Revealed: Hedge Fund Legend John Paulson’s Favorite Income Strategy

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  1. Glenn Edgar says:

    I think the risk of the above is higher than what is implied. Say a stock stops 5% shy of its offer price. And only 8% of the deals fall through. Sounds like easy money. 92% of the time, you just grab an easy profit. True. But WAIT! What is the likely loss in the 8% of the time the acquisition falls through? The 5% risk/time premium. NO! What was the pre-takeover price of the stock? It could be 50% lower (say). It might fall back near there. Ouch. Maybe the current average “merger acquisition” IS too high. But expertise and examining each deal for your estimate of its risk/reward profile is needed. Then pick the ones with the highest expected outcome, with volatility of the expected return always an issue. I’m sure John Paulson would agree with everything I’ve said.


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