Prem Watsa is one of the most respected investors in the world and I always enjoy his shareholder letters. Fairfax Financial has dramatically improved the quality of its insurance operating businesses but the financial results have been obscured by huge losses on equity and CPI hedges. Watsa is a firm believer that the global economy is headed towards deflation and he seems to make the case that a bust in China will be the catalyst that causes the deflation. I believe the prospects of a hard landing in China are very good and the ramifications are under-appreciated by most market participants. China is a the leading market for most commodities and its massive banking system is heavily exposed to credits that are likely to lead to substantial losses.