We've always maintained that debt deflation would provide few opportunities to get rich and that, moreover, it is likely to challenge even financial geniuses to hold onto a fraction of their current net worth. Indeed, the housing collapse that is now sucking the U.S. economy into a deflationary black hole is not going to work like the dot-com boom in reverse, nor will pessimists who are willing to put their money where their mouths are make untold billions as the U.S. economy collapses. Now, one might think that any such precipitous change in the economy would produce at least a few big winners who had the guts to bet heavily against the consensus. While this will always be true to an extent, it is unlikely that those betting the 'don't pass' line this time around will get anything like the spectacular odds that were available in the days when corporate insiders and their investment bankers could buy vast quantities of dot-com start-up shares for mere pennies. We had a high school chum who did this, and the 600,000 shares he held in the company he'd helped start got bid up to $116 apiece at the height of the boom, in 2000. Such stories were all too common before the tech bubble burst, but we can see in retrospect that it was the kind of boom that might not recur in five lifetimes. No Longer a Short And that is why we should assume that hedge fund manager John Paulson will prove to be a rare exception by having made an estimated $3-$4 billion for himself betting on a drop in housing values. His story was recounted in a front-page article yesterday in the Wall Street Journal. The headline said he earned this sum betting big on a drop in housing
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