
- Don’t despise the days of your little beginning. Though your beginning may be small, your latter end shall greatly increase. John’s beginning was very humble, yet he now has a place among the wealthiest hedge-fund managers in the world. Compared to what he’s worth today, the $2 million he started with when he founded his own hedge fund pales into insignificance. Your background may be humble. What you’ve now may be very insignificant, but it’s very imperative that you concentrate on being the best trader you can be, then your latter end shall be increased greatly. Your potential in trading is limitless and can’t be determined by opinions of others.
- John hasn’t been always right, just like other successful traders. In the year 2011, he sustained some negativity when speculating on Bank of America and other business entities. In September 2011, it was reported that his portfolio was almost forty percent negative. Even recently, he announced about eighteen percent negativity. You see, these aren’t the reasons for him to quit trading as certain people do. Ultimately, John would recover his negativity and move ahead; it’s just a matter of time. No matter the trading system you use, you’ll go thru periods of winnings, roll-downs and flat performances. During these periods, you shouldn’t feel discouraged or dejected; eventually you’ll recover your losses and move ahead. Now and then, market wizards’ performances are punctuated by periods of negativity, and there’s no way around this. Ultimately, most of them (especially those who’re good at risk management) would recover their losses and move ahead.
Conclusion: There were those who were passionate about trading, but today, everything has finally ebbed out. Don’t give up! No matter how bad things are right now, no matter how hopeless your situation is; it doesn’t matter how many people have told you to your face that you can’t make it in trading. Things will turn around your tide.
This article is concluded with a quote from John Paulson:
“Nothing is right in all markets at all times… Our goal is not to outperform all the time – that’s not possible. We want to outperform over time.”
