PROPERTY MARKET CRASHES, BUT HE MAKES $5b

PROPERTY MARKET CRASHES, BUT HE MAKES $5b

HE saw the mortgage crash coming. And he bet big on it.

21 April 2008

HE saw the mortgage crash coming. And he bet big on it.

So where others struggled because of the credit crisis, Mr John Paulson, a previously obscure fund manager from New York, took home a startling US$3.7billion ($5b) last year.

It is the single biggest pay-day in Wall Street's history, more than twice anything previously achieved even in the bloated hedge fund industry, reported The Independent on Thursday.

The industry's journal, Alpha Magazine, called his performance 'the greatest hedge fund trade of all time'.

So, what's a man to do with his new-found $5b windfall (let's see all those zeros for fun: $5,000,000,000)?

Well, move on up to the Hampton's, the upstate playground for New York's rich and famous, of course.

That's where Mr Paulson just bought a 4.2-ha lakefront compound - complete with staff quarters, two outhouses and ocean views - for US$41million.

His smaller seven-bedroom, 1.2-ha 'cottage' 1.6km down the road, is up for sale, with a price tag of US$19.5m.

And in yet another fine example of his trading acumen, he'll make a profit of almost US$7m during the two years that he has owned it.

The bet on the mortgage crisis has turned Mr Paulson into an industry legend overnight, courted by powerful bankers and politicians, anxious for insight on how bad the housing crisis in the US and the global credit crunch might still get.

And with his new celebrity status, his Manhattan-based hedge fund, Paulson & Co, has been able to sign up Alan Greenspan, a former head of the Federal Reserve, as an adviser.

The appointment raised a chuckle in dealing rooms across the city, since MrGreenspan is being damned as the architect of the housing market's disastrous bubble.

But then again, Mr Paulson's story is rich with other ironies.

Now 52, he partly learnt his trade during his four years at Bear Stearns, the investment bank which lost billions last year making optimistic bets on mortgages that were the mirror image of Mr Paulson's.

Its collapse last month is the defining catastrophe of the credit crisis.

He also shares a name with - but is no relation of - Hank Paulson, the US Treasury Secretary, whose tenure has been spent trying to shore up the housing market.

Paulson's wealth puts him at the top of Alpha's list of top earners, ahead of George Soros - the veteran trader who has also been betting on economic calamity in the US and who took home US$2.9 billion.

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