A few years ago, when people were cheerfully signing mortgages for beautiful homes they hoped they'd be able to afford, John Paulson was sitting in his darkened midtown office quietly betting that their lives would fall apart — that they'd become overwhelmed by bills and have to default on their mortgages — essentially, on their future unhappiness. This has been a good strategy for him. In 2007 he raked in $3 billion, transforming himself from a nobody from Queens into a "rock star," as one hedge-fund founder puts it to Bloomberg. In the first half of 2008, he made another $1.05 billion, mostly by shorting British banks. He recently celebrated this accomplishment with a lavish dinner at the Metropolitan Club, complete with $500 bottles of wine and a stirring speech by his employee, Alan Greenspan. And why shouldn't he burn a little of that cash? As long as things continue to go wrong for people, he'll make more. Happily, according to Paulson, they probably will:

“You have deterioration in almost every asset class,” Paulson says. “You’re looking at declines in housing prices, the health of manufacturers and the earnings of various companies. There are rising delinquencies in auto loans and commercial real estate.” Paulson, 52, peers over his tortoiseshell glasses. “There’s more to come,” he warns.

Yeah. We bet. You know what else we'd bet on? We'd bet on the fact that as soon as the Bloomberg reporter left, Paulson let out a mad Satanic cackle, busted out the booty rap and Dom, and did a little victory dance to congratulate himself on another fantastic performance.

Paulson Bucks Paulson As His Hedge Funds Score $1 Billion Gain [Bloomberg]