David Tepper / 2009 / Equity Long
Buying what survival was worth.
David Tepper and distressed bank shares in 2009.
Before the outcome was obvious.
A collapsing share price can represent either a bargain or a claim about to be wiped out. The workbook presents Tepper’s 2009 bank trade as a judgment about government support and extreme undervaluation. The distinction is crucial: a financial system can survive while individual shareholders lose everything. The analytical task was to consider which securities might retain value if intervention prevented a worse outcome.
What could have gone wrong
Nationalisation, dilution and insolvency could leave equity holders with little, even if policymakers successfully stabilised the system.
Separate the survival of the institution from the survival of your place in its capital structure.
Put the thesis to the test.
Change the assumptions and watch the arithmetic update. These are simplified scenarios; they do not recreate the instrument’s pricing or the path of the trade.
How this model works
Profit ratio = profit ÷ stated position. Exposure ratio = stated position ÷ fund assets. Neither is a measure of maximum loss or a net investor return.
The workbook’s simple annualisation is profit ratio × 365 ÷ duration = 189.3%. It is linear, not compounded, and is not a repeatable annual return. Fees, financing, collateral, premium carry and changing exposures are not modelled.
What these figures mean.
Source: Legendary Trades Models, Master Comparison!A12:L12; Trade P&L Models, case 9. The following are original workbook inputs, preserved for transparency. They are estimates, not independently audited results.
- Workbook position
- $5bn
- Workbook “gross profit”
- $7bn
- Workbook duration
- 270 days
- Workbook fund assets
- $6bn
- Workbook fund return
- 132%
- Workbook position ROI
- 140%
The fund-return field is a separate source claim, not a calculated result of this trade. Its reporting period and gross/net basis are not independently established here. Model ratios are recalculated from inputs rather than copied from rounded source ROI values.