If you are the type of investor who doesn’t get scared when there is a bit of a storm then there are some opportunities in 2008, an important thing to remember is that when money is lost there is an equal gain somewhere else, almost like that rule in physics, matter cannot be created or destroyed only turned from one form into another, for the sake of our example, money can change from one persons hand into another persons hand (unlike matter it can be created, the Fed,ECB, & BOE have proven that much in the last few weeks!).
Here are some of my picks:
1. Property: Even in a market where prices are falling there are deals to be found, the debt burden is going to push some people out and they may become motivated sellers, this means you can purchase well below the market value. Distressed debt and Vulture buying are not for the feint of heart but I absolutely guarantee that right now the billionaires of the late teens in real estate in the USA are the people who are snapping up property and doing it wisely, this is not a route for the inexperienced. However, for the Investor with some experience and the income and asset base to take a chance this could be a time to find value. It won’t be easy, the Irish market is unique and we are still at a place in time where some people are stubborn about prices believing they can’t come down.
2. Inverse Index Funds or ETF (exchange traded funds): This is really a hedging move and I wrote this article a while back and regret not publishing it earlier because the markets have taken quite a kicking even in the last week alone. Now I can’t be all smug and say ‘I told you so’ – that is unless you’ll entertain me doing it after the fact, which I sincerely doubt will happen.
3. Precious Metals: It worked in the 1300’s and it still works today, precious metals (gold, platinum, silver) are one of the all time safe havens. period.
4. Pension planning: Firstly, if you don’t have one, get one, secondly put money into it, with our tax regime the market would have to fall a huge amount in order to actually lose if you bear in mind that the tax relief element of a pension gives you between a 20-41% cushion. And over time the compounding effect makes pensions one of the fundamental cornerstones of any persons financial plan. I know many retirees and every one of them with a pension talks about it like a loving son or daughter and of how glad they are they did it, the ones who don’t have a pension generally bitch about the price of everything and how the Government are not doing enough. You can decide for yourself where you want to pitch your tent, my camp is the pension camp.
5. Currency: Currencies like the Yen tend to perform well when stock markets don’t. I think that we will see a strengthening of the Yen in 2008, the dollar moved up against the Euro but fell against the Yen which means the Euro did too. In fact the dollar is now at a 2.5 year low against the Yen. Sterling fell this week as well which means on all fronts we are going to be looking at a stronger currency in the Yen.
6: Non-Market Correlated Assets: There are people who make a fortune in the areas of Art, Wine, Antiques, and Classic Cars, in a recessionary period some pieces may become available – in this area you absolutely have to know what you are doing, if you don’t then you better know somebody who does it for a living. I wasn’t even going to include this option in case some idiot ran off and bought a case of Tesco Wine then had a go at me because he’s blown his SSIA or something. Anyways, the basic premise is that things which don’t become worth less money depending on the S&P, Dow, ISEQ or Nasdaq have a place in the investment world and make a lot of people the world round a lot of money. Hence the mention. Actually, the only thing worth anything they found in Michael Lynns house was a case of ‘good quality wine’!