The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History. by Gregory Zuckerman. New York: Broadway Books, 2009. 304 pp. $26.00 (hardcover).
The story of lost fortunes and foreclosed homes in the most recent financial crisis is well known. Less known is the story Gregory Zuckerman tells in The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History. The book recounts how, prior to the economic collapse, Paulson and a handful of other investors recognized that certain financial assets were dramatically mispriced and adjusted their investments accordingly.
Paulson, the main focus of the book, placed a concentrated bet against risky mortgages that would become the “biggest financial coup in history, the greatest trade ever recorded” (p. 1). Zuckerman provides just enough of Paulson’s background to give readers a sense of who he is and how he got to be where he was in 2001, when the central story began. Zuckerman tells of Paulson breaking apart a pack of Charms candies and selling them to his kindergarten classmates for a profit (p. 17); earning huge commissions on sales of flooring from Ecuador while on a break from university (p. 21); learning to spot investments that “had limited risk but held the promise of a potential fortune” (p. 30); making an investment in a start-up brewery that would produce the Samuel Adams brand and earn him several million dollars (p. 30); giving up the parties that had distracted him for years in order to focus on managing his own hedge fund (p. 32); and marrying the woman he loves (p. 38).
By 2001, “Paulson was on . . . solid footing in his personal life. And his fund had grown as well. He managed over $200 million and had refined his investment approach.” Wall Street still did not think much of Paulson, however. “He wasn’t on anyone’s radar screen,” says one of Paulson’s friends. “But something remarkable was about to happen to the nation and to the financial markets,” writes Zuckerman, “an upheaval that would change the course of financial history and transform John Paulson from a bit player into the biggest star in the game” (p. 38). . . .