Friday, October 02, 2009

Paolo Pellegrini interview on Bloomberg

Paolo Pellegrini, the man who helped John Paulson structure his short trades in the subprime mortgage bond market, is the subject of a new Bloomberg profile.

An excerpt from that piece:

Paolo Pellegrini has a nose for trouble. He saw it in rising housing prices in early 2006, when he cranked through decades of home price data and concluded the bubble was poised to burst. Pellegrini then helped engineer a massive bet against subprime mortgages that catapulted Paulson & Co. hedge funds to 2007 gains of as much as 590 percent -- and firmwide profits of more than $3.5 billion.

Pellegrini, 52, pocketed tens of millions of dollars, allowing him to buy a couple of what he laughingly calls “entry- level supercars”: a silver Ferrari F430 with a base price of $168,000 and a black $109,000 Audi R8.

By April 2008, the Rome native smelled danger again. Nearly six months before the collapse of Lehman Brothers Holdings Inc. and the bailout of American International Group Inc., he and his colleagues saw that the unfolding crisis would trigger U.S. government intervention: bank rescues, a stimulus plan and yawning deficits. That move would eventually undercut the dollar and U.S. stocks, unleashing market havoc, Pellegrini reasoned.

“The losses would be massive,” he says. “I knew the policy response would be commensurate...”"

Read on for more about Pellegrini's investment strategy at PSQR, his thoughts on the Fed, the US dollar, and more.

You can also catch Pellegrini in this Bloomberg TV interview, where he makes some interesting points about inflation and the relative health of household balance sheets between 2007 and today.