Articles Archive for April 2008

The man who earned 3.7 billion Dollar with the subprime crisis

27 April 2008 Sören Zschoche 15 Comments Investing

Just like the Chinese philosophy jing jang tells us that every medal has two sides also the subprime crisis didn´t just produce losers. But as you can imagine when so many people nearly loose 1 Trillion USD the winner on the other side must make a real big fortune and that´s exactly what John Paulson a 52 year old hedge fond manager from Manhattan did. He earned 3,7 Billion USD which could be the highest annual profit of the history of mankind.

But who is John Paulson and how could he earn such a big amount of money in such a short period of time?

John PaulsonJohn Paulson´s story began in New New York where he was born and studied later he even went to Harvard. How to deal with money he propably learned when he worked for the fabulous financial genius Leon Levy, he also worked for Bear Stearns and the financial investor Gruss Partners. Then in 1994 John Paulson founded his own company and issued some Hedge funds. After loosing very much money by betting that the corporate bonds would fall in 2005 he started to search for new financial bubbles and finally discovered the beautiful world of the “Subprime Mortgages”. But the question was how to make money with this bubble? So John Paulson developed a complex but in the root idea still very easy speculation strategy. His plan was to collect as many “Credit default swaps” as he could get, “credit default swaps” are something like issues which hedge you of financial losses of credits. So in good times this “Swaps” cost less but in bad times when the credit risk soars there “swaps” rise in value enormously. Well since 2005 John Paulson didn´t do something else than collecting “Credit default swaps” and in the beginning he even made red ink with that strategy. But when Amriquest one of the biggest providers of suprime-credits a fine of 325 Million USD in order to avoid a process for deceptive practices John recognised how phony the market was and issued a fund just to bet against the housing market. It was 2006 and his fund against the housing market didn´t worked well not before the and of 2006 when more and more people got nervous hsi fund closed with a plus of 20 %. Now John Paulson got really amped up about profiting from this bubble and issued a second fund witch also bet against the housing market. And the rest is history the housing bubble burst and John´s on December 31th 2007 John´s first fund closed with 590 % and his second one with 350 %.

However the question how much money he really made can be answered exactly cause Mr. Paulson is very discrete.There are no official affirmations for the definitive altitude but experts assume that the earnings amounts to 3,7 Billion USD. The Magazine Monthly Trader even wrote that this could be the highest annual profit of the history of mankind and placed him on the first place of a list of the TOP 100 fund managers.

John Paulson now lives with his wife and his two daughters in a 2600 aces big city house on the Upper-East-Side, New York. Apropos he bought this house in a forced sale…

The 5 richest criminals of all time

18 April 2008 Sören Zschoche 429 Comments Entertainment

It´s not a big secret you can get rich as a criminal very rich,but if you believe Al Capone was the richest and greatest gangster who ever stepped on our planet you´re at fault. He was not even one of the first 5 richest criminals.

1. Pablo Emilio Escobar 1949 – 1993 9 Billion USD

Pablo Escobar was definitely the greatest and richest criminal the world hasA wanted poster of Pablo Escobar ever seen. In 1989 Forbes listed him as the seventh richest man in the world with an estimated net value of 9 Billion USD.Escobar was born in Colombia where from he estimated a drug cartel of incredible proportions. He had submarines, planes, and employed nearly every inhabitant of his hometown Medellin. On top of his career he even tried to become the president of Colombia, raged a court with tanks and build his own personal jail. All the same Palbo Escobar was shot in 1993 by an American special force.

2. Carlos Lehder 1950 – ? 2.7 Billion USD

According to my investigations the second place goes to Carlos Lehder. He worked together with Pablo Escobar and was one of the co-founders of the Medellin Cartel. His estimated net value was taxed on 2.7 Billion USD.

3. Susumu Ishii 1924 – 1991 1.5 Billion USD

Susumu Ishii was born in Tokyo in 1924. one of the heads of the Ingawa-Kai , Japan´s second largest “yakuza” underworld syndicate. Also he was the 5th soho of the Yokosusa-ikka. His estimated net value amounted to 1.5 Billion USD, which he earned through various loans, banking deals, and real estate scams. But as the Japanese economic bubble burst, Ishii was no longer “the world’s richest gangster”. His assets a his health declined rapidly, and diet one year later.

4.Anthony Salerno 1911 – 1992 600 Million USD

Anthony “Fat Tony” Salerno was a member of the American Cosa Nostra and the front boss of the Genovese crime family. He was born and raised in East Harlem, New York where he worked one´s way up to the top of New York’s mafia as a basher and shylock. In November 1984 the Chicago mob sent a messenger to ask Fat Tony to lay off in Vegas. The FBI had tapped Tony’s club where the meet was and that was the beginning of the end. Had Tony gone to meet with the Chicago boys in one of the Chicago Hotels maybe things would have ended differently. In 1986 he was sentenced to 100 years prison by the “Mafia Commission Trial” where he died in 1992.

5.Meyer Lansky 1902 – 1993 400 Million USD

Meyer Lansky was born in Grodno Russia and emigrated with is family to the U.S.A in 1911, where he settled down on the East Side of Manhattan. At the age of 25 he established gambling operations in Florida and Cuba in a time long before credit card machines. Later he realised own vulnerability to tax evasion prosecution, in response he transferred illegal funds from his growing casino empire to Europe. A few years later he even bought a complete offshore bank in Switzerland.

The only problem by getting rich as criminal is that you probably won´t life very long so don´t get into mischiefs … ;)

The world’s biggest companies in 2008

17 April 2008 Michael Szumielewski 8 Comments Companies

Do you know what are the biggest companies on earth? Well, Forbes.com once again made a huge list of the The Global 2000 from 60 countries. The composite ranking is simply based on sales, profits, assets and market value. This is important because one metric alone can give a false impression about corporate size.
In total, the global 2000 companies now account for $30 trillion in revenues, $2.4 trillion in profits, $119 trillion in assets and $39 trillion in market value. Around the world, 72 million people work for these companies.
So, here are the top 10 companies in 2008 from The Global 2000 list by Forbes.com

Rank Company Country Industry Sales ($bil) Profits ($bil) Assets ($bil) Market Value ($bil)
1 HSBC Holdings United Kingdom Banking 146.50 19.13 2,348.98 180.81
2 General Electric United States Conglomerates 172.74 22.21 795.34 330.93
3 Bank of America United States Banking 119.19 14.98 1,715.75 176.53
4 JPMorgan Chase United States Banking 116.35 15.37 1,562.15 136.88
5 ExxonMobil United States Oil & Gas Operations 358.60 40.61 242.08 465.51
6 Royal Dutch Shell Netherlands Oil & Gas Operations 355.78 31.33 266.22 221.09
7 BP United Kingdom Oil & Gas Operations 281.03 20.60 236.08 204.94
8 Toyota Motor Japan Consumer Durables 203.80 13.99 276.38 175.08
9 ING Group Netherlands Insurance 197.93 12.65 1,932.15 75.78
10 Berkshire Hathaway United States Diversified Financials 118.25 13.21 273.16 216.65

Know the difference between an Asset and a Liability.

9 April 2008 Sören Zschoche 62 Comments Getting rich

Many people say their house is the greatest asset they got and also their largest investment. In the most cases their car is the second greatest asset they got and they are really proud of it. But are these thing really assets? Unfortunately I have to say the in most cases they aren´t they are liabilities and the reason for that fact is that they absorb your money like a sponge. For example a car has many extra costs gas, taxes, repairs and so on, also a house needs very much money for energy, repairs to say nothing of the price you have to pay to buy it. So when you want to become rich it´s very important to know the difference between an asset and a liability.

Asset = Money into your pocket

An asset puts money into your pocket, an asset should generate income on a regular basis. The traditional definition of an asset is anything that you own is worth something-that could be “turned into money” if you needed it to be. Look around your room. Is there anything that might be worth something? You probably have more than you think… a computer, a TV, a cell phone? Skis? Your assets also technically include the balance in any bank accounts in your name, or the current value stocks bonds that you have your wallet.

But here´s the catch: While might consider everything of value in your room an “asset” (because you could sell it for decent money on eBay), it´s not really an asset until it is sold. Why? Because it´s not putting any money into your pocket until then. (And then, it´s not longer an asset because it not longer belongs to you!) Same thing goes for cash in your wallet, your cash is not secretly reproducing itself, putting more money into your pocket. But there are places other than your wallet where cash “reproduces itself”- when it´s invested in assets that give you a passive portfolio income. Anything you own that produced passive portfolio income is an asset.

Liabilities = Money out of your pocket

Liabilities are the opposite of assets. Liabilities take money out of your pocket. In fact, a lot of things mentioned above- the TV or computer in your room that that might traditionally be considered “assets”-are actually liabilities right now, because it took money out of your pocket just to get them. And many of them, when converted to cash, would give you back less money than you would pay for them. So just if the value of your house or your car grows more than you pay for it you can call it an asset.

Source: Rich Dad Poor Dad for Teens

The Biography of Warren Buffett

8 April 2008 Sören Zschoche 1 Comment Entertainment

Warren Buffett, the world richest man of the year 2008, a big philanthropist and probably the best investor of his days. These seven movies show us who he is, where he came from and how he made such an enormous amount of money.

Click to play the movies.

Part I

Part II

Part IIII

Part IV

Part V

Part VI

Part VII


The positive aspects of a recession

8 April 2008 Michael Szumielewski 44 Comments Economy

As Joseph Schumpeter passionately argued in his 1942 book Capitalism, Socialism and Democracy, recessions are a necessary evil in capitalist societies. Well, there are some arguments, that back up this theory. Although the word recession strikes fear into the hearts of people, recessions heal the economy from unrealistic developments and creates opportunities for investors. In the long run it is just a periodic downturn in the economic cycle and for some good reasons it seams.

Effects on the economy

Recessions correct economic imbalances and helps the economy to get back to a healthy, realistic, and sustainable rate of growth. The “job” of a recession is to clean the “fat” out of the system, mop up excess, and pave the way for the next expansion. However, there are always bankrupts, but in a recession the weak companies get put out of business and the strong ones are forced to optimize their business models and come out with better products. This brings job losses which are freed up to be efficiently used somewhere else in a flexible market. Recessions also eliminate these sorts of unsustainable bubbles like the technology bubble in the late 90s or the actual housing crisis. Of course, it hurts to lose a good paid job and suffer from financial loss, but it is necessary for our economy to become healthy once again.

The Stock market drops

Stocks markets go down in recessions, but as stated in one of my previous articles, Search for opportunities in crises, there are great opportunities in stock market declines. During periods of mass panic on the market all stocks go down for a while, because people like to panic somehow, I don’t know why. The important thing is, both good and bad companies go down. This means, that you can get high quality companies at a low price and with good long-term perspectives. That’s the time to position yourself to profit from these companies and catch the opportunity while it is there.
In fact, I even know a few investment guys, who are really cheered up and looked forward to the upcoming recession because of new investment chances.

Personal finance

According to a report by CNN, I found on moneysocket.com, the average American owes $10,000 in credit card debt annually. If people will ever recognise this misbehaviour, it maybe will happen during a recession. Although, I don’t believe people are easy to change, I think if suffering from financial loss, unemployment and hard times, maybe they start to think about there personal finances and learn something from it.

As we know from the past, a recession lasts for about 10 months, so good times will be back. Nevertheless, they are necessary and you will experience a few recessions in your life, so better be prepared. The important thing is not to panic and learn from crises. In fact, recessions can make you better and more skilled after all, just like they do with our economy on a regular basis.

The top 5 April fool hoaxes of big companies

4 April 2008 Sören Zschoche 3 Comments Entertainment

Google & Virgin Spaceship Source: Toptechnews.comEvery year it´s time for the April Fool hoax and also in this year many companies, newspapers, websites, television programs and other organisations took delight in foxing their clients. Here are the 5 most crazy statements of big business concerns.

1. Google Inc.

In Australian Google advertised a search engine which gets results of events 24 hours before they happen. Also Google announced in a kind of joint venture with Virgin Blue to set up a permanent colony on the planet Mars. Larry Page, Sergej Brin and Richard Branson, the CEOs of the two companies, want to start their spaceship in 2014.

2. IKEA

The furniture store announced to build the first drive-through furniture store in Berlin. “Assortment, loading and snacks everything just for 10 Euro extra”.

3. Virgin Blue

The CEO of Virgin Blue Richard Branson advertised for tickets for half the price, the catch was that you had to stand the whole flight. That the “Chair free fares” had just been an April Fool´s joke was terminated by booking them online.

4. BMW

The German car-maker promoted a “dog-deflector” in Great-Britain. The system recognises when a dog wants to piss at your car – and distributes electric shocks.

5.Microsoft

XBOX 360 Recon Edition Source: Microsoft

Microsoft presented 3 new products which actually wouldn´t be such a bad thing. A helmet with a monitor on the visor, an original X-Box made of wood and a board game with live interaction. But in my opinion the best idea was a X-Box 360 Recon Edition.