The housing implosion wasn't a complete surprise to everyone. A few brave hedge fund managers not only predicted the collapse but bet massively on it–and ended up billionaires or at least half-billionaires.
John Paulson is perhaps the best example, but Kyle Bass is not all that far behind. His work to ferret out the CDOs most likely to implode was covered in depth by Bloomberg and by Michael Lewis in his book Boomerang. Bass ended up with profits in the half billion range. Around Dallas, he was an instant celebrity.
While Paulson has run into some well-publicized troubles with his funds, Bass intends to keep his winning streak intact–in part by going on to long mortgage securities. According to DealBook, he now "thinks some of the worst bonds, those which are not backed by the government mortgage giants Fannie Mae and Freddie Mac, could yield 14 percent in the coming years. 'I think housing stops going down in the next six to 12 months,'" he said at the recent SALT panel.
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Synthetic CDOs: A symbol of excess?