Everyone knows that there are some parellels between 1929 Crash and 2009 Crash. While the stock market touched its low in 1929 Oct, 2009 Mar was the lowest point of Dow in the US market in the recent years.
What caused these downturns? A lot of reasons are similar. The downturn in 1929 and 2008/2009 have common features such as -the structural weaknesses, reckless lending, high leverage, speculation, asset bubbles, massive bank failures, stock market crash, etc were some of them.
The US Govt did not sit idle in 1929. They took steps and as a result the stock market moved up in 1930. But consumer spending dropped due to deleveraging, unemployment, erosion in networth due to fall in asset values, which in turn was due to the stock market crash / real estate crash. Lower consumer spending meant lower demand for goods and services. Business dropped leading to more shutdowns and more unemployment, which reached 25% in early 1930s. Stock market crashed below 1929 levels.
Linked to gold standard, the dollar printing was restricted and US Govt/Fed did not inject liquidity into the economy in 1930s. International trade dropped due to protectionism. Overall, the deflation set in causing drop in prices, translating into losses for businesses, that managed to survive. More unemployment. And for some weird reason, Fed kept interest rates high. All of the above ensured the recession continued into a decade.
As a student (got PhD) of 1929 rececession, Ben Benarke is trying to avoid deflation at all costs. Hence, he plans more quantitative easing in the US economy which will pump up to USD 2 trillion dollars (or USD 2000,000,000,000/- dollars).
Ben Benarke should have taken a PhD on Japan's lost decade as well.
Japan after the envious economic growth in the 1970s and 1980s, witnessed fast rise in real estate, stock market and all asset classes fuelled by cheap credit policy of the Central Bank (CB). Panicing one day, CB increased the interest rates (this reminds the action of Ben Benarke in 2006/07 where he constantly pushed up the interest rates till economy collapsed). What followed is well documented in the history. The asset bubbles got pricked, stock market crashed, bad debts zoomed, debt crisis followed, banks collapsed, triggering bailouts by Japanese Govt. It is clear that US did not learn from Japanese folly.
What is the conclusion from the above? History repeats itself and P.hDs do not help always; but common sense will; however common sense is not very common.
Let us hope the future will be rosy and everything will be fine. But also be prepared for 1932 in 2012 or a lost decade in 2010s. G20 is meeting to avert mistakes of 1929 but the looming currency war between China/Japan/US/other countries does not have appropriate historical parallels and may make a history of its own for future generations.
What this mean to you and me? Well Be on Guard. Your hard earned money could be under attack. Remember the best two principles of Warren Buffet (a) Never lose money in investments/savings (b) Always remember the first rule. It is a tough job; but very little alternatives.
Saturday, October 30, 2010
Friday, October 22, 2010
Why Commodity / Mining Stocks may be added into your portfolio
In order to further boost US Economy, the vast majority of Analysts expect an announcement on Quantitative Easing (QE) at the US Fed's policy meeting in November.
QE2 in November is all but certain. The only issue is the details of its implementation. The forecasts show that the next round of asset purchases would be c.$500 billion. Estimates ranged from $500 billion to $1.25 trillion (source Reuters).
Mr. Beranake needs this cash to filter into the private sector. This is expected to create jobs in the US.
Well most investors are probably happy to see another round of QE. Why? The stocks may benefit. But BE CAREFUL. Not all sectors are going to reap advantages. How can it happen when economic uncertainties prevail in many sectors. But there is one sector that could still benefit - even if the QE plan fails.
Years of cheap credit and reckless spending by US governments has taken the toll. Pumping more cash into the US economy and hope that things will improve is a doubtful idea. If the economy wants to sustain genuine growth , then the unviable businesses should be closed while US should become more competitive to China
Unfortunately, it appears that the US government wants an easy route. They try to the avoid the pain of economic adjustments with second round of QE.
May be Bernanke is right. The Governor of the Fed studied the 1929 US depression – when the dollar was pegged to gold. Because of this peg, the Fed in 1920s couldn’t just print dollars to counter deflation.
But it is quite different in 2010. Now Mr Bernanke can create all the cash or dollars. He hopes this will work miracles and will get the US out of economic trouble – be it deflation or not. Following are some of the thoughts on QE in November:
1) It may set off some inflation. Commodities should provide an inflation hedge. Invest in commodities.
2) US dollar could depreciate. This is good for commodities. But other export oriented nations could devalue their currencies against USD to keep their competitiveness.
3) QE funds channels into the emerging markets creating some growth in the developing economies. This will also result in more demand for commodities. Commodities should benefit.
If commodities do well, then mining sector should do well.
Do you want to know more about the mining stocks that could gain? Google is selectively placing advertisements in the blog related to this topic. You may click one of them and try your luck at your own risk.
The above content is for information purposes only and not intended to be relied upon for investment decisions. Appropriate independent advice should be obtained before making any such decision. Investing is risky and can lose money. Always seek expert advice before investing.
QE2 in November is all but certain. The only issue is the details of its implementation. The forecasts show that the next round of asset purchases would be c.$500 billion. Estimates ranged from $500 billion to $1.25 trillion (source Reuters).
Mr. Beranake needs this cash to filter into the private sector. This is expected to create jobs in the US.
Well most investors are probably happy to see another round of QE. Why? The stocks may benefit. But BE CAREFUL. Not all sectors are going to reap advantages. How can it happen when economic uncertainties prevail in many sectors. But there is one sector that could still benefit - even if the QE plan fails.
Years of cheap credit and reckless spending by US governments has taken the toll. Pumping more cash into the US economy and hope that things will improve is a doubtful idea. If the economy wants to sustain genuine growth , then the unviable businesses should be closed while US should become more competitive to China
Unfortunately, it appears that the US government wants an easy route. They try to the avoid the pain of economic adjustments with second round of QE.
May be Bernanke is right. The Governor of the Fed studied the 1929 US depression – when the dollar was pegged to gold. Because of this peg, the Fed in 1920s couldn’t just print dollars to counter deflation.
But it is quite different in 2010. Now Mr Bernanke can create all the cash or dollars. He hopes this will work miracles and will get the US out of economic trouble – be it deflation or not. Following are some of the thoughts on QE in November:
1) It may set off some inflation. Commodities should provide an inflation hedge. Invest in commodities.
2) US dollar could depreciate. This is good for commodities. But other export oriented nations could devalue their currencies against USD to keep their competitiveness.
3) QE funds channels into the emerging markets creating some growth in the developing economies. This will also result in more demand for commodities. Commodities should benefit.
If commodities do well, then mining sector should do well.
Do you want to know more about the mining stocks that could gain? Google is selectively placing advertisements in the blog related to this topic. You may click one of them and try your luck at your own risk.
The above content is for information purposes only and not intended to be relied upon for investment decisions. Appropriate independent advice should be obtained before making any such decision. Investing is risky and can lose money. Always seek expert advice before investing.
Monday, October 18, 2010
Global Economy during Q4 2010. Where does it headed to?
The global economy has shown mixed recovery during Q32010. But fears of slowdown are not gone. Stock markets have done relatively done well during this quarter. MSCI World rose 13.3% QoQ in Q3 (vs a decline in 2Q2010), with S&P 500 rising 10.7% QoQ (vs a drop of 11.9% in Q2).
US Federal Reserve is expected to introduce additional Quantitative Easing (QE) measures, while China is under global pressure to allow appreciation of its currency, which will undermine its exports. Hence, currency tensions prevail. Emerging economies face challenges related to the inflow of hot money – inflation and asset bubbles.
Let us see how reputed authorities view the future
• International Monetary Fund (IMF) - Forecasts global growth - to expand 4.8% in 2010 and 4.2% in 2011.
• Nouriel Roubini - 40% probability of a double-dip recession and it could occur within the next 12 months.
• Jesper Koll (JPMorgan, Japan) - Probability of a Japanese-styled, global lost decade has risen due to high government intervention. Private sector spending must be empowered.
• Peter Sands (CEO Stan Chart) - Emerging markets, partially delinked from the west, is getting more resilient and recovering strongly.
• Mark Mobius ( Templeton) - The ongoing global currency conflict, which has triggered capital control discussions amongst policy makers, is likely to be unfavorable for the market
Some leading global investment banks (e.g. Goldman Sachs) have refreshed their old stories about Emerging Markets (EM) and now began to sing praises. They say the attraction of developing markets lie in the higher economic growth rates, younger, more dynamic demographics and under-representation in global stock markets. But you have to note that same positives were harped in the early 90‘s, but between 90s-00s, EM delivered a ‘total’ return of 38% much lower than developed markets.
EM are volatile. They suffered three 25%+ losses in the past 20 years but recorded annual returns exceeding 50% during five years . The volatility is caused by international investors, whose risk appetite changes in accordance with their priority and not the host country’s.
Now, it seems that another boom may be on the way due to the displacement of capital caused by the latest financial crises in the developed world. If we follow history, this is good now and for the immediate future. But the volatility will return to EM. A crash is hiding somewhere in the medium term.
US Federal Reserve will continue the QE, which will also contribute to the creation of asset bubbles in EM, which will burst one day. But the million dollar question is when? A recovery in developed markets or a domestic / global crisis could trigger this. All prudent EM governments should take steps to introduce relevant measures to prevent such asset bubbles and subsequent bursting which will hurt the individuals, institutions and organizations within EM (and usually not the international investors).
Do you fear unemployment? Do you want to know about 200+ business opportunities for just US$ 14.9/-? Do you want to know how to become rich and Warren Buffet principles for financial success without stock market? Please cut and paste the following link to your browser : http://www.amazon.com/Stay-Employed-stop-fear-recession/dp/1451509936#
US Federal Reserve is expected to introduce additional Quantitative Easing (QE) measures, while China is under global pressure to allow appreciation of its currency, which will undermine its exports. Hence, currency tensions prevail. Emerging economies face challenges related to the inflow of hot money – inflation and asset bubbles.
Let us see how reputed authorities view the future
• International Monetary Fund (IMF) - Forecasts global growth - to expand 4.8% in 2010 and 4.2% in 2011.
• Nouriel Roubini - 40% probability of a double-dip recession and it could occur within the next 12 months.
• Jesper Koll (JPMorgan, Japan) - Probability of a Japanese-styled, global lost decade has risen due to high government intervention. Private sector spending must be empowered.
• Peter Sands (CEO Stan Chart) - Emerging markets, partially delinked from the west, is getting more resilient and recovering strongly.
• Mark Mobius ( Templeton) - The ongoing global currency conflict, which has triggered capital control discussions amongst policy makers, is likely to be unfavorable for the market
Some leading global investment banks (e.g. Goldman Sachs) have refreshed their old stories about Emerging Markets (EM) and now began to sing praises. They say the attraction of developing markets lie in the higher economic growth rates, younger, more dynamic demographics and under-representation in global stock markets. But you have to note that same positives were harped in the early 90‘s, but between 90s-00s, EM delivered a ‘total’ return of 38% much lower than developed markets.
EM are volatile. They suffered three 25%+ losses in the past 20 years but recorded annual returns exceeding 50% during five years . The volatility is caused by international investors, whose risk appetite changes in accordance with their priority and not the host country’s.
Now, it seems that another boom may be on the way due to the displacement of capital caused by the latest financial crises in the developed world. If we follow history, this is good now and for the immediate future. But the volatility will return to EM. A crash is hiding somewhere in the medium term.
US Federal Reserve will continue the QE, which will also contribute to the creation of asset bubbles in EM, which will burst one day. But the million dollar question is when? A recovery in developed markets or a domestic / global crisis could trigger this. All prudent EM governments should take steps to introduce relevant measures to prevent such asset bubbles and subsequent bursting which will hurt the individuals, institutions and organizations within EM (and usually not the international investors).
Do you fear unemployment? Do you want to know about 200+ business opportunities for just US$ 14.9/-? Do you want to know how to become rich and Warren Buffet principles for financial success without stock market? Please cut and paste the following link to your browser : http://www.amazon.com/Stay-Employed-stop-fear-recession/dp/1451509936#
Friday, October 15, 2010
Start Small - the best way to learn investing in stocks, futures & options
One of my friends opened an investment account couple of years ago with a broker and began to buy stocks based on the recommendations in newspapers, friends and broker. Since I knew he was new to the stock market, I asked him to be very cautious and get educated about the various techniques of successful investing. He said he get enough advice and guidance from his sources.
I recently met him and asked about his stock market performance. He said that he suffered losses and quit that business. I told him to get educated and start again. But he was hesitant. This is common for many investors. They want easy bucks. That too in truck loads. They ignore the eternal principle that 'there is no free lunch' and that 'the exceptions prove the rule'.
Two important things a new investor in stocks, futures and options should do are the following:
1. Get good education & practice
2. Start small
Start with the small capital and gradually increase as you make more and more money. If you can’t manage small capital; you won’t be able to do it with big.
This is a craft. It is like learning driving or cycling. Initially, you have to be careful. The initial years were difficult for me as well. But over time, you become experienced and expert.
The key is to break the ice, and even if buying only a few cheap options is not economical from a commission standpoint, at least you get in the game.
Though you might be planning on entering far more risky or complex trades, such as spreads or option writing, I suggest, to gain experience, that you start by taking some very small positions. Again, only stick one toe in the water. Then if you make some mistakes, you will not pay a high fee for your experience.
As you gain experience, commit more money into the business.
I recently met him and asked about his stock market performance. He said that he suffered losses and quit that business. I told him to get educated and start again. But he was hesitant. This is common for many investors. They want easy bucks. That too in truck loads. They ignore the eternal principle that 'there is no free lunch' and that 'the exceptions prove the rule'.
Two important things a new investor in stocks, futures and options should do are the following:
1. Get good education & practice
2. Start small
Start with the small capital and gradually increase as you make more and more money. If you can’t manage small capital; you won’t be able to do it with big.
This is a craft. It is like learning driving or cycling. Initially, you have to be careful. The initial years were difficult for me as well. But over time, you become experienced and expert.
The key is to break the ice, and even if buying only a few cheap options is not economical from a commission standpoint, at least you get in the game.
Though you might be planning on entering far more risky or complex trades, such as spreads or option writing, I suggest, to gain experience, that you start by taking some very small positions. Again, only stick one toe in the water. Then if you make some mistakes, you will not pay a high fee for your experience.
As you gain experience, commit more money into the business.
Advantages of Options
Many millionaires have been created by Option trading in stocks, commodities, etc. If you know, the science and art of options trading, it is a sure way to wealth. On the other hand, if you are ignorant of lazy, this could be highly risky.
Many believe options are more risky than buying stock, which in comparison, to be conservative and safe. That need not be true. The bear market of 2008 saw all Indian stocks dive in value, with many high flying stocks dropping 90% in value. But with options, you could have protected your portfolio.
Here lies the secret advantage of trading options. If you would have owned options instead, you could have greatly limited your losses. You can only lose what you pay as premium for the options.
Therefore, instead of owning high flying stocks that have a dramatic amount of downside risk, you could receive better advantage buying options and utilizing option strategies yet only risking 10% of your portfolio.
Other advantages of option trading are
• A method to buy stocks at lower prices and, while you’re waiting for the stocks to drop to lower prices, make money.
• Options provide a way to earn additional income from your portfolio,
• Options enable you to buy an insurance policy on your stock portfolio that is not available from any insurance company.
• With options you can design investment strategies that will profit regardless of what the market does.
• Gains of 1000% are not that difficult to attain - options enable the speculator to become a casino,
• Options are insurance, especially put options an extremely valuable risk-reduction tool.
But, like all medicines, options must be used with prudence and proper care, for if you overdose, options can be dangerous to your financial health.
Many believe options are more risky than buying stock, which in comparison, to be conservative and safe. That need not be true. The bear market of 2008 saw all Indian stocks dive in value, with many high flying stocks dropping 90% in value. But with options, you could have protected your portfolio.
Here lies the secret advantage of trading options. If you would have owned options instead, you could have greatly limited your losses. You can only lose what you pay as premium for the options.
Therefore, instead of owning high flying stocks that have a dramatic amount of downside risk, you could receive better advantage buying options and utilizing option strategies yet only risking 10% of your portfolio.
Other advantages of option trading are
• A method to buy stocks at lower prices and, while you’re waiting for the stocks to drop to lower prices, make money.
• Options provide a way to earn additional income from your portfolio,
• Options enable you to buy an insurance policy on your stock portfolio that is not available from any insurance company.
• With options you can design investment strategies that will profit regardless of what the market does.
• Gains of 1000% are not that difficult to attain - options enable the speculator to become a casino,
• Options are insurance, especially put options an extremely valuable risk-reduction tool.
But, like all medicines, options must be used with prudence and proper care, for if you overdose, options can be dangerous to your financial health.
Friday, January 23, 2009
BANKS - THE CAUSE OF THE ECONOMIC WOES
Banks fulfill a vital economic function by accumulating the savings of an economy and channelling it to the investors and businessmen, who supplement it to their own equity. This flow of money from the savers into the investments in an economy and flowing back of the money to the savers, when they need them would not have been easy, but for banks. Banking is a business in which they aim to make profit for the shareholders. To achieve this they should meet the operating expenses and make a profit. Hence they price the deposits and credit differently, resulting in a gross margin.
While taking deposits is an easy task, deploying them as credit or investment is not an easy task. Most of the banks have about 40%-50% of the total assets in credit assets or loans. When they extend credit, banks has the responsibility of ensuring that the money will be paid back. It takes various precautions for this and in old style was to take security and lend money. While this old fashioned method may get ridiculed by modern bankers, that is the safest method. When Americans introduced balance sheet lending, it was a departure from the past. They studied the financial statements and based on balance sheet strength or cash flow will lend the money, without security.
Banks give money for retail and corporate customers. Both are to be strictly studied to ensure receipt of money back so that the bank can return the funds to the depositholders.
However, modern banks do more than giving loans. They underwrite, extend guarantees, provide letters of credit for domestic/global trade, transfers funds and several other services. They also invest in equity and public bonds. They act as issuers, arrangers and participants for raising money from individuals, companies or institutions. Whilst some very small businesses may be able to do without banks, all medium to large enterprises require banks in one way or other.
When banks lend irresponsibly or under take exhorbitant risks, the entire economy and the businesses in the economy gets affected. That's why governments panic when banks are in trouble and try to bail them out. During the bail outs of banks in 2008, lot of people asked "why banks? why not other businesses?" Banking system collapse equals economic collapse
Friday, October 24, 2008
How to derive benefit from Recession?
Now all TV Channels, Newspapers scream Recession. It scares the people and creates a fear psychosis as if some monster is in the town.
What is Recession? This is the period of time when people and businesses take a compulsory vacation. The business activity becomes lower.
As I write this today, Car Manufacturers in USA and Europe has announced that they are slashing production. Sony Corporation announced in Japan their production will reduce and the shareholders can expect half the profit, they expected earlier. OPEC announced today that they will cut the oil production by 2 billion barrels p/d. Similarly lot of business will cut production. When they cut production, the resources will be surplus. Accordingly, unemployed resources will increase. This will include human resources. In other words many people will no longer be required because of lower production levels. This will span across industries. Steel mills, copper mills, cement factories, etc will slash output. Then the rawmaterials will be required in lower quantity, resulting lower mining activity. This in turn will reduce the demand for costly mining machinery.
Boy, it is like a vacation. No work and all play!!. But it is painful if you have (a) debt burden and (b) no other means of survival other than your production activity/ business or job.
When people loss job, they will cut their expenditure. There will be lower demand for garments, eatables, luxury goods, cars, TVs, etc. If they have taken loans, they do not have any repayment capacity. All unemployed become sub-prime category. USA is worst affected because the debt-burdened US consumers almost stopped buying things. US Banks, whose bad times started in 2007 with Sub prime mortgage, is not expected to be over anytime soon. With the increasing unemployment, the repayment to the banks will get affected.
Surprisingly, what should have been a US problem has become a global problem. US and Europe economies were intertwined for quite sometime. China has taken all the manufacturing from US and was selling goods to all over the world, which tamed inflation despite ballooning oil prices. They will affect China, India (mainly BPOs, IT, etc) and most of the rest of the world. The only group of people not affected would be the tribes living in jungles and does not engage in any business relationship with the rest of the world.
Who does Recession Benefits:
Many suffer during recession. But some benefits. May be it could be you. I will provide some insight as to how you can benefit towards the end of this session. First of all let us see who all benefits:
a) Lawyers: Many MOUs (Memorandum of Undertaking) and Agreements will be tested during a recession. The promising business ventures inked during the boom conditions may no longer look attractive to one of the parties and will try to escape their contractual obligations. In such cases, the demand for services of lawyers increase. Businesses and people will consult lawyers to see how they can get out of the once promising business deals.
Another set of services, where lawyers will become busy, is little nasty. The real dispute and legal fights between counterparties due to failure to perform. Lawyers services are called in to represent before Courts of Law. One of the main such legal disputes will be in banks as businesses and individuals default on several loans and credit facilities availed.
b) Consultancies (Business): With the sharp fall in demand, many businesses will plan restructuring or downsizing. They will have to revisit the strategies and other growth plans drawn up during good times. Can they be sustained? Shall they be postponed or dishelved? Or a new set of strategies are required? If so, in what direction? How the external markets and stimuli are being reshaped. All these require tough questions and equally critical answers.
Many top management finds it convenient to rely on external consultants to help them to take decisions on such tough issues.
c) Vulture Capitalists: Just as venture capitalists make money helping others start to new ventures, vulture capitalists help them to break up. They acquire bad businesses and break them up and sell them piecemeal. Their business increase during recession.
d) Receivers/Liquidators: They are the category of people who specialise in liquidating the business firms. Once declared bankrupt, a company/business will be entrusted to Receivers (usually by a court of law), who will realise assets and settle the creditors. Usually, this fuction is handled by either Professional Accountants or Lawyers.
e) Shrewd Investors: Warren Buffet's (WB) well known strategy is to pick up stocks when everyone is fearful. Recession is a time when everyone is fearful. WB has already picked up a few stakes in GE, Goldman Sachs, etc. This applies to all fields - not only in stock markets all over the world, but in all other asset categories as well.
Another category is the option and forex traders. Although high risk, by taking risk of a sum you may be willing to lose in a lottery, you may be able to win a jackpot. The probability for a learned individual to win in this type of activity is very high.
One day, the cycle will move up. All policy decisions at all Government levels, Central Banks, etc are aimed at moving the cycle up. There will be many, who will be laughing all the way to bank, because of the Recession.
To get more information on this, I encourage you to browse the wealth of information available on the Internet. For your easy access, the Google Search bar is given below and use your imagination and creativity to do search (e.g. search for 'money in recession' , etc) and unlock opportunities.
Wish you all the best.
Custom Search
What is Recession? This is the period of time when people and businesses take a compulsory vacation. The business activity becomes lower.
As I write this today, Car Manufacturers in USA and Europe has announced that they are slashing production. Sony Corporation announced in Japan their production will reduce and the shareholders can expect half the profit, they expected earlier. OPEC announced today that they will cut the oil production by 2 billion barrels p/d. Similarly lot of business will cut production. When they cut production, the resources will be surplus. Accordingly, unemployed resources will increase. This will include human resources. In other words many people will no longer be required because of lower production levels. This will span across industries. Steel mills, copper mills, cement factories, etc will slash output. Then the rawmaterials will be required in lower quantity, resulting lower mining activity. This in turn will reduce the demand for costly mining machinery.
Boy, it is like a vacation. No work and all play!!. But it is painful if you have (a) debt burden and (b) no other means of survival other than your production activity/ business or job.
When people loss job, they will cut their expenditure. There will be lower demand for garments, eatables, luxury goods, cars, TVs, etc. If they have taken loans, they do not have any repayment capacity. All unemployed become sub-prime category. USA is worst affected because the debt-burdened US consumers almost stopped buying things. US Banks, whose bad times started in 2007 with Sub prime mortgage, is not expected to be over anytime soon. With the increasing unemployment, the repayment to the banks will get affected.
Surprisingly, what should have been a US problem has become a global problem. US and Europe economies were intertwined for quite sometime. China has taken all the manufacturing from US and was selling goods to all over the world, which tamed inflation despite ballooning oil prices. They will affect China, India (mainly BPOs, IT, etc) and most of the rest of the world. The only group of people not affected would be the tribes living in jungles and does not engage in any business relationship with the rest of the world.
Who does Recession Benefits:
Many suffer during recession. But some benefits. May be it could be you. I will provide some insight as to how you can benefit towards the end of this session. First of all let us see who all benefits:
a) Lawyers: Many MOUs (Memorandum of Undertaking) and Agreements will be tested during a recession. The promising business ventures inked during the boom conditions may no longer look attractive to one of the parties and will try to escape their contractual obligations. In such cases, the demand for services of lawyers increase. Businesses and people will consult lawyers to see how they can get out of the once promising business deals.
Another set of services, where lawyers will become busy, is little nasty. The real dispute and legal fights between counterparties due to failure to perform. Lawyers services are called in to represent before Courts of Law. One of the main such legal disputes will be in banks as businesses and individuals default on several loans and credit facilities availed.
b) Consultancies (Business): With the sharp fall in demand, many businesses will plan restructuring or downsizing. They will have to revisit the strategies and other growth plans drawn up during good times. Can they be sustained? Shall they be postponed or dishelved? Or a new set of strategies are required? If so, in what direction? How the external markets and stimuli are being reshaped. All these require tough questions and equally critical answers.
Many top management finds it convenient to rely on external consultants to help them to take decisions on such tough issues.
c) Vulture Capitalists: Just as venture capitalists make money helping others start to new ventures, vulture capitalists help them to break up. They acquire bad businesses and break them up and sell them piecemeal. Their business increase during recession.
d) Receivers/Liquidators: They are the category of people who specialise in liquidating the business firms. Once declared bankrupt, a company/business will be entrusted to Receivers (usually by a court of law), who will realise assets and settle the creditors. Usually, this fuction is handled by either Professional Accountants or Lawyers.
e) Shrewd Investors: Warren Buffet's (WB) well known strategy is to pick up stocks when everyone is fearful. Recession is a time when everyone is fearful. WB has already picked up a few stakes in GE, Goldman Sachs, etc. This applies to all fields - not only in stock markets all over the world, but in all other asset categories as well.
Another category is the option and forex traders. Although high risk, by taking risk of a sum you may be willing to lose in a lottery, you may be able to win a jackpot. The probability for a learned individual to win in this type of activity is very high.
One day, the cycle will move up. All policy decisions at all Government levels, Central Banks, etc are aimed at moving the cycle up. There will be many, who will be laughing all the way to bank, because of the Recession.
To get more information on this, I encourage you to browse the wealth of information available on the Internet. For your easy access, the Google Search bar is given below and use your imagination and creativity to do search (e.g. search for 'money in recession' , etc) and unlock opportunities.
Wish you all the best.
Custom Search
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