Say it isn't so Prem. I'm a bit nervous about getting too bullish with Watsa forecasting such a gloomy future. I read his annual reports in the years leading up to the 2008 financial panic and Watsa was warning of a debt bubble and market collapse very early.
He was quoted in the Globe and Mail this week:
The U.S. economy appears to be heading toward a lengthy period of deflation such as the one that struck Japan, and there is little policy-makers can do to prevent it, says one of Canada’s most accomplished investors.
But it isn’t just the United States and Europe that Prem Watsa is worried about. The potential bursting of a property bubble in China has him even more concerned. And if Chinese demand for commodities dries up at the same time as U.S. consumers are shutting their wallets, then the global economy is in for a lengthy period of pain.
As pessimistic as he is, Mr. Watsa, the chief executive officer of investment and insurance company Fairfax Financial Holdings Ltd., (FFH-T378.009.162.48%) is sleeping soundly at night. While banks, insurers, and investors were watching their assets disintegrate in the financial crisis of 2008, Fairfax was raking in profits, thanks to bets it had made against a number of major financial institutions, including American International Group.
Now Mr. Watsa believes that the company’s gloomy outlook is poised to pay off again.
Fairfax has been selling corporate bonds in favour of U.S. Treasuries and selected municipal bonds, both of which have seen yields drop and prices rise in the past week as investors have fled to safety. Mr. Watsa has long predicted that government bonds will continue to be the best performing asset class – even though U.S. government debt loads have contributed to the economic turmoil – because investors gravitate toward risk-free securities.
“We have said for some time that we think this is a 1-in-50-, 1-in-100-year event,” Mr. Watsa said in an interview Wednesday. “Which means that it’s like Japan or the 1930s, because there’s too much debt in the system.”
For remainder of the article:
http://www.theglobeandmail.com/report-on-business/economy/fairfaxs-watsa-sees-dirty-thirties-pain-ahead/article2125759/
He was quoted in the Globe and Mail this week:
The U.S. economy appears to be heading toward a lengthy period of deflation such as the one that struck Japan, and there is little policy-makers can do to prevent it, says one of Canada’s most accomplished investors.
But it isn’t just the United States and Europe that Prem Watsa is worried about. The potential bursting of a property bubble in China has him even more concerned. And if Chinese demand for commodities dries up at the same time as U.S. consumers are shutting their wallets, then the global economy is in for a lengthy period of pain.
As pessimistic as he is, Mr. Watsa, the chief executive officer of investment and insurance company Fairfax Financial Holdings Ltd., (FFH-T378.009.162.48%) is sleeping soundly at night. While banks, insurers, and investors were watching their assets disintegrate in the financial crisis of 2008, Fairfax was raking in profits, thanks to bets it had made against a number of major financial institutions, including American International Group.
Now Mr. Watsa believes that the company’s gloomy outlook is poised to pay off again.
Fairfax has been selling corporate bonds in favour of U.S. Treasuries and selected municipal bonds, both of which have seen yields drop and prices rise in the past week as investors have fled to safety. Mr. Watsa has long predicted that government bonds will continue to be the best performing asset class – even though U.S. government debt loads have contributed to the economic turmoil – because investors gravitate toward risk-free securities.
“We have said for some time that we think this is a 1-in-50-, 1-in-100-year event,” Mr. Watsa said in an interview Wednesday. “Which means that it’s like Japan or the 1930s, because there’s too much debt in the system.”
For remainder of the article:
http://www.theglobeandmail.com/report-on-business/economy/fairfaxs-watsa-sees-dirty-thirties-pain-ahead/article2125759/
