When big things happen in the market, someone makes money. The story of Cornwall Capital is about two men who started with $100K, turned it into $15M and then to $120M in 2008-2009 when the financial industry fell apart. They paid a high emotional cost knowing ruinous events years ahead of time. Even as they placed bets the system would fail, they tried to warn the SEC to prevent it.
Going back to that first $100K... the tenet of their fund was that Wall Street undervalued the impact of extremely rare events. Bets on such events are cheap to make--no-one believes they'll happen. Enough of these bets worked that they managed 100x returns. Readers of the Black Swan will like this story.
Their attention eventually turned to the consumer mortgage market and then to the banks who were issuing insurance against bonds backed by consumer mortgages. Soon they were making bets against those banks. Banks like Bear Stearns.
Has anyone read The Big Short yet?
Thanks, Fresh Air, for turning me on to this story!
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