John Paulson’s subprime-collapse bet made him a household name (of sorts) and gained him instant “Genius” status. Success brought him fame and scrutiny he probably never asked for. Then all of a sudden Sino Forest comes along and turns the genius into something less, and criticism is fast and harsh. In fact, this post is perhaps the most level-headed analysis amongst others we’ve read, and it’s interesting when one thinks about the processes of investment research (although we have a few issues with the post). Now the recovery in Lehman bonds makes Paulson’s funds some US$ 500 million – what, “genius” again?
Yardsticks are only so good as the thought one puts into creating them. Judging money managers on their “nominal” (as in “not adjusted for risk”) performance in short periods of time is downright dangerous…
Is talent overrated? – Our April 2009 post discusses the ages-old “processes vs. outcome” debate as it relates to the cult of “personalities”. This other post asks that same question in a more humorous way: are we calling “insane” risk-takers “eccentric” just because they got rich, regardless of the process?