The 2007-2008 financial crisis was probably one of the worst-hitting crises of the world. For many investors and companies, the memories of the crash and the subsequent recession are still fresh. Sales resulted to rock bottom prices, while many investors saw their portfolios drop 30%. But there were some really smart investors who saw the crisis as a chance to earn big.
Warren Buffett published an op-ed in October 2008 and declared he was buying American stocks during the equity downfall because of the credit crisis.
This move was the embodiment of a rule he made famous: be fearful when everyone is greedy, and be greedy when others are fearful.
John Paulson became famous during the credit crisis for a massive bet against the US housing market.
The bet made his firm Paulson & Co around $2.5 billion during the crisis. In 2009, he quickly switched and betted on a subsequent recovery. He established multi-billion dollar positions in large commercial banks and gold.
His overall hedge fund returns were decent. However, he posted enormous gains in the big banks where here invested.
Jamie Dimon isn’t a true individual investor, but he made huge gains for JP Morgan.
The US housing crisis brought many financial institutions to their knees. Among them are Bear Stearns and Washington Mutuals. Dimon used the bank’s strong balance sheet to acquire these two financial institutions.
Since its record lows in March 2009, JP Morgan has risen to almost triple its value, making its shareholders and CEO very wealthy.
Ben Bernanke is also not an individual investor. But, during that time, he was the head of the Federal Reserve, helming the US central bank during a crucial period in the history of the Fed.
The Fed’s actions were taken to protect both the US and the world financial systems from a catastrophic meltdown. However, the actions during an uncertain time worked out well for the Fed and the taxpayers.
According to an article, the profits at the Fed came in at $82 billion in 2010. The Fed’s balance sheet tripled from roughly $800 billion in 2007 to absorb a depression in the financial system.
It appears to have worked out nicely in terms of profits now that conditions have returned more to normal.
Carl Icahn is one of those legendary fund investors with a track record of investing in struggling securities and asset in times of downturns.
Icahn specializes in buying companies and gambling firms. He has acquired three Las Vegas gaming properties during financial hardships. He then sold them at an enormous profit when the industry conditions improved.
Icahn sold three properties in 2007 for around $1.3 billion, which was many times his original investment. He started negotiations again during the credit crisis and he managed to secure the bankrupt Fontainebleau property in Vegas for around $155 million.
He then ended up selling the unfinished property for nearly $600 million in 2017 to two investment firms. He made about four times his original investment.
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