Lessons From The Great Financial Crisis

I live in Ottawa Canada, and I invest primarily in the US. This fact has given me a unique perspective on markets. I started my investing career by investing in my home market. I made my first investment in 2006. After that, you might remember there was this little event that started about a year later. The Great Financial Crisis had a global impact in many ways.

I saw the opportunity to deploy capital into markets that had seen a dramatic fall in price. I was still new at investing in real estate and I made a lot of mistakes in those days. Fortunately, prices were so depressed, that the market would eventually wallpaper over those mistakes. There were some powerful lessons from the GFC. What were they? Were the lessons global in nature or local?

Not everywhere was impacted equally. Some markets suffered more than others.

In fact, when real estate prices went down in Miami Dade County by 45.5% from 2008 to 2012, prices in Ottawa Canada went up 32.7% over that exact same five year period. In 2008 when prices in Miami fell by 28% in a single year, prices in Ottawa Canada went up 6.3%.

So the question is why was Ottawa Canada so stable throughout the great financial crisis?

If the GFC was all about subprime mortgages in the US, then why was the first bank to signal a problem on August 9, 2007, BNP Paribas, the second largest bank in Europe the one to come forward with a press release stating that they were having trouble valuing three funds that were on its balance sheet.

The first financial institution to collapse was Northern Rock, a bank based in the UK. But wait, this was a US problem wasn’t it? What does Europe have to do with it?

On tomorrow’s show we’re going to talk about what the GFC was truly about.