Rep. Alexandria Ocasio-Cortez and others are calling for an investigation into Robinhood and other trading apps over market manipulation after stopping users from trading GameStop, AMC, and others following r/WallStreetBets big success in damaging billionaire hedge funds.
Billionaire real estate investor Jeff Greene built his fortune with a lifetime of hustle and no partners. In this interview with Raoul Pal, Greene explains how he transformed himself from a traveling circus ticket salesman to an investment titan putting on billion-dollar credit default swap trades. What began as a hedge turned into the trade of a lifetime when Greene astutely observed that shorting mortgage backed securities was a no-doubter in his first foray with derivatives. Greene also touches on his unique career path, his market outlook for a handful of asset classes, and the philanthropic endeavors that now dominate his focus. Filmed on January 23, in West Palm Beach, Florida.
RAOUL PAL: Jeff, it’s great to be here in Palm Beach and to get you onto Real Vision.
Just chatting off camera, we’ve got a lot of friends in common we didn’t.
You’ve got a fascinating story and I think people would love to hear the story of how
you start your career, how you got into real estate, but even starting before then, you
as a student, going to university.
Talk us through a bit about that.
JEFF GREENE: Well, I don’t know where to begin.
I grew up, I was born in Worcester, Massachusetts, which is a city about 40 miles from Boston.
My dad was a textile machinery dealer, which meant you sold these giant machines that were
longer than this room, they could be 100 feet long, to mills and parts of that also and
they did it very well.
We’re a middle class family in like cute little house with a backyard and my mom was pretty
much a stay at home mom.
Then in the late ’60s, all the textile mills got unionized in New England and they moved
to the south.
My dad lost his livelihood because he didn’t have mills to call and that’s all he’d done.
He had all this money in this business.
He had a warehouse with parts and materials.
My parents picked up and moved to West Palm Beach, actually.
My dad bought a small rubber stamp business.
He never really got on his feet again.
For me, I was just a junior in high school when they moved here, but I was really still
in junior high school and when our financial fortunes went the wrong way.
I had to work my way through college, and I had some financial struggles, which probably
made me hungrier than ever to do well.
RAOUL PAL: How did you pay your way through university?
There’s a bit of a story about that, because you went to Harvard, didn’t you?
JEFF GREENE: Well, I went to college at Johns Hopkins University in Baltimore.
I applied for scholarships, and I got scholarships and student loans.
That paid some of my costs and then also, I had been an exchange student in Israel in
I learned to speak Hebrew fluently.
I taught Hebrew school three days a week.
I had to ride the bus in Baltimore and I had to change three changes.
Three bus rides to go out there to teach Hebrew school on Tuesday and Thursday.
Then I rode out with another Hopkins student on Sunday.
Then I had another job where I checked IDs outside the gym, it was called work study.
It was a government funded program where you get paid a buck 50 an hour when you’re supposed
to be able to do your studying while you check the IDs, which you do.
Then I also, when I came down here to visit my parents, I worked with the Breakers Hotel
here in Palm Beach.
I was a busboy, and then a waiter in the main dining room, and I just slogged along and
made it through college.
I finished Johns Hopkins in two and a half years, not because I was such a genius.
I think it was because it was working so hard.
It wasn’t really a fun college one.
RAOUL PAL: Then after that, where did your career go?
JEFF GREENE: Well, so then what happened is I was down here one summer in West Palm Beach.
I was working at the Breakers, not making any money because who’s here in the summer?
Nobody, so no tips.
I signed out of the local papers, had telephone sales and I went to [indiscernible], it was
to sell circus tickets for the local Riviera Beach Fraternal Order of Police which is a
nonprofit Police Organization and it’s at $2.50 an hour or commission.
Well, minimum wage was a $1.60 in 1972.
$2.50 an hour, you can make 100 bucks a week.
Tuition at Johns Hopkins in those days was 2700 a year so if I work for 12 weeks, I’ll
make 1200 bucks.
Not so bad.
High stress on these tickets.
I’ve noticed that I’m selling more than everyone else, if I feel like I’m selling more than
everyone else in the room so I said to the guy at the end of the day, how much would
I’ve made on commission?
He said $93.
I’ll take commission.
Instead of making $20, I made 93.
Anyway, I ended up doing this all through college.
Wherever I had a break, I then would go on the road and run a telemarketing office for
After I finished at Hopkins, I went on the road to run these telemarketing operations
for fundraising circus from Sarasota, Florida, and I would roll into little towns all around
the country like Bluefield, West Virginia, tangy, you never would have heard of.
[Indiscernible] 20,000, 30,000.
Then I had a Pontiac Grand Am.
I had my clothes on a bar across the backseat, loaded with laundry detergent in the trunk
to go to the laundromat.
I would roll into town, check into the Motel 6 or Days-in or whatever it was.
I set up an office, sell the circus tickets, hire local people.
I did this.
It was a lonely life.
I finished college before I turned 20 so I was just 20 years old, 21, 22 all by myself
like a traveling salesman in these little towns.
Forget having a girlfriend, you couldn’t even have friends because you’re always seeing
You’re always on the move.
I did this and I saved up and I worked so hard.
I saved up $100,000 in the mid-70s.
It was just from working, I worked nonstop.
I lived on nothing.
I saved every penny because I was determined after what I’d been through going through
working my way through college, never to be broke again.
My dad, actually, it’s worse than not losing his livelihood, he actually lost his life.
When I finished Harvard Business School in 1979, in May, my dad didn’t make it to graduation
because he was having heart issues.
He died two months later with a massive heart attack at the age of 51.
I really believe it was because of the stress of not just losing his life, losing his dignity
and his sense of worth.
It puts me in touch today very much and that’s probably one of the reasons I’ve gotten involved
so much in philanthropically, and politically because I’ve really saw firsthand how somebody
can get broken when there are economic reality changes.
Anyway, so I saved up all this money, go back Harvard Business School, I had $100,000 in
Never had bought any real estate because how could I?
I was in a different city every two weeks.
RAOUL PAL: Living out of the car.
JEFF GREENE: Sorry?
RAOUL PAL: Living out of the car.
JEFF GREENE: More or less.
I did have stuff stored.
I’d never had an apartment.
I had stuff stored at my parents’ house, my aunt’s house.
I was living out of my car more.
When people say that you think I wasn’t sleeping in my car, but that was my base.
My Pontiac Grand Am.
Now, a lot of people I knew had invested in real estate.
I got into Harvard Business School.
I didn’t get into the good housing complex, so just field apartments because there was
a waiting list.
A friend of mine from Hopkins said, who would have started off with those first so I said
what do I do?
He said, well, what you can do is why don’t you go buy one of these three-deckers?
It’s like a three family house built in the late 1800s.
You can live in one, rent out the other two and at the end of the time, you think you’re
probably going to sell and get your money back and live rent free and I said that’s
I was set by to discuss– a friend who was broker, also been to the business school and
who I still know actually.
I bought a three-decker, and lived in one and the market was so undervalued in 1977
when I bought this, I could see I was saying, I bought it for $37,000, 7000 down, so that
would happen as I got approved for the housing.
I said, what’ll it make me if I rent all three, how does this investment work and by every
measure I looked at, I was going to end up after my mortgage payment, making $2200 a
year on my separate thousand dollar investment.
If that’s a 30% return, I said I got to get more of these.
While I’m at Harvard Business School, I accumulated 18 properties.
I bought them.
RAOUL PAL: You were just buying them out of the cashflow of each property?
JEFF GREENE: No, I had my hundred thousand.
RAOUL PAL: Out of school.
JEFF GREENE: For the first one I wanted when that was perfect, so I’m saying I can’t be
like dealing with repairs when I’m at Harvard Business School.
Who’s going to do this work?
Then I started getting comfortable doing remodeling and for the time I was done, I was buying
junkie buildings, fixing them up and anyway, that became the beginning of my real estate
As it turns out, the market was so undervalued.
That property I bought for 37,000, I sold three years later for 185,000.
Another property bought for 38,000, right near the Cambridge line, and somewhat sold
it for 3380, 330 to 380.
RAOUL PAL: Is that when interest rates started coming down that suddenly the price of property
Around ’81, ’82?
JEFF GREENE: I think you’re right.
That’s when Reagan was just– RAOUL PAL: Yeah, that’s right.
Reagan just cut in, there’s the Reagan-Thatcher years, interest rate just peaked and just
started to come by– JEFF GREENE: The late ’70s, so yeah, so before whatever it was,
the market just exploded and my 100,000– by the time I finished Harvard Business School,
I had a million dollar net worth.
Then I was off to the races.
It’s interesting because people often– RAOUL PAL: You didn’t use your Harvard education
JEFF GREENE: I always use my Harvard education.
RAOUL PAL: You leave Harvard, you’ve made a million bucks and I guess you decided real
estate’s the business you want to be in.
JEFF GREENE: I fell into it.
What happened is I decided to move to California.
I had a great aunt and some cousins there so I moved to LA after I finished at the business
school and thought I’d do real estate but the prices in LA were very different than
they were in Boston.
Boston was– it was before the tech booms and the biotech booms and Boston was a little
bit sleepy in the early ’80s.
Even after things had started to appreciate, you could still put down when you buy an apartment
building, you put down 20%, 30% you’d make a nice return on your cashflow 5%, 10%.
I go to LA and you buy a building, it’s okay, here’s what you do.
You put 30% down and you’ll lose cashflow.
Because basically in LA, you are buying the futures because everything was perceived to
be going like that, and I just didn’t get it.
I did some other things.
I bought actually 50% of a clothing manufacturing company, did that for 14 months.
RAOUL PAL: Why?
JEFF GREENE: I just finished Harvard Business School, I had to do something for my career.
I looked at buildings, they all just seemed outrageously expensive, didn’t fit the format.
I was used to cashflow real estate.
I just couldn’t figure it out.
I think, to tell you the truth, I’d taken a class, a business school by small businesses.
The way you find a small business is you do business brokers, go talk to local accountants.
What my cousin had was a textile salesman.
I said, let me go see your accountant.
Well, the only companies the accountant knows is textile and garment companies.
He said, well, I got this guy who has half of– he has a company, he’s just fired his
partner, he’s looking for someone like you to come in and help run the business.
I bought half of this company, and it was very successful 14 months.
I hated every minute of it.
It wasn’t my cup of tea.
I was thrilled and I’m showing up in my– at the time, Brooks Brothers suits and buttoned
down shirts and ties and these guys who were working there, gold chains around their necks
and they were in these spray on printed shirts that just it was aggressive, tough screaming
It wasn’t what I was planning on doing with my newly minted Harvard MBA.
Anyway, I got out, made some money and then I started doing real estate deals and started
I figured out the LA market, started buying properties and had a nice run up till early
’90s when I participated in the crash like most developers and investors.
RAOUL PAL: When you said you figured out LA property markets, does that mean you just
went into the momentum trade and realize it was all about price gains and not about–
JEFF GREENE: Yeah, I realized that you’re not going to make your cashflow in year one,
you’ll get your cash flow in year three or four and that’s how it was priced and just
I started doing things that way and sure enough, you bought one or two so I bought like an
eight-unit building, a seven-unit building.
Then you’re seeing there, as the rents go up and I started saying, now, I get this.
By the time I get to a– that was the starting like in ’82-’83 and by ’91, ’92, ’93, I had
about 100 million dollar real estate portfolio.
I never had investors or partners, but I had a lot of debt.
That’s how I built it.
I probably had debt on at maybe, I don’t know, 65 million, which is 35% equity, had been
refinanced and did grow aggressively, and then the market dropped and all the sudden,
somebody– ’92, ’93, ’94.
By ’94, my $35 million net worth was like minus $15 million.
RAOUL PAL: Did that terrify you?
How did you think about debt from then?
JEFF GREENE: It was tough, because basically, from my papers and snow shoveling jobs, my
whole life in business had been straight up.
The truth is let’s finish Harvard Business School at 24.
I have a million dollars.
I’m thinking I’m a genius.
I’m bored, and people call you, you must be– you’re really boy wonder, you think I’m really
a smart guy here and basically, I had never been– had not been married.
I had girlfriends, but I had been single, all I really had was my career, to tell you
the truth, to hang my hat on.
In 1994, I was just turning 40 years old and basically, everything I had worked for was
all of a sudden that and it was traumatic.
It was a tough few years.
It was a tough few years, because I’m thinking like I could actually very easily be liquidated
out back to zero and have nothing at all to show flow for what I’ve been doing in my whole
I got good education, but what would it have gotten me?
RAOUL PAL: How did that affect you psychologically at the time?
JEFF GREENE: It’s tough.
It’s interesting, I still– RAOUL PAL: You can’t take risk so easily when you’re thinking
JEFF GREENE: It’s interesting.
I’ve always been a fundamental– believe in the fundamentals like the way I invest, where
I do everything and I try to focus on long term and not let noise bother me.
I knew why that market had happened.
I understood it very clearly.
It’s a longer story, but the government empowered savings and loans and then try to allow them
to make crazy loans.
Basically, because what happened and if you will remember back, interest rates started
going up, SNL is having their books, all these fixed rate loans, and they were all in trouble
so the government said, okay, you want to be able to pay 8% for CDs, we’ll let you do
People were buying McDonald’s franchise with the SNL funds and they will make 100% construction
Of course, you’re going to have this crazy froth in the market.
I didn’t really feel I would like that.
Then nothing that I had done, it was the government that did it, and it happened and so when it’s
so good, I plotted through it.
I kept renegotiating with lenders.
Lucky for me, I had one main lender, called Glendale Federal Savings, they were the sixth
largest SNL in the country and believe it or not– RAOUL PAL: They stayed solvent?
JEFF GREENE: Barely.
They had $200 million in capital.
I owed them like 69 or 59, give or take.
RAOUL PAL: Okay, so you were too big to fail.
JEFF GREENE: It’s crazy because they were like, it’s almost a $20 billion SNL, my little
thing was enough to push them over the hump so they kept working with me and I was– look,
I was very persistent.
I’d give them a building, they would cut loans in other buildings.
We just work together and kept restructuring a few times, then eventually by probably ’95-’96,
my net worth was zero again, like all my loans equaled my values.
Then I got lucky and I said, look, I sold one property.
I had a property on Sunset Boulevard, a nice house at a very nice part of LA, 40-unit building.
It probably was worth $4 million.
The loan was for $4 million, but the Getty Museum needed housing for the new faculty.
They were just finishing the new Getty Museum.
They had looked at some other land I had, I called them up and I said, how about this
I sold it for $6 million, so I get 2 million bucks cash.
Now, most people having been through what I was, they would have taken that 2 million.
I said, I’m not going to risk this ever again, but I didn’t.
I went I bought three new buildings immediately.
I bought them from the RTC.
I bought an office building for $30 and cents– RAOUL PAL: I just want to get back a little
How do you– the psychology of doing that.
Taking a loss or getting close to having to realize a big loss is actually quite hard
thing to do.
Trading, investing and I run a hedge fund.
I know what that’s like, how did you distance yourself from that?
Let’s do it again.
You thought you had nothing to lose anyway?
JEFF GREENE: No, no, I just felt that– I really felt that I understood why this had
I felt that this was a crisis that was brought on by the savings loan excesses and that the
RTC and the government had it very badly.
I don’t know if you remember it, the Resolution Trust Corporation.
They just took everything and liquidated and they caused a lot more havoc than would have
otherwise been in the market.
I could see that’s why my properties were dropping in value to those levels, not because
people were leaving LA or didn’t want to live there anymore.
I have a chance now to buy these properties at barely pennies on the dollar.
I snapped up an office building at 30 bucks a foot, that was like eight years old, it
was what it costs $200 a foot to build then.
Then I bought another 65-unit apartment building for 2.7 million.
All townhouses and I’m thinking there’s no way you can lose money on these deals.
Sure enough, they all like tripled in value.
Then I was able to get those stabilizes, or refinanced.
I just started going and buying and honestly, I’d say that my recovery in the late ’90s
was really relationship oriented.
I’ve always been very relationship oriented.
I had one bank that I worked with a lot.
I figured out what they needed, they figured out what they need to do with me, and they
were my lender, and I started buying properties very aggressively at very cheap prices.
RAOUL PAL: All in LA?
JEFF GREENE: All in LA.
I was buying apartment buildings, because what you had was you had in this SNL period,
you had people who had built all these new buildings.
Hundreds and hundreds, if you drive to LA today, you’d still see these late ’80s, they’re
That’s the zoning over two levels of parking.
Wood frame, stucco.
They all look the same.
Basically, these buildings, what happened is moms and pops would have them or people
would not own them.
They were shell shocked because they went through rents– because they have a building.
They may be got it in say, and I’m just guessing they built it maybe in, I don’t know, 1987,
That’s when the big build– now, this RTC gets the building next door and cuts the rents
by 40% so now, you cut your rents by 40%.
By the time you get to ’96, you’re just so happy to have tenants.
No one’s raising rents, rents are way below market.
You go into buildings, you just buy them, we clean them up a little bit.
Change the entire rent roll to market and then refinance and buy more and so I got this
going again through great broker relationships, lending relationships, and I got up to 8000
units by 2005.
RAOUL PAL: 8000 units?
JEFF GREENE: Yeah, and over a billion dollars’ worth of real estate.
RAOUL PAL: All in LA.
JEFF GREENE: All in LA.
RAOUL PAL: Talk me through the next phase then.
2005, you’ve now got half of LA, it sounds like.
JEFF GREENE: It was a great run.
I’m freaking out, and my debt was probably I’m guessing 500 million.
I’ve said I’ve gone from minus 15 million to positive 500 million net worth, but I know
that stuff can happen and even things that you have nothing to do with like the SNL crisis.
I’m thinking what had happened was the value’s gotten so high because after the dot-com bust,
interest rates were cut to the lowest since World War II.
As a result, cap rates on apartment buildings got very low and I’m thinking like, this may
not be sustainable.
What can I do?
As this is happening in like ’04, ’05, I’d go and I’d sell five or six buildings, get
some cash, then I think, yeah, I’d do an exchange and buy more buildings.
I’m thinking there’s got to be some hedge because I’m reading about all this stuff on
RAOUL PAL: Which year are we talking about now?
JEFF GREENE: This is ’06.
There’s got to be some way rather than just selling buildings and paying and getting nervous
then buying new ones.
There’s got to be some way to get a hedge so if the value of the buildings drop, I won’t
lose as much money.
I go to talk to Goldman Sachs, JP Morgan, they said, well, you can short the SNL stock
because if the market collapses, those will drop.
Then I think, well, if you do that, what happens if the one that you short gets taken over
Then I went to see a very old friend of mine, John Paulson, who was a very close friend.
I called him up, and I said any ideas on this, he said, come see me and work on something
you may like, so I went to his office and he showed me how– he said, I’m shorting subprime.
What does that mean?
Well, I’m using derivatives.
What’s a derivative?
Well, you use credit deposit?
What’s a credit deposit?
Then he shows me some slides.
I get the idea.
Housing prices are not going to go up, are going to drop and people won’t be able to
pay the mortgages and the bonds will default, but these are very complicated instruments.
I didn’t really know exactly how you get from giving your money to this up to putting your
money up to you make a profit because the way these bonds work, they were very complex.
I remember saying, I said JP, can I do this on my own because now, we’re friends and I
may be– and he said, no, you won’t be able to because you have to sign this.
It’s an institutional trade.
His fund wasn’t ready for several months, anyway.
This is like in March or April of ’06.
I went back to LA and went to Berlin.
Then I called up all my bankers, and they told me, absolutely not, you can’t do this.
I hustled SIP, and I’ve pushed them in then I got approved to do this trade.
Initially, I went short $650 million worth of subprime mortgage backed securities with
JP Morgan and Merrill Lynch.
RAOUL PAL: You then sit it out for a bit, because nothing happens.
It gets marks against everybody.
JEFF GREENE: Yeah, a little bit.
It went down a little bit, and then I went to JP, sent me his fund, finally said, I’d
like to go in your fund now.
I told him, I’d done every email, I told him my I’d done some trades, and he got upset
that I’d done the trades.
RAOUL PAL: Without him?
JEFF GREENE: Yeah, but I still wanted to go to his fund.
We’re still friends now.
I think it was I should have probably told him I was doing it when I did it.
I’d say, I just did it.
I figured he’s running up, at the time, he had $5 or $6 billion in a matter I think,
he’s got a big business and I’m just doing a relatively small amount of this in the overall
scheme of things but, and I’d said I should have told him and I couldn’t, I think it caused
a problem between us for a while, but nevertheless, I ended up doing that.
The fund dropped in the summer a little bit and then so I was down.
Then it went up and then it went down again the next January for some reason.
RAOUL PAL: Have the housing prices have a tipping over at this point?
JEFF GREENE: Housing prices with– all the fundamentals of housing were going like this,
the punt’s going like that by January, it made no sense.
I said I want to do more of this.
I caught up and I was able to do another 400 million of the short and so I had 1,000,000,050
on at that point.
I was going to do more truthfully but by the time I got approved for more at one of the
two banks, it already started to deteriorate, the prices already dropped against.
I had this in them.
Then I just gradually started closing out that trade in, I’d say, 2008 and it was a
very profitable trade.
It turns it wasn’t a hedge at all.
That’s the craziest thing and I knew when I went and started, the more time I spent
on this trade, it’s faster I realized that this is not a hedge because apartment buildings
values were a function of rents and interest rates, lower interest rates provide low cap
rates and high and stable rent markets, people want to buy buildings with stable rental markets,
but I looked at it, I knew it was an incredible trade because I’m thinking this doesn’t make
There’s no way that these bonds are getting repaid.
That’s why I stepped right up and I did over a billion dollars in this stuff.
RAOUL PAL: That was a hell of an initiation to the world of derivatives.
JEFF GREENE: Yeah, pretty lucky.
It could have gone wrong.
RAOUL PAL: It could have gone wrong.
There again, in the end, they’re not very expensive trade.
The good thing is they were relatively cheap to put on but the punt was so ridiculous if
you get them right.
JEFF GREENE: Yeah.
Well, I think I had to put up I think to 5% which made sense because basically I was doing
it 1.3 over.
Here’s the problem.
The problem with this trade is I was very lonely doing this trade.
I’d never been on– I’m going up against the biggest banks on Wall Street effectively.
I don’t know anything about the stuff.
I’m thinking about– am I missing something?
Just seems all seemed too good to be true.
I would talk to my smart friends, like my close friends from Harvard Business School
and some other friends who are on Wall Street.
I’d say, what do you think of this?
They would go talk to their advisors.
Interestingly enough, a lot of very smart people would come back and said, the problem
is just really stupid that you’re basically agreeing to pay the spread for 30 years on
If no one pays off the loans, you’ll pay for 30, but that’s completely nonsensical, because
even normal loans get refinanced and as an average duration of any bond, any pool of
In this case, I focused every– I don’t know if you have seen how these loans business
is like, so basically, there was one type of loan, it was called a 2/28 loan.
I would try to find bonds at 80% of this.
What that meant was for two years, the rate’s fixed at some very low rate, maybe it might
have been at, in those days, at 6% for a subprime loan, and then in month 25, it can go up to
300 basis points, then 100 basis points every six months till it peaks at 600 basis point
It means after three and a half years, it’s a good chance that these loans are going up
6% to 12%.
On top of that, a number of the loans of the pools that I shorted went from interest only
Imagine you have a 6% interest rate loan, three and a half years later, you’re amortizing
it at 12%.
Of course, nobody can afford.
The only way out is if housing prices keep getting higher and you can refinance, but
when I did this trade, only 11% of buyers in California could qualify for the median
priced home loan, means 89% couldn’t qualify.
Who is going to possibly push prizes for a lift?
That’s exactly what happened.
RAOUL PAL: You get through the housing crisis pretty well, and the value of your real estate
portfolio didn’t really suffer?
I guess single family homes got really killed in that.
JEFF GREENE: Yeah, everything dropped, I’d say, but apartment rents dropped 15%, 20%
in LA and the value’s the same.
The thing about LA, it’s a very supply constrained market.
Even in the worst crash, it never really that bad.
It was bad in the early ’90s.
There was such an enormous overbuilding, there wasn’t any overbuilding going into 2000 into
There was no overbuilding at all of apartment buildings.
It was a very tight market.
Of course, people, the economy get bad so rents dropped a little bit.
It was no big deal, then they came back immediately.
RAOUL PAL: Then after that housing crisis, and that was the financial crisis, what opportunities
did you see?
Because a guy like you sounds like you would have been looking for opportunities in there.
JEFF GREENE: Well, it’s interesting.
What happened was I’d never been married.
I met my wife in the summer of ’06.
’06 had a pretty good, spring, summer when I did subprime short in April, I met my wife
That’s a pretty good period and I’d never been married.
RAOUL PAL: Mike Tyson’s party, is it?
JEFF GREENE: Mike was actually on a boat I owned in Sag Harbor for his 40th birthday.
I’m like a guy who likes to really figure things out and really plan things out, that
are going to happen, I don’t know, like depend on random circumstances.
I don’t go to Vegas and place bets on things.
I’m really pretty mathematical serious.
Meanwhile, how do I met my wife?
I’m having a crazy party for Mike’s 40th birthday.
Friends of mine go get a DJ.
DJ says, can I bring a few hot chicks?
Walked in with the DJ.
It ended up that’s the mother of my three children, go figure it out.
You know the plans you have, they sometimes are funny.
Anyway, so what happened is, so I met my wife that summer, summer ’06, and then we ended
up getting married in September of ’07, and she’d been living on the East Coast and in
truth, I knew I was cashing out the subprime debt anyway and I was thinking, you know what,
I’m going to have 100– I could save 100 million dollars in state income tax if I live in Florida
The point is I was only in LA three or four months a year, because I was on my boat a
lot, traveling, so it wasn’t like I was– had kids in school.
I was only there part time, so I said, and I was already in Florida a month and a half
a year because I had my boat or something and I went, let’s spend a couple more months
in Florida, one month in LA and I’ll save 100 million dollars and I’m not doing anything
illegal, everybody gets that’s the law.
We end up moving to Florida, getting a place in Miami and this is in early ’08.
At that point, everything was a mess.
RAOUL PAL: Miami got murdered in that.
JEFF GREENE: Interesting enough, well, you couldn’t get anything in Miami because what
happened is I’d be driving around and I’m giving up, I’ve got like, I’m a real estate
guy, who truthfully never had any money.
You don’t go from zero to eight to a billion dollars with a real estate with no investors,
and no partners and have cash in the bank.
You do that by you refinance a building, 15 minutes later, that build money is due to
buy another building.
It’s like literally you got enough money to pay for lunch but not much else.
I’m cash poor, asset rich my whole life because I was always moving around.
Now all of a sudden, I’m sitting with either a million dollars of cash and the real estate
market has collapsed and everything’s– I’m thinking like, wow, this could really be a
lot of fun for me, instead of being like all my peers, struggling, I’m just the guy with
What a great reversal that was.
RAOUL PAL: Somebody told me once very early my career, he said, listen, there’s one piece
He who has cashed in the recession is king, and it’s so true because then you’ve got the
opportunity that nobody else has got.
JEFF GREENE: Anyone else– it’s not saying that like I didn’t need to make more money.
It’s really more that also, it’s just so much more relaxing years I have in liquidity.
Just in general, even forgetting opportunity, just not having– it’s nice to build a business
and grow, and not have partners or investors to worry about, but it’s stressful constantly
trying to move things around and depending on loans and refis.
It was certainly like I saw in Miami, I’m there and I’m driving around like some– I’m
a deal junkie and I’m a serial entrepreneur, I’m looking around and I see all these big
buildings with all these low lights on and I see all these empty lots next to the big
I think, how do I get some of these and nothing’s available because it’s early ’08, and they’re
in the bank portfolios, nobody’s sure what’s happening.
Then, but we moved here in December of ’09 to Palm Beach.
By the time we moved here, it was just the time I’d say like 2010 when the property started
getting sorted out, the lender started getting control of them and they were starting to
I started buying here very aggressively.
I bought this hotel.
I bought the note here and foreclosed on it.
This hotel, I think it cost the former owner, it was over 100 million dollars, I bought
the note for 41 million from UBS and all kinds of fractured condos and land and it was really,
there’s a lot of opportunities in this market.
Originally, I was coming here just thinking, okay, I’m living here in Palm Beach, I’ll
do a few things to make some money.
I thought they’ve really great values.
I didn’t really necessarily think it was a great place to do deals, that it was a good
place to do deals.
Then the more time I spent here, realize this is just a great place to live, a great place
to invest, a great place to develop.
I was able to snap up all these great opportunities.
RAOUL PAL: Then the whole hedge fund industry moves here.
The whole of Greenwich turns up here, and that’s going to help you, the hotel, and of
the neo taxes and the big move here.
JEFF GREENE: I don’t think it’s as big as people think.
As soon as you talk to people in business, first of all, hedge fund people, how many
do they employ?
First of all, the kinds of hedge funds that come here, the little ones are on office,
they have a satellite office.
RAOUL PAL: Yeah, because people like Paul come here and it’s just him, he stays in his
office and he didn’t bring any employees then.
JEFF GREENE: No, of course not, because everyone says us, from these big business developments
had said, we’ve got all these hedge funds to move.
People and hedge funds, first of all, if you have a hedge fund in New York City, you’ve
got mature, serious people, have wives and parents living there and kids in school and
They’re not just going to, hey, guys, let’s all moved to Palm Beach, okay, we’ll all just
RAOUL PAL: It’s only the founders and the owners who come down here.
JEFF GREENE: Of course.
It’s hard to come here because they still have to keep their presence because people,
it’s not that that people don’t like, it’s a great quality of life but people have commitments,
not everybody don’t just going to pick up and moved and uproot themselves.
You really haven’t seen that.
On top of that, those aren’t the kinds of companies that employ large numbers of people
like LA, you got like Snapchat, they open an office, and they employ– they have 200
people, rent 100,000 a year in one office.
Google, when those kinds of companies come into New York where I’m building a building
and about two blocks away, Google’s building a saying jobs terminal, you’re talking about
6500 jobs and I read the average pay is over $100,000.
That’s what moves as an economy here.
We haven’t really seen that.
RAOUL PAL: Talk to me about the New York real estate market, because I’ve been talking to
a few people.
Just the Real Vision offices are in New York and I’m there every two weeks, and there has
been one of the largest buildups of New York real estate, I think in history, has gone
in the last four years.
What do you about all of that?
What’s in your radar?
JEFF GREENE: I wish I had another deal I do.
I’ve just finished a 25-story building.
It’s when I started doing this, it seemed like a great idea.
The problem with real estate developers is one developer has a successful building.
It does really well and then there’s no regulation how many others can do it.
Then 15 other developers are hired to do the same building and everyone thinks, well, I’ve
got a better architect, I’ve got a better view.
I’m a smarter developer.
Then you end up with 20 buildings, and there really were enough buyers for just the first
I think in New York, that’s what have happened.
For me, look, I don’t use construction loans.
I don’t have investors.
I don’t have EB-5 money.
I don’t have limited partners.
I try to just do enough, that kind of development that I can afford to pay for with my own cashflow
and I’ll make it through this cycle.
I think it could be a long cycle.
The good thing about the building I’m building, lucky for me, is it’s in an area called Hudson
Square, which is a little– not Hudson Yards, but Hudson Square, which is a tiny pocket,
just below the West Village, above Tribeca, between Soho and the river so it’s really
a five-minute walk to West Village, Tribeca, Soho or the river and that was great because
you’re in the middle of everything.
What’s even greater is ABC Disney just in that is building right now.
The whole operation one block from my building on the same street, it’ll be ready in a few
years and then Google’s building St. John’s Terminal two blocks away.
We’re going to have 15,000 new jobs within two blocks.
That’s very lucky.
I think that I have to figure out how I’m going to make it till when we’re done in about
six months till three years from now when the neighborhood really comes into it, but
New York’s– you know what, you can’t bet against New York because isn’t even as bad
as it is.
Just those two projects in my neighborhood are going to have 15,000 jobs and I realized
the ABC people were working up in the Upper West Side, but those buildings solve a steam
bottom and they’re going to rebuild them into something.
New York is like it’s the greatest city in the world.
It’s our biggest city.
If you want to do certain things, you want the talent and the resource.
You want the infrastructure, that’s where you’re going to go.
Eventually, we’ll figure out a way to get past this cycle, I’m sure and all this real
estate, they will just– RAOUL PAL: How are you thinking of the real estate market overall
I know you’re mainly focused here in Florida, I guess, for most of your investments and
some in New York, what are you thinking now?
What’s your senses?
Because you had amazing timing in 2006-’07.
JEFF GREENE: Look, I think there’s different kinds of real estate obviously.
Right now, I’m building a 300,000 industrial building here in West Palm Beach.
I feel very positive about that, because the movement is clearly towards more industrial
because everybody’s ordering on their computers and getting it delivered by Walmart or Amazon
so there’s tremendous demand for industrial space.
It depends on the category, I would say that the values of things like apartment buildings
that are in the three to four cap rates, and based on rents which have already gone up
for the most part a lot, seem pretty high.
It feels like we’re in an asset bubble in almost every category to be honest with you
and I think stocks are at an all-time high, bonds low, interest rates are low.
Those are all close to a high.
Real estate’s close to a high, and it’s interesting, everyone just seems to be very optimistic.
I just had lunch with someone today from Merrill Lynch, he was telling me how he thinks all
the smart people, they were just going to be fine because rates are low.
When everybody thinks things are going to be fine, that means everybody’s already in
and you’re not going to be so fine.
RAOUL PAL: That’s one of the things that struck me about Nome Goldsman, who we talked about
Nome, he’s had to say he’s had had a sense of some of this.
His whole, he went over the hedge fund business and a lot of real estate and he ends up buying
fast food, businesses and frozen food.
He bought a huge chain of Burger King.
He built the largest frozen foods business in Europe, just looking for that anticyclical,
It feels like it’s the time to be cautious when nobody else is.
JEFF GREENE: Yeah, but interesting enough, look, the other side of this, everybody’s
been saying that now for a long time.
RAOUL PAL: Yeah.
It’s been going on.
JEFF GREENE: People are sitting on a lot of liquidity, stay in the loop of liquidity,
though is coming from this– you’ve had a rigged economy for 10 years, where basically
with artificial– you have the central bank balance sheets adding, I don’t know what,
$15 trillion globally to their balance sheets, and you have rates held artificially at zero
for almost for a decade and now, again, very low and negative in Europe.
It obviously cause distortions in the market now.
I think everyone’s used to the distortions and figures the distortions will keep on going,
so everything will be just fine.
I don’t know if that’s going to– RAOUL PAL: What about the community here?
There’s a lot of hedge fund managers, a lot of people, entrepreneurs who’ve made a lot
of wealth, is their sense starting to shift?
Because some people I know are sensing shift and others are saying, no, still full on,
aggressive risk taking mode.
What do you think the mood is here?
JEFF GREENE: Everybody talks, everybody says you got to be cautious, but I think everybody
is also thinking I can’t– cash is trash.
We got to buy things.
Look, one of my biggest holdings is Apple.
It’s sitting at 1.3 trillion market cap, I get it.
It’s no longer a device company.
It’s now a platform that everyone’s on.
It’s now the telephone company when I was a kid, everybody has to have one and we’ll
keep getting them and buying these services.
The question is, what’s the value of that?
Is the value, is it more than 1.3 trillion?
If it’s less than 1.3 trillion, stabilize them, we’re all going to lose money in today’s
I don’t really, obviously, if you could show me that earnings are going to keep growing
from today’s levels at that company and they’re going to be making– I guess they’re going
to have to make 100 billion dollars a year to trade at 13 times earnings, which is what
you’d want to be at some point, maybe not today.
It’s a lot of money to make, even a global company with the monopolistic platform like
Who knows where these things are going?
That’s been real estate to me.
It definitely feels that a lot of good news are already out there.
Rents have gone up a lot.
Unemployment rate’s very low.
Just to be– I guess the question is how real is this global economy and how much of is
That’s the question.
If it’s real, and it can get a snide, you can do, we can rig things, but then the rig
timing can lead to real– RAOUL PAL: Well, the question is does rigging last?
What fragility is it building?
It’s like you talked about the SNL crisis.
That was a rigged situation where the SNLs were just because of the government irresponsible
of what they’re doing.
We’re seeing the central bank’s irresponsible with how money’s being thrown around the economy.
JEFF GREENE: Well, yeah, so no.
Look, if that’s the issue, like who knows?
The reality is, I can tell you this, up until two or three years ago, if we had employees
who in any way, were a substandard, giving us a hard time you’d said, bye-bye.
There’s another one waiting right now, starting about two years ago probably when Trump became
president, not because of Trump, I’m saying but at that time in the cycle, the way labor
market changed dramatically, all of a sudden, carpenters who are making 35 an hour are making
50 an hour and you can’t even get them.
All of a sudden, in hotel, workers that were making 10 an hour, make 15 an hour and wage
didn’t go up 3%, they went up 20%, 30%, 40%.
Pilots, I have a plane and my pilot salaries went up 30%, 40%, just like that.
What’s happened is all that liquidity has now led to increased wages.
Now if that’s just starting to happen, maybe we are more mid-cycle and then maybe we’re
not late cycle because it– RAOUL PAL: If it filters through that is, because people
can raise prices in the hotel or whatever.
JEFF GREENE: It is filtering through because everyone’s making more money and Donald Trump,
lucky for him, gets to take credit for it.
Whoever the president at the time, he’s the custodian of the economy.
That’s what seems to be happening.
Now, I can’t tell you like it does– what’s the consumer debt levels, I don’t know that
they’re necessarily overextended.
A lot of people are refinancing their homes no with lower rates, their 401ks were on all-time
high, they’re going to spend money, it’s going to keep this economy moving.
What is an economy anyway?
An economy is it’s a perception and so that’s why people are so confused, because you look
at the reality of all this funding money voodoo stuff going on, and you think, is it real,
but then you think at the end of the day, if everybody believes it’s real and they’re
out spending money, it becomes real.
RAOUL PAL: Outside of Apple and real estate, what do you invest in?
Do you have gold, do you think about gold?
JEFF GREENE: I don’t really, I don’t own gold.
Because we have a lot of real estate, which is a hard asset, we have a nice art collection,
which is a hard asset.
I’ve other, Alibaba is a big possession of mine, Google’s a big position of mine.
I tend to lay down to one of those tech stocks.
I have to own the banks and others, too.
I have a lot of liquidity right now to me, honestly.
A big chunk of money sitting in a lot of them in these bank prefers that I know are going
to get taken out because they’re about to roll into very high spread preferreds.
I’m sitting on a lot of money making 1.7% to 2%.
I’m happy with it.
I’m thinking like you know what, when things that move– I often look at a time in the
cycle, I’d say is morally, if you had to make one bet, it’s two choices.
Things are going to be 20% higher than today or 20% lower than today a year from now, two
years from now.
I think most smart people would say the better chance, they’ll be 20% lower because of where
I’m happy to sit in market, plenty of liquidity.
Look, everyone’s different.
If I were 25 years old, maybe I’d filter.
I’m 65 years old, I’m not assuming and if I have any trouble, I’d be worried but I’ve
already had that.
I’m basically just being cautious and I’m ready to have the liquidity available.
If there’s great opportunities, fine, if not, then I can live fine on my assets and make
RAOUL PAL: Talk to me about your other interests, the institute you set up.
JEFF GREENE: That was set up because five or six years ago, I could see that a country
that was solving its inner world, that was solving its problems only with monetary policy,
was going to leave behind a lot of people and I could see it happening.
You could see that those were the assets– RAOUL PAL: Is this when you were involved
in politics as well at the time, or?
JEFF GREENE: No, I’ve been involved in politics a few times, I actually have lost.
It’s funny, people say that you learn a lot more from your mistakes than in your successes
so I must be an expert on politics then because I’ve lost three, three out of three.
Obviously, I must really be smart in that space.
I think that you could just see because I could see that wages– I could see as owning
businesses that wages were not going up at all.
All of this with assets, saw our value’s going up, because with low interest rates, real
estate prices go up, stock prices go up, bond prices go up, those were the assets who’re
getting richer, those with labor were not getting richer, were struggling.
I said, this is unsustainable.
On top of that, with what was happening with technology and AI and machine learning and
how that was driving people out of the worst workforce and would cause some big disruptions.
We started a nonprofit and we’ve had some really stimulating conferences, in which we
brought together some very smart people with Ray Kurzweil, a Tom Friedman, and Larry Summers
and Tony Blair, and David Cameron’s been here and they’ve all come right to this hotel and
we’ve had some talk in the old education.
The list goes on, super smart people convening together to really talk about the future of
Again, as I said earlier in this interview, I have a personal experience with what can
happen to somebody when their work life changes because of my dad.
I’m very sensitive to that.
I have friends, honestly, who were highly educated, who have been marginalized and lost
their jobs and never gotten jobs again.
If you lose your job and you’re in your 60s, you really got to go get retrained to become
Of course, you can’t do that.
I really think that we are going to have a lot of disruptions and we have a lot of work
We talked about that.
We talked about education.
I don’t know if you know that we started a school in West Palm Beach.
We basically were– I have three young boys and we were frustrated with the private and
public school options so we started the Green School.
If you ever hear and want to see it, we have to take you by, it’s up to just under 130
kids, pre-K to eighth grade.
That school really embodies what I’m talking about and that we want our children to develop
a love of learning because we realized that kids today were going to going to graduate
15 years now or five years from now may have five, six, seven,10 career changes and they
may have to constantly learn and relearn, they can’t hate learning, they have to love
learning because they may have to learn new skill sets throughout their lives.
We’ve also have a focus on getting kids digitally influenced.
They start doing coding in kindergarten like kid coding exercises all the way to building
robots in the fifth and sixth grade.
We have enough emphasis teaching the whole child so we have met mindfulness and yoga
and dance and art.
We’ve really tried to create– and it’s a nonprofit school.
My wife and I funded it 100% ourselves.
We give financial aid so kids pay what they can’t afford what the computer says they can’t
afford to pay.
It’s 30%, 40% get financial aid and it’s been very fulfilling for us, as you can probably
see from our [indiscernible].
RAOUL PAL: Yeah.
How do you think we’re going to resolve this rich/poor divide?
Because it is not getting better.
Yes, there’s some marginal wage growth, late cycle wage growth that we talked about, but
at a structural level, we’ve still got a huge problem.
The Fed injecting more liquidity and stock prices exploding higher and your Apple shares
JEFF GREENE: Apple’s doubled in the last year.
RAOUL PAL: Yeah, doesn’t help the average guy.
How do you see that resolving?
You’re getting all these people together, they’re talking about it.
Are they talking about it?
Is somebody thinking, because you’ve got Trump on one side, you got Bernie Sanders on the
That’s how split this is becoming.
Someone’s got to find a solution somewhere.
Because if not– JEFF GREENE: We know that the Bernie Sanders socialism doesn’t work.
As they say, certainly in socialism, the poor will be richer, but you’re not going to make
the poor richer by making the rich poorer.
Basically, to me, I think the first thing is education.
That’s like the absolute no brainer.
Right now in this country, 14% of Americans are illiterate.
Now, if you’re illiterate, it’s not an issue.
It’s not about an income gap.
It’s about a possibility of you moving forward, it’s virtually impossible.
We’ve really failed in our education in this country.
I think that’s the first thing.
I think that– because you can’t even be as happy if you’re not educated.
Even if we created a society that people talk about where you have this, you have unlimited
resources, people only have to work 20 hours a week because you figure out a way to make
your food more efficiently and your housing, your 3D printing houses don’t need people
to do stuff.
If you’re not educated, how are you going to spend your life?
You can only have opiates, so you’re going to do drugs and drink?
I think being educated gives you the opportunity and I’m like to do better but to enjoy and
to thrive in your life.
I think that there are great examples of successful educational improvements in American.
States like Massachusetts and New Jersey actually has gone from 35 to three in the country in
public education by doing a few simple things.
Two years of pre-K for every child, because like in a lot of the states in the country,
these kids don’t even get any preschool education at all hardly.
Then they show up at kindergarten and they have a multi-million word vocabulary deficit.
You start behind, you stay behind, and I think we’re really failing our children in this
That’s the first order of visit.
If I was president of states, that would be my number one priority.
Get our kids educated competitively, because if they’re educated then at least we can compete
with whatever there is in the world.
Then how do you deal with solving the issue of jobs where we want people to feel good
about their upward mobility?
A lot of that, to me is a function of where we are in our cycle.
People don’t talk about this much, but my grandparents, like most people my age came
from Eastern Europe or another country.
Most definitely they were poor, everyone was poor.
Nobody came with any money.
They came with a shirt on their back and a dream.
The only dream my grandparents has probably that my parents will be able to have on their
table, nothing more than that.
There’s more than they had when they were in Eastern Europe and maybe a place to sleep
that was safe and clean.
Then what did my parents want for their kids?
They wanted their kids to be able to have every opportunity to follow the other Americans
who’ve been in for generations.
They fought hard and worked hard so we can go to good schools, and we had great public
schools as kids and great, great colleges.
What do we want for our kids and as it goes forward what?
The level expectation keeps getting higher and higher, and no one talks about that, but
from my grandparents’ generation to my kids’ generation, their level of expectation is
much, much greater for the kids.
Meanwhile, what’s happened is when my grandparents, after two world wars, we destroyed the industrial
complex of our competitors.
We were this global superpower with unlimited numbers of jobs and opportunities when people’s
expectations were here.
Now, we’re in a very globally competitive economy where we have to fight with much hungrier
countries around the world and their explanations are here.
You say, well, how do you fulfill their expectations?
It’s a lot harder.
I think the first thing is get our kids educated so they can be competitive globally.
Then just try to figure this all out, but it’s going to be a tough challenge.
I think it’s something– it’s the issue of our time.
The issue of our time.
RAOUL PAL: Yeah, I think it is.
I think politics remain pretty volatile until we figure out some of this stuff.
I think that seems to be a part of our future that we’re dealing with and it’s across all
the Western world and a lot of it is transition of the baby boomers, your typical, the baby
boomer, generation of the baby boomers.
That generation and the impossibility for the younger people to better afford even the
JEFF GREENE: I really believe we’ll figure it out.
Whenever I get pessimistic, I always think of our friend, Warren Buffett.
Warren Buffett, we’ve got to know, he’s members of the Giving Pledge, and we’re sitting around
a table with them in recent June and, or in late May, we’re talking and somebody said,
Warren, has it ever been this bad?
The antagonism and the divisiveness, and he said, these are two things that I have lived
through for 15 presidents, 14 I invested with.
He said, seven Republicans, seven Democrats, and there’s no place in America.
The whole world wants to come here.
Don’t bet against America.
Then he said something else, he said, I’m 88 years old, three of my lifetimes, which
is 264 years, in three of my lifetimes ago, there was nothing here.
It was dirt roads, and Indians and cowboys driving around and riding around the horses.
Look at what this system has done here.
Look what we’ve built.
In the same, you could say the same for the European countries and the whole Western world,
and so in the end of the day.
RAOUL PAL: It’ll figure itself out.
JEFF GREENE: Yeah, the ship will start to drift a little bit, but we always ride it
and I think we’ll figure out these issues and this system works.
If we just stay with our system, there’ll always be people like me who are aggressive
entrepreneurs, are trying to create and build things.
There’ll be other people who are more mellow and just want to make a living.
There’ll be other people who are creative and artists, and they’ll be like you who are
trying to build your journalism, your media business.
I think we’ll get through this just fine.
That’s my view.
I don’t know.
RAOUL PAL: Jeff, that’s a perfect way to end.
Thank you ever so much for giving an optimistic ending amongst all that.
JEFF GREENE: I really believe it.
RAOUL PAL: Thank you.
Published on: March 27th, 2019 • Duration: 34 minutes
Bridgewater Associates LP has bet more than $1 billion that stock markets around the world will fall by March, said people familiar with the matter.
The wager, assembled over a span of months and executed by a handful of Wall Street firms, including Goldman Sachs Group Inc. and Morgan Stanley, would pay off for the world’s biggest hedge fund if either the S&P 500 or the Euro Stoxx 50—or both—declines, some of the people said.
It is made up of put options, which are contracts that give investors the right to sell stocks at a specific price, known as a strike, by a certain date. They allow investors to shell out a relatively small amount of cash to hedge a larger portfolio or make a directional wager. The options expire in March and currently represent one of the largest bearish bets against the market.
Bridgewater paid roughly $1.5 billion for the options contracts, or just about 1% of the Westport, Conn., firm’s $150 billion in assets under management, according to people familiar with the matter.
The options contracts are tied to around $100 billion worth of the indexes, said people familiar with the matter. How much the firm stands to potentially make would depend on many factors, including the magnitude of any market decline and the timing of when the firm cashes in its bet.
It couldn’t be determined why Bridgewater made the investment. Several clients said it may simply be a hedge for significant exposure to equity markets the firm has built up. Funds often hedge, or take offsetting positions, against other exposure to protect against losses.
The massive size of the wager has prompted chatter among traders and caused the price of some options to rise.
There has been a surge in put options outstanding tied to the S&P 500 index. The number of S&P 500 put options outstanding hit the highest level in more than four years in September, according to data provider Trade Alert. There has also been growing interest in S&P 500 put options expiring in March, the data show.
The bet is one of a growing number of bearish trades that have been placed as stock markets reach new highs and as some investors worry about a correction. Some prominent money managers have also predicted that markets would fall if Sen. Elizabeth Warren wins the Democratic Party nomination, or the presidency; traders have started to place bearish wagers in sectors including health care.
Bridgewater declined to comment on its trades in a statement, adding: “We have no positions that are intended to either hedge or bet on any potential political developments in the U.S.” Bridgewater also said that its positions change often and are frequently hedges for others and that reading too much into a single position “would be a mistake.”
Bridgewater’s bet is made up of a series of put contracts, said people familiar with the matter. The stock indexes wouldn’t have to fall to the contracts’ strike prices for Bridgewater to profit. Rather, Bridgewater could turn around and sell contracts that rise in value if markets start falling, even if the declines leave indexes short of the strike prices.
Most contracts aren’t exercised at their designated strike prices, but instead are commonly used as trading instruments for investors looking to profit from the market’s moves. Options prices typically rise as the underlying instrument gets closer to the strike price and as it appears more likely the instrument could hit that level by the expiration date.
Bridgewater’s counterparties could theoretically be on the hook should its wager pay off. A standard practice among Wall Street counterparties is to turn around and hedge the risk they have assumed.
Some investors have been unnerved by the near relentless march upward of the S&P 500 since March 2009—the longest bull run in the index’s more-than-90-year history. The index has hit 23 highs in 2019, in a year when hopes for lower interest rates and for a resolution to the trade dispute between the U.S. and China have continued to propel stocks.
March 2020 is significant in the Democratic primary because a majority of the party’s delegates, which are needed to capture a presidential nomination, will have been awarded by the end of the month.
Investors including Stanley Druckenmiller and Leon Cooperman have said in recent months a Warren presidency would cause markets to fall. Some traders say companies are likely to hold off on major spending decisions until it becomes clearer whether she’ll win.
Wall Street has begun offering analyses of what a President Warren could achieve by executive power and suggesting ways investors could trade a Warren candidacy. Morgan Stanley on Oct. 1 sent trading clients an “Elizabeth Warren Risk Basket” it described as a way to hedge the risk associated with her myriad plans. The basket and its ticker—MSXXWARR—were renamed later that day.
A person close to Morgan Stanley said the basket was meant to reflect the progressive agenda and was broader than any one candidate. Other big banks also have created baskets of stocks tied to Democratic presidential candidates’ policies.
The Warren campaign didn’t respond to requests for comment.
Key Square Capital Management, a $4.5 billion macro hedge fund founded by Scott Bessent, a former investment chief for George Soros, is betting against the dollar in a variety of currencies anticipating Ms. Warren’s continued strength, according to people familiar with the matter.
Key Square said in a Nov. 14 letter to investors that “intelligent people can argue whether Ms. Warren’s numerous programs will be good or bad for American society, but they are unequivocally negative for U.S. asset prices.”
There also have been bearish trades on one of the biggest exchange-traded funds tracking health care, the $18.5 billion Health Care Select Sector SPDR Fund, which holds shares of pharmaceutical companies and health-care providers, analysts said. Ms. Warren and Sen. Bernie Sanders, another leading Democratic presidential hopeful, have called for banning private health insurance and negotiating down drug prices.
Trying to time the markets or bet on political outcomes can be treacherous. Mr. Soros, a major Democratic donor, lost nearly $1 billion in the immediate months following Donald Trump’s unexpected election when the stock market rallied. Even spending money on simple hedges in recent years has often been a money loser as major U.S. indexes have ascended.
Bridgewater’s unorthodox management culture of “radical transparency,” which includes taping and posting most internal meetings for all employees to see, has made it one of the few hedge funds to fascinate both on and off Wall Street. Its founder, 70-year-old Ray Dalio, has laid out that philosophy in a book he has promoted as a management manifesto for companies, despite high-profile shake-ups in Bridgewater’s own leadership ranks in recent years.
Mr. Dalio, who has called for higher taxes on the wealthy and signed the Giving Pledge—a campaign started by Bill Gates and Warren Buffett to get the wealthy to promise to give away most of their wealth, has warned recently that rising populism around the world and extreme levels of inequality can cause conflicts. “Capitalism needs to be reformed. It doesn’t need to be abandoned,” Mr. Dalio said in an episode of “60 Minutes” earlier this year.
Credited with forecasting the financial crisis, Bridgewater made 8.7% in 2008 in its flagship Pure Alpha fund, then made a major shift into bonds that drove a 27.4% gain in 2010.
This year, the macro fund has lost 2.7% through October. Another fund it manages, All Weather, is up 14.5% for the period. Bridgewater typically makes many small bets across a broad array of instruments.
Famed activist short seller Carson Block pulls no punches as he takes aim at Canada, Jack Ma and the U.S. pharmaceutical industry in this interview with Brian Price. Block, who serves as CIO of Muddy Waters Research, discusses the red flags he looks for when hunting for fraud, and reveals which companies are currently on his radar. Carson also touches on how his line of work has led to both tremendous success and death threats. Filmed December 4, 2018 in New York.
Other large traders were even more bearish. “Other reportables”—a loose category of firms that don’t necessarily manage money for outside investors—held more than three times as many short positions in bitcoin futures as long ones, the CFTC report shows.
So who is the optimist? The report shows it is mostly small investors taking the other side of the trade. Among traders with fewer than 25 bitcoin contracts, a category that likely captures many individuals placing bets in bitcoin, long wagers outnumbered short bets by 4 to 1.
Through the Coalition for Affordable Drugs, a company they formed this year, Mr. Bass and Mr. Spangenberg identify pharmaceutical patents that they consider weak or abusive. Then they request that a unit of the United States Patent and Trademark Office review the legitimacy of the patents.
By mid-November, the firm had filed 33 requests for patent reviews, targeting 13 drugs from a dozen companies.