Invest in Canada

How ‘08 went bust

by investor on 28/12/08 at 12:54 pm

It began with a general feeling that the economy, though struggling, would be fine. Then the mortgage crisis hit. Then the bottom fell out. Now, market players are in shock.

In January, there was widespread speculation that the economy could repair itself just as quickly as it had soured. The hope was that maybe the worst had already passed.

There is a small cadre of finance whizzes and fringe academics who have, at various volumes, been predicting a market crash and burn for years. In Canada, one of the most prominent among those is Prem Watsa, the humble CEO of Toronto-based Fairfax Financial Holdings. Back in 2003, he and his team concluded that the U.S. housing market was in a speculative froth; from 2003 to 2007, his group hedged against the conventional wisdom in their industry, buying up protection against banks and other entities exposed to the lending and mortgage boom. “We just thought it was a question of time before that came to haunt people,” Mr. Watsa said in a recent interview. “We’ve had 20 years of a great economy without a recession.”

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