“I wait for the blowup, then invest”

Fortune talks with Richard Rainwater.

Rainwater is no crackpot. But you don’t get to be a multibillionaire investor—one who’s more than doubled his net worth in a decade—through incremental gains on little stock trades. You have to push way past conventional thinking, test the boundaries of chaos, see events in a bigger context. You have to look at all the scenarios, from “A to friggin’ Z,” as he says, and not be afraid to focus on Z. Only when you’ve vacuumed up as much information as possible and you know the world is at a major inflection point do you put a hell of a lot of money behind your conviction.
Such insights have allowed Rainwater to turn moments of cataclysm into gigantic paydays before. In the mid-1990s he saw panic selling in Houston real estate and bought some 15 million square feet; now the properties are selling for three times his purchase price. In the late ’90s, when oil seemed plentiful and its price had fallen to the low teens, he bet hundreds of millions—by investing in oil stocks and futures—that it would rise. A billion dollars later, that move is still paying off. “Most people invest and then sit around worrying what the next blowup will be,” he says. “I do the opposite. I wait for the blowup, then invest.”
The next blowup, however, looms so large that it scares and confuses him. For the past few months he’s been holed up in hard-core research mode—reading books, academic studies, and, yes, blogs. Every morning he rises before dawn at one of his houses in Texas or South Carolina or California (he actually owns a piece of Pebble Beach Resorts) and spends four or five hours reading sites like LifeAftertheOilCrash.net or DieOff.org, obsessively following links and sifting through data. How worried is he? He has some $500 million of his $2.5 billion fortune in cash, more than ever before. “I’m long oil and I’m liquid,” he says. “I’ve put myself in a position that if the end of the world came tomorrow I’d kind of be prepared.” He’s also ready to move fast if he spots an opening.

Posted by on December 15th, 2005 at 12:40 pm


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