Surfing the crisis: 5 "experts" rake in the cash from the great recession

The storm named crisis 2007-2009

In 2008, the financial world was shaken. What started as a seemingly harmless subprime mortgage in the United States quickly spread into the worst global financial crisis since the Great Depression of 1929.

Giant financial institutions collapsed like dominoes, the stock market plummeted, wiping out trillions of dollars in assets and plunging millions into unemployment and homelessness. Fear gripped the world, panic selling reached its peak. For most, it was a dark moment, the end of dreams of getting rich.

It all started in the US housing market, where easy credit and lax lending standards fueled a massive housing bubble. Investment banks raced to package mortgages, including risky subprime ones, into complex financial products like mortgage-backed securities (MBS) and collateralized debt obligations (CDOs), and sold them to investors around the world.

As interest rates began to rise and housing prices leveled off and then plunged in 2007, subprime borrowers began defaulting en masse. The debt bomb exploded. The value of MBSs and CDOs collapsed, causing heavy losses for the banks and financial institutions that held them. The collapse of the investment bank Bear Stearns in March 2008 (bought cheaply by JP Morgan with the help of the Fed) was the first warning.

But the panic peaked in September 2008, when Lehman Brothers, a 158-year-old investment banking giant, declared bankruptcy. It was the largest bankruptcy in U.S. history, sending a huge psychological shock and paralyzing the global credit system. Markets froze, confidence collapsed. Soon after, AIG, the world’s largest insurance company, was on the brink of collapse and had to receive an emergency bailout from the U.S. government.

A wave of panic selling swept through global stock markets. The Dow Jones Industrial Average lost more than 50% of its value from its 2007 peak to its March 2009 trough. Trillions of dollars in assets were wiped out by individual and institutional investors.

The Great Recession had officially begun, bringing with it a global economic downturn, soaring unemployment, and unprecedented intervention by governments and central banks. It was in this dark, chaotic, and fearful environment that the investors we’re about to profile saw light at the end of the tunnel.

In September 2008, Lehman Brothers declared bankruptcy, causing a huge psychological shock and paralyzing the global credit system (Photo: Getty).

Portrait of 5 legendary investors who weathered the storm

The 2007-2009 financial crisis was one of the most difficult periods in economic history, with stock markets plummeting and major banks collapsing. However, some investors took advantage of the situation to make huge profits.

Here are the stories of five top investors, including Warren Buffett, John Paulson, Jamie Dimon, Ben Bernanke, and Carl Icahn, and how they turned the crisis into opportunity.

Warren Buffett: Philosophy "Be Greedy When Others Are Fearful"

Warren Buffett, a Nebraska-based value investor who turned Berkshire Hathaway into one of the world's largest asset holdings, became famous during the crisis with an October 2008 New York Times article announcing his purchase of U.S. stocks.

He invested $5 billion in Goldman Sachs preferred stock, with a 10% interest rate and the right to buy additional shares, which Goldman bought back in 2011. He also invested $3 billion in General Electric with similar terms.

These investments not only brought huge profits but also helped the companies overcome the crisis. Buffett's assets are now over 162 billion USD according to Forbes, a testament to his foresight.

John Paulson: Historic Bet Against the Housing Market

John Paulson, manager of the hedge fund Paulson & Co., became famous for correctly predicting the mortgage crisis. He shorted mortgage-backed securities, which made the fund about $20 billion, and he personally made nearly $4 billion.

After the crisis, Paulson invested in Bank of America, Goldman Sachs, Citigroup, JP Morgan Chase, and gold, which performed well in 2009. This reputation helped him attract billions of dollars in assets under management.

Jamie Dimon: Leading JP Morgan through crisis

Jamie Dimon, CEO of JP Morgan Chase, turned the crisis into an opportunity to expand. With a solid balance sheet, he bought Bear Stearns for $10 a share (15% of its intrinsic value) in March 2008, and Washington Mutual in September 2008 at rock-bottom prices.

These deals helped JP Morgan become the world's largest bank, and its stock tripled in 10 years from its March 2009 low, bringing huge profits to shareholders and Dimon himself. Dimon is considered a "Wall Street hero" for his leadership during the crisis.

Ben Bernanke: The Fed's Role in Economic Stabilization

Ben Bernanke, who was Fed chairman from 2006 to 2014, led the agency through its most dangerous period. He cut interest rates to near zero and implemented a policy of quantitative easing, buying $1.3 trillion in assets from November 2008 to June 2010. These moves helped stabilize the financial system, avoiding a second Great Depression, and he was named Time magazine's "Person of the Year" in 2009.

Carl Icahn: Leveraging Bankruptcy Assets

Carl Icahn is a legendary investor known for buying assets on the cheap. During the crisis, he bought Fontainebleau Las Vegas for $155 million (4% of its construction cost) and sold it in 2017 for nearly $600 million, making a fourfold profit. He also invested in companies like Take-Two Interactive, Telik, and WCI Communities, taking advantage of the low valuations during the crisis.

Warren Buffett with his legendary investment philosophy "Be greedy when others are fearful" (Photo: Getty).

Billionaire Warren Buffett is famous for his legendary investment philosophy "Be fearful when others are greedy and greedy when others are fearful" (Photo: Getty).

Lessons from the winners

The stories of these five investors and financial institutions are more than just anecdotes about getting rich. They contain valuable lessons about investing and market psychology:

Contrarian thinking: The biggest thing they have in common is their ability to go against the crowd. When everyone else is selling in panic, they see an opportunity to buy. As Buffett says, they are “greedy when others are fearful.”

Keep a Cool Head and Be Patient: Crises are always accompanied by extreme volatility and a constant barrage of negative news. Successful investors don’t let emotions get the best of them. They analyze the situation objectively, based on fundamentals, and with a long-term view.

Thorough research and valuation: They don't buy blindly. Buffett looks for strong companies that are temporarily struggling at a discount. Paulson does a deep analysis of the housing market and then the potential for a financial recovery. Icahn is a master of valuing assets in bankruptcy.

Courage to act: Recognizing an opportunity is one thing, spending billions of dollars when the future is uncertain is another. It takes a lot of confidence and courage to make big investment decisions during a crisis.

Leverage financial power when possible: Buffett and JP Morgan have the advantage of capital and prestige, allowing them to make big deals that others cannot. The Fed has the unlimited power of a central bank.

The 2007-2009 financial crisis was a dark chapter in modern economic history, causing untold pain and loss. But as is the rule, there is always opportunity in danger. People like Warren Buffett, John Paulson, Jamie Dimon, Ben Bernanke and Carl Icahn have proven that, with the right vision, courage and strategy, crisis is not only a challenge but also an opportunity to create extraordinary results.

And when the next panic sweeps through the markets, those who learn from these financial wizards will have the opportunity to turn fear into profit, turning crisis into life-changing opportunity.

Source: https://dantri.com.vn/kinh-doanh/luot-song-khung-hoang-5-cao-thu-hot-bac-tu-dai-suy-thoai-20250415082932044.htm