GlobeFund.com: The Reluctant CEO of the year

Over the decades, The Globe and Mail has named dozens of CEOs of the Year. Prem Watsa is the first, as far as anyone can recall, who tried to reject the honour. Vehemently.

“There’s no limit to what a man can do or where he can go if he doesn’t mind who gets the credit”.

Most everyone agrees that some of Watsa’s decisions–his reluctance to speak publicly, the complexity of Fairfax’s structure and the move to list on the New York Stock Exchange in late 2002–made him easier prey for a short-selling assault.

And that’s how Watsa and Fairfax made a $2-billion score. From 2003 through early 2007, they bought protection against banks and other entities that were exposed to the lending and mortgage boom, when the risks were believed to be low and the swaps were cheap.

Fairfax’s CDS bets were down 74% by the end of 2006. “But we still held it,” Watsa said, “and we took a deep breath and bought some more.”

. . . when you read it, you can’t believe that these guys did what they did. They never worried about risk…and the only way that could happen is if we have a long period of stability–a long period where there wasn’t any accidents. You’d never take that risk otherwise.”

Through Oct. 24, Fairfax had earned six times its original investment. It had sold more than $2.05 billion in swaps and still held some $600 million worth.

“They’re the only guys standing that can put in the type of money that is required for some of these investments they’re looking at, and have a time horizon of 10, 15 years,” says Clark. “I’ve been telling people things are going well, but watch out” –they’re about to get better.

Patience. The ability & guts to think independently. Long-term thinking.

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