GREG LIPPMANN

Greg Lippmann's Career Timeline

From Wall Street Trader to "The Big Short" Pioneer

Greg Lippmann rose to prominence as the pioneering Deutsche Bank trader who recognized the impending subprime mortgage crisis and orchestrated one of the most profitable trades against the housing market. His contrarian bet against mortgage-backed securities made him a central figure in Michael Lewis's "The Big Short". Internally, he earned nicknames like "Bubble Boy" and "Patient Zero" for spreading the short-the-housing-market thesis across Wall Street.

Early Life and Education

c. 1969

Gregory Lippmann is born to a Jewish family in the New York metropolitan area. From an early age, he displays the analytical mindset and mathematical aptitude that would later serve him well on Wall Street.

Late 1980s

Lippmann attends the University of Pennsylvania, studying economics and finance at the prestigious Wharton School. The rigorous quantitative curriculum at Wharton provides him with a solid foundation in financial theory and market mechanics that would prove valuable in his future career.

1991

Lippmann graduates magna cum laude from the University of Pennsylvania with a Bachelor of Arts in Economics and a minor in English. Like many ambitious graduates of this era, he sets his sights on Wall Street, which was then entering a new phase of innovation in structured products and derivatives.

Early Career on Wall Street (1991-2000)

1991-1995

After graduation, Lippmann begins his career at Credit Suisse, where he would eventually rise to become a Director and head of ABS/MBS Subordinate and CDO trading. During this period, he works in fixed income, where he gains exposure to various credit products and develops expertise in analyzing complex debt instruments. This coincides with the rapid expansion of structured finance and securitization on Wall Street—developments that would later play a central role in his career.

2000

Lippmann joins Deutsche Bank, where he begins as a trader of non-investment grade ABS and RMBS securities. He quickly distinguishes himself by developing a deep understanding of the intricacies of the mortgage market and bond structuring. During this period, he closely observes the evolution of the mortgage industry, including the rise of subprime lending and increasingly complex securitization structures like collateralized debt obligations (CDOs).

Rise at Deutsche Bank (2000-2007)

2003-2005

Lippmann is promoted to Global Head of ABS and CDO trading at Deutsche Bank. Under his leadership, the bank's trading desk becomes one of the most active in the growing market for mortgage-backed securities. During this period, Deutsche Bank emerges as a powerhouse in structured credit products, with Lippmann playing a key role in expanding the bank's presence in these markets. His responsibilities include trading various tranches of mortgage-backed securities and other asset-backed products. Lippmann develops a reputation for both his trading acumen and his distinctive personality—characterized by bluntness, confidence, and occasional brashness.

Lippmann developed a reputation not just for his sharp market insights but also for his aggressive communication style. Colleagues nicknamed him "Bubble Boy" and "Patient Zero," highlighting his relentless efforts to spread awareness about the housing bubble. His forceful approach won him both admirers and critics within the industry.

2005

While most of Wall Street remains bullish on the housing market, Lippmann begins to notice troubling patterns in mortgage loan performance data. He observes deteriorating underwriting standards, increasing default rates among subprime borrowers, and signs of a housing bubble. Unlike many of his peers who dismiss these concerns, Lippmann begins to develop a thesis that the subprime mortgage market is fundamentally flawed and headed for collapse.

2006

Lippmann becomes increasingly convinced of the impending subprime crisis and begins to formulate a trading strategy to profit from it. He focuses on using credit default swaps (CDS) to bet against (short) subprime mortgage bonds, particularly the BBB and BBB- rated tranches of mortgage-backed securities that he believes are most vulnerable. Lippmann begins actively pitching his short thesis to hedge funds and other institutional investors, often using a now-famous 50+ slide presentation detailing the problems in the subprime market. While facing considerable skepticism, he manages to convince some investors, including Michael Burry's Scion Capital, Steve Eisman's FrontPoint Partners, and Cornwall Capital. According to Michael Lewis's "The Big Short," Lippmann reached out to Burry in November 2006 about his credit default swap positions and later attempted to acquire more of Burry's trades. Burry would later acknowledge in an email to his staff that "Lippmann is the guy that essentially took my idea and ran with it. To his credit."

During this time, Lippmann also helped popularize the use of the newly developed ABX Index, a synthetic instrument that allowed investors to short baskets of mortgage bonds more efficiently, accelerating the growth of the subprime short trade.

2007-2008

As Lippmann's predictions begin to materialize with rising delinquencies in subprime mortgages, the ABX index (tracking subprime mortgage bonds) starts to decline. By mid-2007, the subprime crisis is in full swing, and Lippmann's short positions start generating substantial profits for Deutsche Bank and the clients he convinced to take similar positions. Through his strategic positioning, Deutsche Bank makes approximately $1.5 billion from shorts on the housing market. Despite internal resistance and criticism, Lippmann is vindicated as the crisis unfolds exactly as he had forecasted. He becomes known as "Bubble Boy" within the industry for his prescient call. His success attracts the attention of journalist Michael Lewis, who features Lippmann prominently in his research for what would later become "The Big Short." In late 2008, his role expands as he adds non-agency MBS to his business responsibilities at Deutsche Bank.

Financial Crisis and Aftermath (2008-2010)

2008

As the financial crisis deepens, Lippmann's reputation as one of the few traders who saw it coming grows. While continuing to manage trading operations at Deutsche Bank, he begins to shift his focus from shorting subprime to identifying opportunities in the aftermath of the crisis. By late 2008, with prices of mortgage securities having collapsed, Lippmann starts to see value in certain segments of the mortgage market that had been indiscriminately sold off. He begins to advocate for selective long positions in mortgage securities that he believes have been oversold relative to their fundamental value.

2009

Despite his success during the crisis, Lippmann grows increasingly restless at Deutsche Bank, where he now serves as head of all non-agency RMBS, ABS and CDO trading globally, leading a team of 30 senior professionals in New York and London. Having generated enormous profits from his contrarian bet, he begins to consider opportunities outside the traditional banking sector. He explores the possibility of launching his own hedge fund focused on distressed debt and mortgage securities, seeing significant opportunities in the post-crisis landscape. By year's end, rumors circulate on Wall Street about Lippmann's imminent departure from Deutsche Bank.

Although Deutsche Bank reaped substantial profits from Lippmann's trades, internal tensions grew over his outspoken warnings about the broader mortgage market, which some feared could damage the bank's reputation. This friction contributed to his decision to leave and establish LibreMax Capital.

2010

In April 2010, after 10 years at Deutsche Bank, Lippmann announces his departure to start his own hedge fund, LibreMax Capital, with former colleague Fred Brettschneider. Lippmann takes on the role of Managing Founding Partner and Chief Investment Officer (CIO). The fund focuses on structured products, particularly residential and commercial mortgage-backed securities, aiming to capitalize on opportunities in the post-crisis credit markets. LibreMax launches with approximately $400 million in assets under management and attracts significant attention due to Lippmann's reputation from the subprime trade.

LibreMax Capital Era (2010-Present)

2010-2012

During LibreMax's early years, Lippmann positions the fund to capitalize on the recovery in structured credit markets. The fund invests primarily in non-agency residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS), which had been heavily discounted during the crisis. LibreMax grows rapidly, with assets under management reaching approximately $2.7 billion by mid-2012. The fund generates strong returns during this period, benefiting from the gradual recovery in mortgage securities prices as the U.S. housing market stabilizes.

2012-2015

LibreMax continues to expand its investment strategies beyond its initial focus on mortgage securities. The firm launches additional funds to target other areas of structured credit and alternative lending. Lippmann maintains a relatively low public profile during this period, but occasionally shares his market views at industry conferences. In 2015, Michael Lewis's book "The Big Short" is adapted into a feature film, with actor Ryan Gosling portraying a character based on Lippmann (named Jared Vennett in the film). The movie brings renewed public attention to Lippmann's role in identifying the subprime crisis.

2016-2018

LibreMax diversifies further into commercial real estate lending and collateralized loan obligations (CLOs). In 2018, the firm acquires Trimaran Advisors, a CLO manager with approximately $3 billion in assets, signaling Lippmann's strategic expansion into the leveraged loan market. By the end of 2018, LibreMax's total assets under management approach $5 billion, cementing its position as a significant player in alternative credit investing.

2019-2022

Lippmann navigates LibreMax through the market volatility of the COVID-19 pandemic, which causes significant disruptions in credit markets. Despite initial challenges during the March 2020 market selloff, the firm capitalizes on dislocation opportunities in various credit sectors during the recovery phase. In 2021, Lippmann helps steer the firm through a strategic evolution, with an increased focus on private credit opportunities alongside its traditional structured credit strategies. Throughout this period, he remains a respected voice in credit markets, known for his analytical rigor and contrarian thinking.

2023-Present

LibreMax continues to operate as a specialized alternative asset manager under Lippmann's leadership, with a focus on structured products, corporate credit, and real estate debt. The firm manages approximately $7 billion in assets across various strategies. As CIO, Lippmann serves as chairman of LibreMax's Investment Committee, a non-voting member of its Risk Management and Valuation Committees, and a member of its ESG Committee. Beyond his professional responsibilities, Lippmann is active in philanthropy, serving on the board of New 42nd Street and the South Fork Natural History Museum. He is also on the Advisory Council of the American Museum of Natural History. Lippmann maintains his position as one of Wall Street's most respected credit investors, known for his deep analytical approach and willingness to take contrarian positions when warranted by fundamentals.

Lippmann's Investment Principles and Trading Philosophy

1. Focus on Data Over Consensus

Lippmann's approach emphasizes rigorous data analysis over market consensus. During the housing bubble, when most investors and analysts remained bullish on mortgage securities, Lippmann meticulously analyzed loan-level data that revealed deteriorating credit quality. This data-driven approach allowed him to identify the disconnect between market pricing and fundamental reality.

2. Identify Structural Mispricing

Lippmann excels at identifying structural flaws in securities pricing. His famous subprime short focused on the BBB and BBB- tranches of mortgage bonds, which he recognized were fundamentally mispriced due to rating agency methodologies that failed to account for correlation risk. He understood that these tranches offered an asymmetric payoff profile - they would either pay in full or be worthless, with little middle ground.

3. Patience in Contrarian Positions

Lippmann demonstrated remarkable patience with his subprime short thesis, maintaining conviction despite significant pushback and periods of mark-to-market losses. He understood that contrarian trades often require time to play out, and he was willing to endure interim volatility for the sake of the ultimate outcome.

4. Find the Optimal Expression of Investment Thesis

Lippmann is known for his ability to identify the most efficient instruments to express his investment views. Rather than shorting homebuilder stocks or broadly shorting mortgage indices, he specifically targeted credit default swaps on BBB tranches of subprime mortgage bonds. This approach maximized leverage and precision while minimizing carrying costs.

5. Rigorous Communication of Complex Ideas

Despite the complexity of structured credit, Lippmann developed a gift for explaining intricate concepts in accessible terms. His famous pitch presentation on shorting subprime mortgages translated complex financial engineering into intuitive concepts that investors could grasp. This communication skill proved critical in convincing others of his thesis.

6. Conviction Alongside Risk Management

While Lippmann had strong conviction in his subprime short thesis, he structured positions with defined risk parameters. By using credit default swaps rather than shorting securities directly, he created positions with limited downside (premium payments) but massive upside potential.

7. Market Cycles and Opportunistic Repositioning

Demonstrating intellectual flexibility, Lippmann began considering long positions in mortgage securities by late 2008, when prices had collapsed and fear was rampant. This willingness to change course when market conditions shift has characterized his post-crisis career at LibreMax.

Comparing Lippmann to Other Wall Street Figures

Lippmann vs. Michael Burry: Both identified the subprime crisis early, but their relationship was more interconnected than often portrayed. According to Michael Lewis's account in "The Big Short," Burry was actually an influence on Lippmann. In late 2006, Deutsche Bank's Lippmann reached out to Burry about his credit default swap positions, and later attempted to buy Burry's billion-dollar portfolio of swaps. Burry later acknowledged this connection, stating in an email to his staff that "Lippmann is the guy that essentially took my idea and ran with it. To his credit." While Burry approached the trade as an outsider focused primarily on loan-level analysis, Lippmann leveraged his position as a market insider with deep knowledge of structured products to scale the trade dramatically. Lippmann not only traded for Deutsche Bank but also convinced numerous hedge funds to take similar positions, helping to create broader market awareness of the subprime problems.
Lippmann vs. John Paulson: Both profited enormously from the subprime collapse, but Paulson entered the trade later than Lippmann and focused more on the ABX indices and synthetic CDOs. While Paulson's trade generated larger personal profits, Lippmann is often credited with being earlier in identifying the problem and more instrumental in creating the market for subprime credit default swaps.
Lippmann vs. Steve Eisman: Both were outspoken critics of the mortgage industry, but while Eisman's approach was more confrontational and morally charged, Lippmann approached the trade primarily as a market opportunity. Eisman was a client of Lippmann, taking short positions based partly on Lippmann's research and market-making.

Legacy and Impact

Greg Lippmann's career embodies several enduring lessons for investors:

The value of independent analysis: Lippmann's willingness to challenge consensus views and conduct original research led to one of the most profitable trades in modern financial history.
The importance of structural understanding: His deep knowledge of mortgage securitization allowed him to identify precisely where vulnerabilities existed and how to exploit them.
The power of conviction: Despite widespread skepticism and pushback, Lippmann maintained his bearish view on subprime mortgages, demonstrating the value of well-researched conviction.
Adaptability in changing markets: After the crisis, Lippmann successfully pivoted from being a banking-sector trader to an alternative investment entrepreneur, showing the importance of evolving with market conditions.

While Lippmann's famous short trade against the housing market secured his place in financial history, his longer-term impact lies in how he helped change Wall Street's approach to structured credit analysis. By demonstrating the flaws in rating agency methodologies and highlighting the importance of loan-level analysis, he contributed to more rigorous risk assessment practices in securitization markets.

Today, Lippmann continues to apply his analytical approach at LibreMax Capital, focusing on identifying value in complex credit instruments—a testament to the enduring relevance of his investment philosophy in ever-changing markets.