The warning signs were already on the wall before the start of the financial crisis that has rocked the world over the past year, according to a Bermuda-based investment expert.

Patrice Horner, vice-president of North Atlantic Asset Management Ltd., said that the mortgage-backed and derivatives market surrounding structured investment vehicles (SIVs) did not add up, prompting her company to steer well clear of alternative investments and investments that lacked transparency.

The global economic meltdown was sparked by the collapse of Lehman Brothers a year ago, followed by the Dow Jones Industrial Average plummeting by more than 500 points in one day and a financial crash and credit crunch ensued.

And in a column she wrote in April 2008, Ms Horner claimed the cracks in the foundation of the financial system were evident the previous spring when it became clear that there were insufficient bonds to back the exploding credit-default swaps market, with more obligations being traded than bonds behind them.

"It looked more like a house of cards," she wrote. "When a couple of hedge funds backed by pre-eminent banks failed in July, it sent shockwaves through the system and started a cascade of failures."

Ms Horner outlined the build-up to the financial crisis, saying that the US Federal Reserve dropped its key lending rates to record lows between 2002 and 2004 in order to sustain the economy, with the housing market booming on the "easy money" as the plethora of mortgages proved to be an endless source of fodder for mortgage-backed securities and other asset-backed securities being sold in turn.

Meanwhile, some investment bankers relaxed or waived restrictive convenants and credit quality standards designed to protect investors as the profits rolled in, she said.

In turn, mortgage-backed securities and derivatives were packaged together into SIVs in a world of alternative investments fraught with event risk, arbitrage and distress securities, with Ms Horner cautioning that without support of the triple-A rated bond insurers, the sub-prime mortgage-backed securities and SIVs would fall into the heap of junk bonds, far below investment grade.

Ms Horner said that most markets were no longer as predictable due to the broader use of shorts, securitised debt obligations, structured vehicles and other alternative investments, arguing that the magnitude and velocity of trades was destablising the whole financial system.

"Smart investors should realise that much of the engineering is engineered to enrich the investment bankers," she continued.

"The warning sign of caveat-emptor was overlooked as investors were blinded by the dazzle created by the brilliant MBAs and their alchemist black-boxes."

But she added that historically a fundamental approach of buying a bond or a stock from a solid or growing company has prevailed over time. However, she warned the drive to get to the top had taken many of the ambitious away from a firm foundation in tangible value.

"At a bare minimum, the motto 'Everything in moderation' is prudent guidance for investing," she concluded.

"Another is 'Don't bet everything on a long-shot'. This may be better restated to say: 'Risk a little to gain a lot, but do not risk all for nothing."