10 Greatest Trades Of All Time

Chairman Bernanke's period of "the Great Moderation,"ended in 2007 beginning new era of "heightened volatility".

This period destroyed the careers of some on Wall Street, while making the careers of others like hedge fund manager John Paulson, who made billions betting against the subprime mortgage crisis.

As a result, interest has renewed in "making huge, concentrated bets by analyzing fundamental economic/business conditions," or 'global macro' trades.

IBTimes compiled a list of the greatest trades of all time.

1. John Paulson's bet against subprime mortgages

Hedge manager who predicted and profited from subprime mortgage crisis.

This trade made his hedge fund $15 billion in 2007, propelled him to stardom and his hedge fund to the 3rd largest in the world.

Why does Paulson deserve credit for making the greatest trade ever?

a.) Paulson earned billions betting big on the largest economic event of the past 70 years

b.) Less than 10 players on Wall Street made big profits from this event.

Global macro trading isn't even Paulson's background (his background is merger arbitrage) so it is puzzling yet impressive that he came up with such spot-on analysis.

He should receive credit for being bold enough to trust his analysis and ignore his oblivious Wall Street pals.


2. Jesse Livermore's call on the Crash of 1929

Legendary speculator early 20th century, Livermore correctly predicting both the 1907 and 1929 stock market crashes.

Livermore made $3 million of his 1907 call (equiv. $70 million today) and was worth $100 million (equiv. $1.2 billion today) after his 1929 trade.

Like Paulson, Livermore earns credit for the high impact of the events he predicted and the amount of money he made.

Furthermore, he made his fortune without the benefit of massive investor money or fancy derivative instruments.

One more point towards Livermore is that he became successful with less mentors and educational resources than todays speculators.

In fact, Livermore is still considered a pioneer in the art of speculation. Traders still swear by Reminiscences of a Stock Operator, a book based on Livermore's trading philosophy and career.


3. John Templeton's venture into Japan

Born in 1912, Sir John Templeton, is a legendary investor who pioneered the mutual fund industry.

In the 60's, when Japan was beginning its 30 year long economic miracle, Templeton was one of the country's 1st outside investors. At one point, he put over 60% of his fund in Japanese assets.

Before his brilliant Japan call, Templeton also correctly assessed the economic impact of World War II, the 2nd most important economic event of the 20th century.

In 1939, he invested $100 each in 104 U.S. stocks trading below $1. In 4 years, this portfolio increased 4Xs.

Templeton also gets credit for being a pioneer.

Back in the 60s, people weren't hip to investing in Asia and Japan's export-driven model wasn't yet proven.

It took Templeton's ingenuity, courage, and foresight to lead the way.


4. George Soros' breaking of Bank Of England

In 1992 George Soros put the hedge fund industry on the map by breaking the Bank of England (BOE) by shorting 10 billion worth of pound sterling and forcing the U.K. to withdraw from the European Exchange Rate Mechanism (ERM).

George Soros made $1 billion (an unimaginable sum back then) in the process.

Why didn't IBTimes rank Soros higher?

"Not to belittle Soros' accomplishments, but the analysis behind it wasn't as difficult as some of the other trades on this list. " -IBTimes

Also, it was Soros' partner Stanley Druckenmiller who first came up with the trade idea. Soros' just agreed and bet big on it.

Still they give Soros credit for boldness. And he gets 'coolness points' for ringing in a new currency regime for a major country.


5. Paul Tudor Jones' shorting of Black Monday

Paul Tudor Jones correctly predicted and profited from 1987's Black Monday, the largest single-day U.S. stock market decline (by percentage) ever!

Jones tripled his money, making over $100 million while the Dow plummeted 22 %.

In the weeks before Black Monday, traders were nervous about the market. Some also saw the danger of portfolio insurance, partly responsible for the magnitude of the fall.

Thereby, many went short going into Black Monday or advised clients to get out, so Jones wasn't alone in predicting the crash.

Even so, Jones deserves credit because Black Monday was so momentous a market event and he made more money than anybody.


6. Andrew Hall's $100 oil prediction

Back in 2003, when oil was $30 a barrel and the economy was recovering from the dot-com crash, Andrew Hall bet oil would exceed $100 in 5 years.

When oil shot past $100 5 years later in 2008, Hall's employer Citigroup made a fortune and Hall raked in a $100 million bonus.

According to Time Magazine, Hall arranged the contracts so that if oil didn't hit $100 within 5 years, they would expire.

This took conviction and brilliant analysis.

It's hard enough to predict the direction of an asset, much less find a good entry point.

Hall pinpointed a timeframe and price level of the move.

Known for doing these brilliant but risky trades, Hall thought spot oil was cheap in 2009, but couldn't buy oil futures (too expensive) so he actually bought 1 million barrels of real oil and physically stored it.

So while Hall's calls weren't on monumental events, he makes up for it by his creativity and brilliance and .

7. David Tepper's 2009 bet on financials

In early 2009, David Tepper bought severely depressed shares of big banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C).

Everyone knew Bank of America and Citigroup shares were cheap, but they were too scared to buy because, among other things, they were afraid the banks would be nationalized.

By the end of the year, Bank of America quadrupled in value and Citigroup tripled in value from their bottoms earlier in the year.

That earned Tepper's hedge fund $7 billion. He personally made $4 billion.


8. Jim Chanos' prescient shorts

IBTimes heralds Jim Chanos as "the best short-seller in the world".

He predicted, and profited from the fall of Enron.

He also successfully shorted Baldwin-United, Tyco International (NYSE: TYC), Worldcom and KB Home (NYSE: KBH)

Chanos found red flags in Enron as early as 2000. As he dug deeper, he discovered more discrepancies, alerted the media, added to his short position, and got rich when the Enron scandal hit the fan in October 2001 and the company went bankrupt.

IBTimes considers Chanos' short of Enron like a miniature version of Paulson's short of the subprime mortgage market.

Chanos is now looking at China because he believes its economy is a giant bubble.


9. Jim Rogers' early call on commodities

Jim Rogers spotted the secular bull market for commodities in the 90s. In 1996, he created the Rogers International Commodity Index and worked on ways to make it investable.

Since 1998, it has returned 290% through the end of 2010.

This compares to the 10% return of the S&P 500 Index during same interval.


10. Louis Bacon's geopolitical play

In 1990 Louis Bacon made a fortune predicting Saddam Hussein invading Kuwait.

Bacon went long on oil, shorted stocks, and his new hedge fund returned 86% that year.

The following year, Bacon also bet the U.S. would quickly defeat Iraq and the oil market would recover.

Bacon gets points for venturing outside the field of finance and correctly anticipated a geopolitical event.

His feat was also impressive because he anticipated events better than the U.S. President, director of the CIA, and top government officials who had better information and access than he did.

Source - International Business Times