The mighty fall!

This story talks about John Paulson’s flagship hedge fund being down 49% for the year. Finance 427 students may recall discussions of the synthetic Abacus CDO that Goldman put together for him in 2007-08. Those mortgage bets  earned him $4 billion that year. With the PIMCO bet, that makes two so far. More will undoubtedly follow.

In related news, El Erian calls US economic conditions “terrifying,” here.

As the nth European summit nears and US stocks look overbought, almost everyone must be looking to “sell the news” or waiting to go short it. December SPY put open interest is 440K contracts at the 120 and 125 levels.  Will the obvious work this time?