John Paulson of Paulson & Co. took in a record $3.7 billion. Mainly by betting against mortgage debt products. Top finance guy George Soros made 3 billion. What do you guys think, overpaid or deserving the money due to their funds perfomance? Personally, that kind of money is disgusting. You could find a cure for cancer, and you still shouldn’t make that much (in retrospect, the researcher who does find it will probably make a six figure salary only…)
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How can one be overpaid when he/she owns or partially owns the company and are paid based on their performance and the performance of their firm? Let’s say you own 50% of your privately held firm, and the bottom line is $6billion…how much should you take home?
CFAMaven Wrote: ------------------------------------------------------- > John Paulson of Paulson & Co. took in a record > $3.7 billion. Mainly by betting against mortgage > debt products. > > Top finance guy George Soros made 3 billion. > > What do you guys think, overpaid or deserving the > money due to their funds perfomance? > > Personally, that kind of money is disgusting. You > could find a cure for cancer, and you still > shouldn’t make that much (in retrospect, the > researcher who does find it will probably make a > six figure salary only…) Ummm…much of this would be due to incentive fees on their funds I assume. If it was mgmt fees, yes, that is a tad exorbiant, but if it’s for making their clients money, I say rock on. As well, much of the money donated to chairty will come from these types of folks, not from the other 99.99% of us who would like to help out more, but can’t.
I think you would be singing a different tune if you were in his position. Also, what if he is a big philanthropist. He probably donates a lot to charity. Edit: I was too slow.
Heck I would retire and travel the world, go fishing, go hunt some cape buffalo in Africa, etc.
Paulson absolutely deserves his money. He made a very well thought out and well timed bet on subprime by buying puts on the ABX index. His fund returned something in excess of 300%. He also had a merger arb fund that ranked #3 on the list in last week’s Barrons. For the ABX trade, by using puts, he protected his investors by defining his downside. As you can see, the upside in this trade was spectacular. Best trade I have ever seen or heard about in my career.
tobias Wrote: ------------------------------------------------------- > Paulson absolutely deserves his money. He made a > very well thought out and well timed bet on > subprime by buying puts on the ABX index. His fund > returned something in excess of 300%. He also had > a merger arb fund that ranked #3 on the list in > last week’s Barrons. > > For the ABX trade, by using puts, he protected his > investors by defining his downside. As you can > see, the upside in this trade was spectacular. > Best trade I have ever seen or heard about in my > career. It depends on how everyone else at the firm was compensated. If the next highest person is at 5 million, that’s going to create a lot of animosity towards Paulson and his firm will face the danger of losing some top talent.
Actually, I believe part of the reason Paulson was so successful was he took a much more sophisticated approach than just shorting ABX. He dug deeply into the collateral of specific ABS CDO deals and shorted the most toxic stuff he could find. Obviously directionally he was right on the entire asset class, but part of the reason his success was so spectacular was that he spent a lot of time picking the best instruments on which to express his views, magnifying the results as his thesis played out. I’m not sure I can be ok with someone earning that much in a year though.
of course he deserves it - someone voluntarily agreed to take the other side of his bets and his clients knew the fees going in.
Ha, if you taxed him 99.9% of his income, he’s still walk away with $3.7 million, which is nearly 70 times higher than the median income of an American family of four in the United States in 2007. I’m a hardcore conservative, but this is why the nation has gotten richer in per capita basis over the last 20 years while the middle class hasn’t seen much of the benefit. But what do you do? I don’t believe in redistribution. Let’s just hope he’s a charitable guy.
Well, the avg american household better start doing something intelligent/creative. Its not the guy’s fault that he’s the one that came up with the idea. People will laugh at him if he bets wrong, but question his morality if he wins? Makes no sense.
Socialist Hippies be planning his death…they will rise up and “slay” him…
This is what happens when reward outweighs risk. Just wait til next year when all these other HF managers try to top these guys. It’s not gonna be pretty.
I think and have seen in the past that people who make money like Paulson almost always turn out to be some of the world’s largest philanthropists, both in terms of the size of their donations and in terms of advocacy of the issues they support. Examples abound - Bill Gates, Warren Buffett, George Soros, and on and on. If it wasn’t him making it, it would have been someone else (or a few someone elses), and probably just would have been a few extra Ferraris/Bentleys driving around Connecticut. This way I think we can look forward to substantial charitable contributions from these individuals. Look at it from their point of view - they know how bad this looks to the average American family scraping by with under $100k in family income, and will be quick to try to shun the label of “capitalist pig” that MANY are far too quick to apply. Put that in your pipe and smoke it, hippie. (not directed at anyone here of course)
ancientmtk Wrote: ------------------------------------------------------- > Well, the avg american household better start > doing something intelligent/creative. Its not the > guy’s fault that he’s the one that came up with > the idea. People will laugh at him if he bets > wrong, but question his morality if he wins? > Makes no sense. Pretty sure no one here is questioning his morality. I think people are just pointing to the utter absurdity (absurd as in the absurd size of the universe, not the fairness of it) of $3.7 billion in compensation. That’s more than 70,000 American households earn in a year. This one guy made more than the economic activity of many metropolitan statistical areas–for managing money. Not for revolutionizing the world like Bill Gates. Honestly, $100 billion doesn’t even do justice to the impact Bill Gates has had on the way the world works.
… So if $100 billion is an appropriate monetary reward for what Bill Gates has done for the world, then what is the comparably appropriate monetary compensation for Warren Buffett, who arguably has done little other than be an utterly brilliant investor (charitable works aside)? I think saying anyone “deserves” any amount of money is getting into silly territory. This guy had an idea about the market, went out and executed brilliantly, and turned out to be right. Others turned out to be wrong. For a lot of them, that doesn’t make them better or worse money managers than this guy, just that this wasn’t their year and their time for hitting on their big great market idea. This guy had a great year, and he gets my congrats at least (not that he needs or wants them of course). Money well-earned in my view. Comp is just a number anyhow with most of these guys, as their net worth (from what I have seen and know of managers in this league) is heavily invested in their funds, generally highly illiquid, and doesn’t represent money that is really there for them to spend in the short run. On a sidenote, all this popular and media backlash lately against moneymaking and free-reign capitalism that has taken over network news as the root of all evils is starting to get on my nerves. Yes, unfettered capitalism (and some stupid decisions) perhaps led us into our current predicament, but capitalism will also be the ONLY thing that will lead us out, something that stupid commentators forget to mention far too often. (Rant over, been watching too much cable news, sorry!)
What was interesting was to see George Soros at number 2 - lately he has been everywhere, blathering on about this being the mother of all financial meltdowns, the end of life as we know etc etc… I now know why he’s spending so much of his time talking up the problem, he’s making a fortune out of it. Just a bit more sophisticated than a stock chatroom spammer doing a pump and dump…but not much more noble. Good on ya George. How much integrity can $2.9bn buy?
Right… The entire sub-prime crisis/credit crunch does not exist…Its a fabrication of George Soros’ rumour mills!
No Syd_RE, the sub-prime crisis/credit crunch does exist but it is clearly in George’s best interests to talk it up, make it seem much worse than it really is. I was wondering why I was seeing so much of him on TV and hearing him so much on radio. Here you go: George Soros warns of ‘serious’ US correction - Times Online 6 Nov 2007 … George Soros, the currency investor who almost single-handedly drove the pound … The medium term fall-out of the Subprime crisis would be … business.timesonline.co.uk/tol/business/economics/article2819069.ece Real Estate Bubble - Housing Bubble » George Soros: subprime … 9 Apr 2008 … News and commentary about the excesses of the American culture, the Real Estate bubble, and financial systems. www.nationalbubble.com/george-soros-subprime-losses-could-be-up-to-1-trillion/ Soros: Global subprime losses likely above $1 trillion - Boston.com 9 Apr 2008 … NEW YORK (Reuters) - George Soros, the hedge fund legend and billionaire philanthropist, said on Wednesday the subprime mortgage crisis is … www.boston.com/business/articles/2008/04/09/soros_says_global_subprime_losses_could_top_1_trillion George Soros, Schema-Root news Soros on Credit: Bloomberg reports that billionaire George Soros said the seizure in global credit markets caused by the subprime collapse will get worse . … schema-root.org/people/career/business/george_soros/ - 54k Have you have a guy who is making billions from the sub-prime crisis and the credit crunch, saying it will be much worse than people expect. How naive are you to think there’s no reason for it?