funds. and i've always been very interested in and fascinated by big trade and strikeouts and a big home runs as it were on wall street. i guess it is my -- i am a sports guy so i like strikeouts and home runs and i also feel as a writer there has been a lot of drama and listens to be learned from people who make good decisions and those who do well and those who can't make mistakes and you can learn from those as well, so those always have the most drama and interest to me. so here i was in the fall of 2007, sitting at my desk and things were starting to get bad. wall street firms were losing lots of money, merrill lynch, citigroup and i was covering some of this stuff with my colleagues and kind of figuring out who is next to fall and was going to have more problems and eventually things got much worse

obviously. and i got a call from a big hedge fund manager and this is sort of what i do. we treat information. and he said i just played tennis with a guy, his name is john paulson. i barely knew who he was the time, this is a hedge fund manager saying it, and i just could not believe how much money he's making now while everyone else is losing money. ..

>> i followed it up with about a year or so of work on my book. my book is about the oners in this crisis, as i've said. john paulson and others. but behind it all, what propels it all is sort of a con none drum that it shouldn't have been john paulson and the invs. tours that i it all is sort of a conum john paulson and the writers i write about. obviously the greatest investor of the past century or so, he could have done it. he didn't do it. mike is a expert in

mortgage-backed securities. that's what john paulson threw himself into learning about and analyzing and betting against. jim is the most famous short seller out there. this trade is a short sell. and jim didn't do this trade. david tipper who is someone i wrote about more recently he made $7 billion last year. he is known for his big trades. big debts. he's okay with big trades up and down. very volatile trade. that fascinating me and continued to do so. it wasn't the big group of big names on wall street. those that did it include john paulson as i mentioned, just to tell you a little bit about john paulson.

he spent a career on wall street, he went to nyu, undergrad, did well. went to harvard business school. did well. started out with investment banker at bear stearns. what he focused on is merger arbitrage. it's among the safest kinds of investing. you buy the stock and your short or you bet against the company that's doing the accusation. you could shake it up a bit, sometimes he did. it's not full of risk. you can do better than the next guy. he had a good career and track record. he was a merger arbitrary, he didn't net big gains in a year. he was the one who did the trade. his right-hand man, the one really key in that trade is a gentleman named palo. he's a native of italy and also

a smart graduate of harvard businessman. he is even more unlikely to have played such a crucial role in the greatest financial crew in history. he spent a career kicking around wall street. investment banker, didn't do very well. never got a promotion that he wanted, never really rose very far. ended up leaveing there. did some trading on his own. he didn't do so well. he traded -- tried to trade one the through the divorce traded his wife money a little bit. didn't work out so well. had some of the great ideas. you don't want to do that too much. he the great ideas, great business ideas, innovative guy, didn't work out for him. again, sharp as they come. yet he calls up in the spring of 2005 he is out of a job.

he was living in westchester north of new york city in a one bedroom apartment he had two children from one of his two marriages. he didn't want to go back to italy and leave them behind. he wanted a job. he was approaching 50. it's tough on wall street. it's a young person's business, financial industry. he was aware of that. they called john paulson asking for a job. they interlapped a little bit in bear stearns. paulson said the only job i really have as an analyst, that's because someone left to go to business school. you don't want that job. it's a grunt work. he said no, i like that job. i'll take that job. again, unlikely two years later in the fall of 2007 he was on vacation with his third wife wife --

[laughter] >> talk about the greatest trade ever. [laughter] >> so he's on vacation with his new wife. they are in st. barts, and they stop to check the atm. she stops to just get the money out of the atm and he hadn't really told his wife too much about the trade they were working on. he's a little superstition and didn't want to jinx it to much. she had an awareness it was going well. not many details. so she's at the atm and she checks and he's like there's $45 million in our account. at that time, he really had very little money in his bank account. which was shocking, that $45 million was the part of the $175 million that he made for the bonus for that trade. he goes from having nothing really one bedroom apartment in 2005 to two years later he's got

$175 million in the bank and st. barting having a good time. so -- he's again unlikely. palo, the other characters i track equally unlikely. there's a doctor turned investor in northern california named michael burry. he was early on the trade. before paulson and others. he's a head strung guy. he's a little bit stubborn. he didn't always get along so well with his own investors. a lot of them didn't believe him. he was doing really well with bidding on stock. this as we'll talk about in a second, the trade had nothing to do with stocks. it was derivatives, mortgages, a lot of his own investors didn't believe in him. they were skeptical. burry kind of persisted. he gets a lot of credit 37 he's really a kind guy and a generous guy. but he can be a little

stubborn. unlikely and an interesting guy to have pulled this out. in southern california, another guy that i write about jeffrey green who was the hollywood type. he was a real estate investor who made a lot and lost it all and had made more afterwards. he steals the idea from john paulson and runs with it. they were good friends. he did a lot of his own work. he gets a lot of credit as well. he's not kind of the obviously guy to pull off the greatest trade in financial history. there's a young guy in andrew in santa monica, california who is more of a surfer than an investor. he's very passionate about his investing, the other thing he's passionate about is legalizing marijuana. you can talk about both. you can -- again, a guy you really wouldn't predict. there's a guy named greg litman. he's a trader at deutsch bank,

still is right now, there's rumors he might legal. he's told by colleagues that housing is going to go up. he risk his career to bet housing and subprime mortgages and to pull the trade off. in my view, these guys are the climbing up a mountain. they are going to the top. and paulson make it is to top and a few other come close. but not all do. some slide back down. why some succeeded and why some didn't, it's a fascination. that's why i wrote the book. why it was these guys and not the experts. that sort of kind of drives the book, as well as the dynamic about writing about winners. i thought it would be more enjoyable to write about and read about the individuals who figured this out. we can learn from these people as well, as opposed to those who learn the mistake. that's another reason why i threw myself into the book and

project. i still find it kind of fascinating. first thing is why the experts didn't see it. that kind of runs through the whole book. it's a fascinating period of time in our financial system and in our nation. it's history because the very people that created this toxic kind of mortgage and all of these kinds of things that blew up were the very people that got burned the most by them. and there is sort of this kind of view now that those investment bankers were sort of evil and they are out to get the investors. i don't think that's the case. the proof being they got hurt the most. citigroup and merrill lynch, they are the ones that created this stuff. it's almost like a butcher who

has this poisonous meat, knows it's poisonous or maybe should know it is. that's the point. brings it home, and instead of selling it all, bring it is home and serving it to the kids. it's always been fascinating to why that's the case. again there's this sort of understanding that they knew what they were doing and hoisted it on the investors. i know some of these people. i was a gentleman in my community in the little town of new jersey. he created some of the cbo stuff. so i talk to these people. that's sort of what i do. i got some observations as it very to answer that question. if you think about it, there's been an evolution. maybe there always have been p there was an evolution in the creation of some of these

investment products. then you have mortgage-back securities, and take them and put them with some other debt product and create the cbos. the obligations and then you have synthetic versions and credit default swaps. thing really evolve. and became much more complicated each year. and everyone kind of tried to do outdo the next in terms of creating these products. to me, it got to the point where the very people at the investment banks didn't really understand them the way they should have. in my view, you have two tiers. the senior people, the robert ruebens and the chuck princes and stan o'neils, merrill lynch from the first two gentleman helped run citigroup. they were too senior. they didn't know what the products were or their risk. they deferred to the people

below them, you can criticize, the expert as well as the model that everyone was relying on. these models were based on historic data. a lot of that housing had never fallen on a national level. at least more than a small blimp in a month or two, if that. so the models all said this is safe. the rating agency said it was safe. it was a little bit of passing the buck. it was a little bit of well, i can't understand it myself. i'm going to defer to the experts. and the experts were either relying on models or they were focused on their competition. and on wall street, unfortunately, we're at the point where everywhere is worried about the next guy. and everybody is worried about the next quarter and meeting earnings. so my friend in my town who is not a bad guy, he knew if he wasn't createing even if it was

tockic, somebody else would be. i don't think he thought they were so back. the bigger think got, the more -- each group knew about their own area and the risk level. maybe they said, yeah, i could see what that would happen. they didn't have a larger group and the overall risk of the firm. there were some firms that were better than others. goldman sachs does a much better job of drilling down and seeing where the risk is. that said, goldman sachs was late at catching this as well. they get a lot of credit. and people either love them or hate them. but in the spring, actually fall or late summer of 2006, josh was the head trader was the paulson

and company. he was invited over by john paulson after he established this bet. the surgery against the toxic mortgages, tockic mortgages truck. paulson invited him other there. he gets a lot of credit. i think there's the real lesson that paulson invited groups of analyze, many of them were bullish. josh sits across from the experts at paulson and he's -- he's the number one guy in the streets. he knows this stuff better than paulson. paulson was a merger arb for years. he says whenever you are selling i'm going to buy. the guys at paulson were taken back. was he trying to help them because he traded with them, maybe trying to help them out, or trying to fake them out. maybe he was sick of taking other sides because they kept shorting and shorting. he was trying to tell it stop

it. fake them out. all they knew in the top guy in the business was warning them. yes, they kept with their trade. that saws to me, paulson gets a lot of credit, goldman sachs was a little late. they realized late '06 and early '07 how dangerous some of the mortgage on their books. they turned around and not only shed some of it but started shorting it. to me that's a great investor and great firm. they get a lot of credit. back to my earlier theme. the experts really didn't see this coming. part of it is they are too caught up in the their own world. you know, when it comes to the experts who are investors, who should have been seen this coming, the mortgage experts. there were guys who dealt with mortgage product day in and day out for years. years and years. this is what they did. yet this merger arb guy, john paulson was the guy that realized how tockic it was.

qualification that? >> why was that? part of is the value. you don't make home runs too often president it was all sort of what pool of mortgages looked better than the next. i'm going to buy this one, shorten this one if i can, there's no relative value. normally it's a step back. that speaks to a problem on wall street. if you think about it, the people that rise to the top at the firms are people that play by the rules. are the people that kind of the -- are really good in the institutions. the geithners and thebear gnash -- bernankes, hank paulson, bank of america, they are people that are good within the firms. but the firms don't usually have people sitting around speaking about the tales, what bad can happen? chuck is famous for saying we

have to keep dancing until the music is over. that's sort of the attitude. maybe i'm worried about this product that i've got on my book books and sell it. if i don't put it on my books, someone else will. i'm going to lose earnings. that's a real problem on wall street. we don't really have the people that think a little differently. we don't have enough of these people. part of the issue is in the hedge fund world because it pays so well. and it draws out towns. but it doesn't just draw out towns, the people the moynihans and bernankes, those kind of people that play by the rules. this is part. they are very entrepreneurial. it's one reason i enjoy writing about them. they think a little bit outside the box. no sharper -- i don't think that smarter than the people within the firms. but it's sort of a self-selecting group of people

that take the risk and go join a hedge fund or try to run a hedge fund, they don't like working for the people often. they think about what bad can happen. they are a little more skeptical, i've found. and unfinancial, -- unfortunately, they get drawn out of the firms. what's left is small people are worried about the quarter to quarter too often. goldman sachs does well. i think part of the reason is because they keep a relationship. more entrepreneurial people, i think, who make want to start a hedge fund, they know that half of them, i'm exaggerated, many of the hedge funds are started. maybe by definition, self-selected group who go to goldman, goldman, they keep in touch with a lot of the x goldman. if you are a risk manager, i think it's easier to make a few calls and see what the real risks are out there. maybe that's some kind of lessons that some other firms can learn by.

but there's the sense that i had that each of these firms became more leveraged and didn't real estate the overall scope of the risk. and saw the subset in their own worth world. no one was able to take a step back. you make so much money on wall street there aren't many people with great experience, institutional experience. there aren't many people that remember ltcm, who work on wall street, the long term capital management in 1998. any other industry, the people that do really well usually stick around and they don't make so much that they can retire. they retire after 10 or 15 years if you are good. the really good ones often left to start hedge funds or retire and live on some island. the ones that were left were often younger. they hadn't remembered in the early '90s, the housing market

did have some problems. boston, california, it wasn't on a national scale. but clearly, there was some history. and some of the older people actually remembered that. john paulson was approaches 50, as was palo, jeffrey green, the playboy investor who made over $1 billion, he was approaching 50. so there's something to be said for having that experience and or at least having someone isn't the firm with some of that experience. too often, some the firms, i think, only the street don't have those kind of people with that kind of experience. the other issue is a lot of things move. you have to have patient. that's not exactly a virtual that's rewarded at many firms on the street. again there's a lot of competition. if things change slowly -- and it really did. it just took years. i mean it's a myth that people

weren't bearish on housing. my brother, ezra has written about some of those issues. there are all kind of people that bet against housing in 2003, 2004, and they got burned. some who could hold on ended up doing really well and making a lot of money. but hard to when we're in a world where it's much easier to be come paired and come pair yourself against others. your other managers or other investment firms. people used to be must be on a quarterly or yearly basis. now daily. people look at the screens. they know what they are doing. they know the p and l. profit and loss. they have the sense for the competitor. i talk to these guys all day long. people often criticize me and writing negative. you always write negative stories about hedge funds and the industry. the stories come from people in the industry. because they all hear what each other are doing.

they are the first ones to call us and tell us who's blowing up. they are very focused on each other and their own returned and investors and competitors and rivals. it's a fascinating thing where their worth is often determined by that computer screen. and the p and l for that day. you could have done really well for the year before. angie, you probably know these guys as well as i do. a lot of the guys i talk to don't have to work. they don't. they probably should be curing cancer. but they are not. instead, they are really focused on that trade, this trade, and this year, and this quarter, and today, and trying to beat the next guy. half of them are former athletes or want to be or have that adrenaline. that makes them happy. there's an argument, probably another discussion for the free flow of capital that could be a

good thing that focused on these kinds of trade. we do need sharp people. so these people are very focused on themselves and on their excel can tours. and these firms are very focused on their competitors. that cost, i think, in the end, they saw the changes. they didn't take a step back to see what could tap. the other fascinating thing that i found in my research for this book is one the reasons why people didn't do the trade, i'll explain in a second that it cost money. what i mean by that -- i'll explain it now. the subprime trade -- i'll take you to john paulson. here he was in 2005 or so. he has this vague worries about housing. he's not a housing guy. but he's not a housing guy.

he's looking for protection on the overall short folio. but putting on the 500 which would protect the downside if the stock market fell. so he was looking for some other way to hedge himself. and his right-hand man, palo, native of italy, he had been at the firm for about half a year or so. he said, well, john, you might want to think about the kretek fault swaps. they sound complicated. but they are not really. they are basically a derivative. it's an insurance contract on you can do it on anything. any kind of debt. so it debt defaults and you have the defaults but you have the insurance, the credit default swap insurance, then you are protected. palo said to paulson, paulson, you could look at the credit default stuff. it protects your downside. just like my insurance contract,

your downside is protected. because you pay a certain amount and you are protected. so paulson is like wow. i never knew much about this. i vaguely heard about it. and he knew himself into it and learning and it. to me that's one the most impressive things about those that did the trade. i mean think about it. many of the investors were approaches 50. they had already done well. credit default swapped are complicate, they can be very complicated and derivatives. warren buffett is warned about derivatives about the top investors why didn't you do this trade? bill gross, he's the king out in california. he said derivatives aren't really what i do. yeah, i could to it, greg, but my investors don't want me to do some much of it. a lot of investors are not fond

of the credit default swap. it helped lead to the fall of aig. there's a reason to be weary. john paulson learned about them and palo as well. the thing about credit default they cost money. they are like a credit insurance. yet 2340 one else is behind. they were dirt cheap in 2005. here he is the merger arb, he has vague worries about the housing. palo said about the credit default swap. the downside is 7% and the upside is 100 of percent a year. why isn't everybody doing the trade. i kept asking that question. unfortunately one the whereins is negative carry. negative carry is sort of complicated. but basically just means you are paying out. at the beginning of the year, everyone starts fresh and

everyone is focused on themselves and on their competitors. to pay out by the insurance, i don't want to be behind my competitor. yeah, not by more than half a percentage point if i buy a lot of this. but no one wanted to buy, half a percentage point behind their competitor. it's a fascinating thing to me. the outside backed up and brought as much as possible. which is what john paulson did. it helped being an outsider. people on the inside who get judged day to day and worried about being up 67% for the year when their big competitor is up 7.5%. they are not buying. i understood the trade. i got it. but negative carry. that was sort of their justification. maybe that sold, you don't want to -- you'd rather risk being -- it's worse for a lot of these people. it's actually worse being behind

a half or full percentage point than it is missing out a trade of the lifetime if it means that everybody else missed it out. missed out on the trade. that's what happened. most people missed the trade. so the guy that passed on the trade is still had a job and still making a few million a year. yeah, i passed on the trade, greg. look at me now, i'm doing well. unfortunately, you're not rewarded for taking these, i guess, career risk is really what it is. it's funny. the guy that takes the most risk in my book is greg litman, because he wasman a bank. he was working at deutsch bank. :

analysts said don't worry. some of them were skeptical. so, he gets the risk and takes

the biggest risk of anybody in this that i write about largely because he had more downside when it comes to the stuff come he was making a good living yet he did the trade any way. excuse me. so those are the people that should have done it in the den, i guess one of the things i've come to the conclusion to that wall street talks a big game about being a contrarian investor, their books written and they are not contrarian at all. people jump on trades and that's why i think we are in an age of bubbles where a hot treat this communicated much more easily than ever before, and sort of a separate topic but we are in this period as an academic he would think markets should be becoming more efficient over

time, not more inefficient. you've got more information, more plan investing i should say and slip of the tongue. you'd think things are becoming more efficient and he would have fewer bubbles over time, not more, and yet he has documented i think she tells maybe 26 or so financial bubbles in the past century. if you think the last few years he had obviously the housing bubble, energy prices, oil prices shot to 140 apparel down to 40, 50, back up to 70, asian markets come asian currencies in 1997 or so and the technical bubble obviously was a huge bubble. it's my view that it's easier than ever for people to jump on trade. it used to be the case that if i'm a commodity expert don't do anything about stocks. or if i am the stock and by i

don't do commodities if they need a seat on the trade how do i do it? nowadays there are eft and credit defaults of and other derivative ways to express a trade, and to me it is leading to just more of these bubbles. we are we to have more of them and people are piling on to the trade command its troublesome. it is worrisome and you wonder what kind of where we are now. maybe china, maybe some brazil was up about 100% last year and people are talking about canadian realistic as a bubble. i'm not saying it is but i do think we are kind of the point where there may be too many of these bubbles and it's costly, and again, wall street is not as contrarian as it thinks st. john's on the bubbles largely because they are worried about the competitors are doing and they don't want to be left out. i've been writing a lot about the pigs trade credits, the pigs trade now. a chollet of light that the "wall street journal." i apologize. portugal, italy, ireland, greece

and spain said its bidding against those countries, the debt of those countries and all kinds of investors are giving it. it's not just the sovereign debt experts or bond experts, people that are experts in international affairs or anything like that. people who never knew anything about these countries i assume they can find out the match, they are piling on the trade and i'm not saying it's a bad thing it's just interesting dynamic and you're going to get more of these and it's hard to be contrarian on the streets harder than ever i would think. why was it these investors i write about why was it john paul and jeffrey green, greg linen? again there is a myth out there that everybody trinkle leedy and everybody believed in housing between this data into the center and 2003 there were 14,000 mentions of the phrase housing doubled in articles in u.s. publications over the next three years there were 5500

mentions of the phrase and big stories and newspaper stories and other places, so it wasn't even the case am i investor's the one my right about were the only ones who were skeptical. there were a lot of people spectacles, why was it a day that came up with it run of the reasons is some of them were late to the game and that can help so good fortune here is important as well, so there were investors who put on the trade about credit the fault swaps, this insurance on subprime mortgages than they bought in 2003, 2004 and nothing happened and their bosses got upset and they took the trade off or they took off themselves and their investors got upset and their clients were not thrilled, they were losing money and other people bet against home builders or try to come up with another way to bet against housing and there were not a lot of great ways. there were if you bet against

let's say a home builder it didn't really work for a long time and then even if he were convinced that eventually it would work there's a lot of consolidation that industry and maybe the one you bet against what end up doing pretty well and there was the danger and a lot of times eight hirsh people so there were not a lot of ways to get cautious about housing you could move the misses and the kids out of the house and ranch. that's hard. they've got friends and a lot of stuff in the house. it's not easy to do. there weren't many ways to do it and those that were worried in the credit the fault swaps early, it took a little while for them to be really great trading mechanisms and it is one thesis it took until 2005 and early 2006 for there to be a great way to bet against housing and bet against subprime mortgages and that was credit stifel swaps when the introduce synthetic ones where you can bet against a pull you didn't have to own the pool and basically

you by some insurance and then there's the index that tracks subprime mortgages said that was all winter dustin 05 and 06 and then maybe it's not a coincidence that perhaps that's when things started imploding but they really wasn't easy to bid against holes in and was better to be lead than to be early on this trade and that is what john paulson and some of these people have going for them in that they got nervous about housing. in 2005 it in 2006 is when things start of flattening out and early 2007 is when there was the implosion and all kind of fell apart, the housing market so it helped being the plate and having good fortune and also it helped ignoring the experts. as i said, john paulson to his credit in sight of all kinds of analysts, top guys into his firm to challenge their thesis and to their credit they stuck with the thesis and hold onto it and i give them more credit for that

than i do just for kind of putting on the trading game early holding on to your conviction and it's a remarkable temperament that allows yourself to do that. you have to be self confident and ignore everybody else and what happened was paul allegrini came up with a charge and it showed housing prices on a national basis over the past 75, 80 years or so and i was basically right in front of them, it was clear and things were slowly growing and they shot up and they figured out and he came to paulson and said check this out and paulson looks back and says literally look at this data it's right here. it's clear. we should start bidding against housing and that is was held on to it. the irony is to win the first people to come up with the data. the already published of the a year earlier but paul guerini came up with it himself and he became convinced of it as did paulson and they held on to their conviction and it's pretty

impressive because again it's hard when you have the experts telling you one thing and your clients are nervous, there's a lot of investors who didn't really believe in the trade. some did and some realize it was very little downside and a huge upside but here is a stock by paul, with the body and on the supply protection and that is why paulson was smart in that he had a lot of it in his own funds but he said if i'm going to make a big bet i've got to set up a new fund, just dedicate to this trade. one trade fund. now a lot of people on wall street are doing that. bill admin did one for target and others about the time there were all that many people. it was seen as justification, how do you have one trade in a fun day and when you started raising money john paulson had difficulty key only reason hundred $47 million at the get go and early 2006 for the dedicated funds she was a rejected time after time he went

into harvard and they said we don't see it, we don't get it are there other ways to express the trade and they didn't do this trade but they thought they had a better way to do it. he got rejected their and a lot of different places and the experts told them housing doesn't fall on a national basis, how are you going to get out of your trade and things like that and paulson stuck to the gums and that kind of conviction to me is pretty impressive as as i am impressed by how he held on to the trade and i'm going to tell you in february, 2007 they made 66% in a single month. just to give you some context they never made than a few percentage points in a single month. 66% in one month. they were making war in one morning than george soros made bidding against the british pound and george soros made about a billion dollars betting at the british pound for his hedge fund and paulson was

making billions and paul green hadn't been paid much before so he comes to his boss and says we should be taking some of this trade-off, wright and paulson said no look at the data don't forget the data and helped paulson was ready and he didn't need to take the profits like other people would have been tempted to. he held onto his conviction and they are up 66% in a month and investors called up and said 6.6%, there is a typo and they said no, 66% and some of them said it take the tree of, some of them encouraged to come some of them said move me to another fund which doesn't have as much exposure to these sub prime credit to be called swaps which is what the trade was and paul sing data and he didn't break stride, he held on to this trade and that kind of conviction to me is pretty impressive and she gets all kinds of credit for that. the other lesson, the kind of

thing i've learned from paulson and its trade and some other people that have done well and i've written about is the idea and they've gotten both in to this going for the jugular and when you see an opportunity it's like in sports, to any of my metaphors in my book or sports and i apologize for that but it's very much like sports where at that they say you have one or two pitches to hit. some are going to be bad, some you can't really handle but you are going to get one or two and those are the ones that you've got to pounce on and hit out of the ballpark and it's funny talking to these investors they say the same thing that paulson and george soros and warren buffett and timber they say you're not going to have many of these opportunities but when you've got the news got to go for them, you don't have many and that is where paulson gets a lot of credit. he saw this huge opportunity and he jumped on it and backed up the truck and ignore everybody else and it's a cliche, you

know, be confident in yourself but they've got this remarkable ability and it's almost paulson and other states got this ability to kind of turn on a dime and paulson for example and to those of and the firm made $15 billion betting against housing and subprime mortgages again by far the greatest trade in financial history soros had made a billion dollars spending against the british pound so he makes $15 billion in 2007 and in 2008 he made another $5 billion transforming the trade and this is where he gets a lot of credit as well in my book, no pun intended, shifting the trade from one against housing to one against financial firms because he saw where the dominoes were going to fall. he settled on the second housing is falling apart, prime is melting down, who is holding the stuff and they did the research and they said look at maryland and citibank and these firms, bear stearns and lehman brothers and they started buying credit to default swaps model no

mortgages which they have been doing but on the firms themselves and the $5 billion doing that in 2008. but then in early 2009 he doesn't just take the trade-off he starts going along. he starts buying the three banks he did against and it's a remarkable impressive, and i see it all the time with the best investors they've got this almost in personal kind of way of looking at the portfolio they don't fall in love with their investment which is what the average investor often does. someone told me that you don't want to be married to these kinds of people they can't really kind of separate and not get tied up emotionally. that's not to say john paulson isn't a person to be married to. he's probably a good person to be married to come a good father and good person i'm told. but you don't fall in love with a portfolio and it doesn't necessarily make for someone who is going to necessarily be friends with but it's a great investing treated not to be so emotionally involved and interested as it were in your

portfolio. so going for the jugular and not kind of falling in love with your investment, those are sort of some of the things i kind of picked up from these investors and have been impressive to me. i was just going to segue into the investors are doing now and the biggest trade, there's been too actually, one is the gold trade. so, john paulson and her late 2008 s things were melting down and we were throwing money at all the problems out there as a government, he started taking a look at gold because he was worried about the money supply leading to inflation and gold as a great way to hedge his lyrically it's been a way to hedge inflation, there's another top investors who've been buying gold as well. it is a fascinating investment because it's different from the housing that because there's more downside. we don't know what gold is worth. about 1100 today.

is that cheap, is that expensive? i don't know. you can't dcf like you guys need to learn to do. it doesn't pay a dividend. we even like gold? what investors has a fault in queens somewhere filled with gold and he doesn't own it because his wife is a big fan of gold or anything. he likes cold because he thinks the next guy is going to like it even more so that seance like a creature trade and he had historic the thousands of years gold has held up and has been an alternative to paper currency so i get it if you are basing your paper currency gold is not a bad place to be i just find it to be a fascinating investment and it could double in price and it could be cut in half and the very investors who bet against the housing has shifted to do that including john paulson others are betting against the countries like greece and some of the affairs and they have done very well and it is an interesting trade. it's not clear how you can make money on the other side of

things really implode was on the other side. it's a little bit like bct history to have to worry too is on the other side each trade with a lot of these people are betting is that it's just either the euro collapses or just yields on a lot of the bonds, the debt, the rate that a lot of the countries are paying is going to have to go higher and continue to go higher as people just weren't about the debt than the home run trade is japan, some of the investors are betting against interest rates in japan which have been low for eckert, about 1.3%, ten years the japanese bonds, 1.3%, they haven't been above 10% in years and that is why it is cheap to bet against to buy credit-default swaps or do other foreign currency moves that are in effective dates that if the rates go higher japan is going to have trouble paying its debt and have to restructure. it doesn't have to go higher before the interest costs get

higher than you have troubles with a lot of these people are betting against japan and we will see how that does so those are the kind of big trades on working right now and i invite any and all questions about anything in the book the greatest trade ever wear anything i'm writing about right now. [applause] i think i get the privilege of the first question. we only have time for what? i find it interesting the greatest trade ever and the second greatest trade ever work short. do you think that there are more great trades among shorts than long? >> they tend to be more asymmetrical and that is what these guys look for so the crowd generally does well in the herd as it were bidding on things to go higher and things generally have gotten higher, things have

improved over time, so it is the out lawyer kind of trade is often the short trade. it's not always the winning one that it often is. [applause] i will stick around if anybody has any questions. >> gregory zuckerman writes for "the wall street journal" and the heard on the street column. mr. speaker, on this historic day the house of representatives opens its proceedings for the first time to televised coverage. 31 years ago america's cable companies created c-span as a public service. today we've expanded your access to politics and public affairs, nonfiction books and american history through multiple platforms, television, radio and online and cable television's latest gift, and the extensive

free video archive, c-span's the new library. we are here with christina aquith, author sister is in war. christina, who are zia and nunu? >> they are 18 and 21-years-old at the start of the war and they are filled with hope for the americans will do for iraq because they suffered horribly under the iraqi regime. fielder sister goes to work for the americans and ends up falling in love with an american contractor and the younger sister, nunu, is struggling to get her university of the university which becomes harder and harder as the americans lose control of the country and the radical islamists gain control. >> when did you meet him? >> i met them in early 2003 at the start of the war. >> through your book you talked to zia and nunu and two other women?

>> captain quinby u.s. soldier reservist. she's at the start of the war and she eventually becomes in charge of really the biggest initiative to bring americans version of women's rights to the middle east. the other woman is omar, she is an american activist and is working for women internationally in iraq trying to help iraqi women build a grass-roots effort to strengthen their rights. >> so you followed these women through the stay on the ground in iraq and when was that from? >> i was there in may 2003 until the beginning of 2005. >> what changed tuzee? >> tremendous change. we went from a country that was absolutely thrilled at the fault of the u.s.. there were overthrowing saddam, the potential to rebuild the country to give iraq a new lease to a realization that the u.s. didn't quite know what was doing. it wasn't prepared for the problems that it faced. in the day -- the country was

spinning slowly out of control. it was a very safe place in the beginning for to this journalists and became an extremely dangerous place by the end. >> these women come from different backgrounds. how did they see the change in the way they were treated as women in iraq? >> they have a lot of freedom under saddam hussein. they lost their freedoms instantly with the war as often happens with war there was no security so there were virtually under house arrest for a long time. that eventually got even worse unfortunately at that the power vacuum led to the of life left radical islamists with jury conservative version how women should lift many influenced by iran and iraqi women felt themselves unable to leave the house possibly losing their rights in the constitution and government in matters of divorce and inheritance family law and they became desperate for the future might hold and surprised they never would have thought they would have ended up like

that because like i said, they had a lot of rights under saddam hussein. >> you reported from them the least in many years. have you seen the relative change in the we've been treated as a female reporter on the ground in the middle east since september 11th? >> i think most arabs were welcoming to americans despite what the media portrays them as being anti-american. but i think that the u.s. aggression in iraq and afghanistan have changed and have made a lot of errors feel that all americans are against the arab world and against islam as a religion. so i've had to counter that and i have had to address that in meeting them. >> is it difficult to be that as a journalist? >> yes, it is. there's a lot of suspicion about journalists in the middle east. a lot of them think we work for the cia, they are spies, they don't quite appreciate the wall that exists between the media and the government in this

country so they don't really believe that we are neutral observers. i have to counter that before i got anywhere in terms of talking toap them. >> christina asquith, the author of sisters in war story of love, survival and new iraq. thanks so much. in their book, shaping foreign policy and times of crisis, law professors michael scharf and paul williams talk about the impact of international law on the decision making process of the state department. joseph beth booksellers in lyndhurst ohio posts this hourlong discussion. >> good evening, ladies and gentlemen. welcome to joseph beth booksellers, a bookstore in beach would ohio, legacy village for those of you in the television audience joining in tonight. it is wonderful to see so many people who have come out on a cold cleveland winter night to

hear about paul williams and my new book shaping foreign policy in times of conflict. this book is literally so hot off the press but it's still warm. the richest delivered to the bookstore yesterday and we are very excited to launch our book tour with this even this evening. i'm going to start off by introducing myself, paul, michael author will introduce him, we will tell you a little bit about the book why we wrote it and how we put it together and with our unique findings were and then we are going to spend most of the hour answering your questions because we think that is when to be the most exciting and interesting exchange we possibly can have. so to begin with, i am michael scharf, professor of international law and director of the international law center at case western reserve university school of law and i'm glad to see several of my students have come out this evening along with so many friends and people that are interested i think in the

subject. i formerly worked at the u.s. department of state during the first bush administration and clinton administration along with paul williams and the office of the people what pfizer which is the subject of this book and the role of international law in the shaping of foreign policy. to get paul and i after leaving the state department created a non-governmental organization called public international law and policy group which paul will tell you more about it this is our second book to get there, the 13th book that i've written and i am looking very much forward to telling you all about it this evening. >> thank you, michael p. ribaldry quick 32nd introduction. my name is paul williams, professor at american university both in law school and school of international service and it's a great pleasure to be back in cleveland again. michael invites me out every now and then to give a talk or purpose of hate in his conference this and exchange ideas with his colleagues at

case western. it is a pleasure to be out here from american university. i'm also the director of the organization michael and i ron called the public international law and policy group which is a global pro bono firm and what we do when we are not teaching on tuesday afternoons the rest of the week we provide free legal with vice to countries involved in peace negotiations, drifting posed conflict constitutions and prosecuting war criminals to we've we've had offices in about a dozen countries, somalia, sudan, ugonda, iraq, sri lanka, nepal, and reef príncipe did in about two dozen peace negotiations or post conflict constitution's, and we are always wrestling with the question with our clients what is the role of international law. they always want a lawyer in the peace process or the constitution but they don't want you to cross your mind to get out of the box into the political realm and the oftentimes turn to their lawyer and say is that real law or would he want to happen, my

lawyers telling me it is also i have to do it. a lot of those questions are what pushed michael and lie in the direction of this book, the rules call and shaping u.s. foreign policy. >> now, today we are going to be talking about u.s. foreign policy and just about a dozen hours ago a major event happened in the world. there was a huge earthquake in port-au-prince in haiti and just now they've announced the casualties of that for over 100,000 people. so i think it is appropriate that we began with the moment of silence where we think about the poor souls and how we can help out in haiti. okay. so, we have been wrestling with the question is international law really law to read when i teach my first year international law questions is usually the question we address in class. if you or someone who took philosophy class is as an rg