Topic: How To Invest

What is Pat’s commentary for the week of July 10, 2018

Article Excerpt

When a hedge-fund manager goes into a performance slump, media and investor reactions often leave me with an odd feeling. They make me wonder, “Why does this surprise you?” The media and the investors they quote seem to treat a hedge fund manager’s slump as a temporary departure from a predictable career path—like a series of bombs by an Oscar-winning film star, or an unreadable experimental novel by your favourite author, or, depending on your politics, Hillary Clinton’s loss to Donald Trump. For example, John Paulson pole-vaulted to the top of the hedge-fund heap in 2008, with a superbly timed bet against the subprime mortgages that were financing the real-estate boom. When the boom collapsed, that single trade earned $15 billion for Mr. Paulson’s investors and $4 billion for him personally. To top it off, he was able to defer taxes on his portion of the profit for nearly a decade, using a U.S. tax provision available at that time to hedge-fund…

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