"S&P dives to lowest level since 1997"
"Mexican Peso Falls to Near Record as Recession Concerns Mount"
"Big Three's plea for aid fizzles in Congress"
There were a lot of big headlines yesterday. But amid all the market mayhem, one quieter headline really grabbed my attention:
"Fairfax Removes Hedges on Equity Portfolio Investments"
Fairfax, in this case, refers to Fairfax Financial
At the helm of Fairfax is Prem Watsa, who got nervous about the equity market years before the real cracks began to show. Watsa hedged Fairfax's investment portfolio back in 2003-2004, with a combination of short sales, total return swaps, and credit default swaps (CDS). Those CDS investments alone have since reaped billions of dollars in profit. Virtually no investment manager has better protected his or her investors from the 2008 crash than this man. And now that he perceives the worst of the storm to have passed, Prem is ready to pounce.
Both Fairfax and reinsurance subsidiary Odyssey Re