The recent recession certainly didn’t produce many winners and definitely left millions, probably even billions, of people feeling like they were on the losing end. Still, those that came out on top are sitting pretty now as the rest of us are just trying to get back on our feet.
The world fell apart for most people less than two years ago, but for some–whether they were just there at the right place at the right time, or had the foresight to make the right investments during the downturn–the recession might have been the best thing to ever happen to them.
Now that isn’t to say they preyed on the misfortune of the masses. No one could have controlled what happened to the economy; it was a systematic failure. Some people just took advantage of the end result.
What Happened To All the Money?
While many people like to compare investing money to gambling, the two aren’t the same. While gambling is a zero-sum game–meaning that for every winner, there is an equal loser–investing is not. The basic principle in investing isn’t based on how many dollars were used to buy or sell something, it’s that value it is either created or diminished. There are no set prices when it comes to investing, it’s only worth as much as someone is willing to pay for it.
During the recession, investments like real estate, stocks, oil, bonds, etc., became insanely expensive. People were willing to overpay because they thought the value would only go up. This created inflated values for those investments, or a “bubble.”
Then no one wanted to pay for those things anymore and the values fell hard. Did anyone hear that Pop? That money so many people lost is gone forever because, in a way, it didn’t really ever exist.
So while there are plenty of losers from the recession, there are actually far fewer winners.
The Guys Who Came Out On Top
While the following six people probably benefited the most during the market downturn, they aren’t alone. They represent certain groups that were able to capitalize when things were looking their bleakest.
- Jamie Dimon, CEO of JPMorgan Chase & Co.: While many in the banking industry suffered unprecedented collapses, Dimon’s firm didn’t touch the subprime market during the bubble and ended up in great position to pick up some valuable assets when the recession hit. Dimon became the poster boy of good banking, standing against everything that was bad with Wall Street. With the government’s help, JPMorgan acquired Bear Stearns and Washington Mutual at very deep discounts.
Similar: Healthy banks like Wells Fargo and maybe Bank of America who bought distressed banks.
- John Paulson, founder/president of Paulson & Co.: Credit default swaps were a major reason why many insurance companies went under during the recession. Essentially, Paulson bet against the market before the crash and believed mortgages would default. They did. While many hedge funds had to close their doors when the market crashed, Paulson’s firm tripled in size from $12.5 billion to $36 billion in 2008. He himself has reportedly made $3.7 billion in 2007 and $2 billion in 2008, and was a top earner again last year.
Similar: Contrarian investors, short sellers and CDS buyers who profited from the crash.
- Nouriel Roubini, Professor of Economics at NYU: Affectionately (or not) known as Dr. Doom, Roubini made a name for himself during the recession as one of the first and loudest to call out the impending meltdown of the mortgage market. He gained popularity by making the rounds on talk shows and newspaper quotes with his pessimistic outlook. In his spare time, Roubini blogs, tweets and authors books about the flaws of the U.S. economy. He also likes to party.
Similar: The Black Swan author Nassim Nicholas Taleb, economist Peter Schiff and others who actually saw the bubble’s burst coming.
- Jim Cramer, host of CNBC’s Mad Money: “Hey, I’m Cramer, welcome to Mad Money. Other people want to make friends, I just want to make you money.” With an intro like that, it’s no wonder why the former hedge-fund-manager-turned-financial-TV-personality became the trusted face America turned to for their stock advice. Cramer’s cartoonish slapstick and simple structure made his stock advice easy to follow and even fun to watch. His popularity skyrocketed when the market started peaking and then crashing. People fled to him to explain what was going on. Soon, he was making cameos in movies and TV shows. He may have taken a few shots from The Daily Show‘s Jon Stewart, but he’s still ticking.
Similarities: Financial TV news channels like CNBC and FoxBusiness that increased in popularity and ratings.
- The Walton Family: Who are the Waltons? They’re the namesake of the largest retailer in the world, Wal-Mart. The discount warehouse chain served as an oasis for people trying to make ends meet when times were toughest. In fact, shares of Wal-Mart (NYSE: WMT) were actually at their second highest in its history during the recession. The first? During late 1999/early 2000…when Y2K was actually an issue. As of March, four different Waltons rank in the top 20 of Forbes‘ richest people in the world, with a combined wealth of almost $84 billion.
Similar: Other discount stores like 99 Cent Store, Dollar Tree, Costco, etc. that benefited from penny pinching shoppers.
Sure, maybe they took a hit during the recession, but they’re still standing, still working and still saving. That’s a winner in my book.
Anyone else you want to see on the list? Did you manage to benefit from the market’s downturn? Tell us in the comments!