Hedge fund manager John Paulson set a new record for the most money made investing in a year, ever.
The Wall Street Journal reports that John Paulson, hedge fund manager of Paulson & Co., has set a record for the most amount of money made in a single year of investing.
“Paulson personally netted more than $5 billion in profits in 2010—likely the largest one-year haul in investing history, trumping the nearly $4 billion he made with his “short” bets against subprime mortgages in 2007,” writes “WSJ.”
One is almost tempted to conclude from Paulson’s story, as well as the earnings of fellow hedge fund managers like David Tepper and Ray Dalio, who netted $2 and $3 billion respectively last year, that the free-market die-hards like Republican Paul Ryan and Sarah Palin are right—that a 100% laissez faire free market yields the greatest rewards.
After all, Paulson’s “most money ever” record was made by making smart bets, and came without the federal bailout money required by competitors like Goldman Sachs, who performed at a lower level. Writes the Journal: “By comparison, Goldman Sachs Group Inc., Wall Street’s most profitable investment bank, paid all of its 36,000 employees a total of $8.35 billion last year. James Gorman, chief executive of 76-year-old investment bank Morgan Stanley, is expected to receive compensation of less than $15 million for 2010.”
Ford Motor Company, the only American auto company not to take federal bailout money, also recently announced their highest net income in a decade in 2010, at $6.6 billion for the year. (It’s actually pretty remarkable that Paulson personally netted almost as much as Ford Motor Company in 2010.)
But in reality both Paulson and Ford benefitted from federal guarantees, whether or not it’s obvious on the surface. Ford may not have directly taken bailout cash from the government, but the federal “cash for clunkers” program that incentivized consumers to go out and buy cars certainly helped bolster Ford’s robust 2010 sales. This is reflected in their drooping 4th quarter sales, just announced today, which may more accurately reflect market demand for cars now that “cash for clunkers” is over.
Paulson, who made his previous record-breaking $4 billion in a year by betting against the housing market in 2007, seems to have made a big chunk 2010′s banner-year profits investing in gold, essentially betting against the dollar and other currencies. I don’t know enough about economics to know exactly how global currency markets are interconnected, but I do know that the federal bailout of AIG was widely speculated to have prevented a ripple effect so extreme it would have brought the entire country to its knees in a way not seen since the Great Depression.
Which, I guess, now that I think about it, could have sent the value of gold through the roof, making Paulson even richer, many times over. But who really wants to live as the richest man fathomable in a decimated world where there’s nothing much left to buy?
It’s truly dumbfounding that one dude just raked in $5 billion in a single year of investing. But it’s delusional to think he did it alone.
