Real-estate tycoon Jeff Greene made $800 million shorting the last housing bubble. He explains how John Paulson inspired the contrarian bet, and how he's protecting his wealth today.
The real-estate tycoon had already weathered a severe crash by the early 2000s, when the dot-com bubble burst and the Federal Reserve responded by slashing interest rates, sending asset prices skyward over the next few years.He sought the advice of a longtime friend, John Paulson.
"When I looked into it, it just turned out to be so mispriced," Greene said."Sometimes you stumble into things — I wasn't at the time thinking of a housing bubble." The property investor said he had $1 billion of real estate and $500 million of debt at the time, and was concerned about his exposure if asset prices suddenly tanked by 30% or 40%. Prior to meeting Paulson, the opportunity to buy credit-default swaps as a form of insurance against a housing crash wasn't on his radar.
"It was almost like a perfect storm," Greene said about the chance to bet against securities priced as investment-grade when a"tidal wave of foreclosures" was headed their way."It didn't make any sense."
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