Investing during an economic slump

I was reading an article by Alex Berenson titled “Those With a Sense of History May Find It’s Time to Invest” and it felt like déjà vu. We were on our way to Dapitan yesterday and we passed by an unfinished condominium project in San Juan. Huge project but it appeared abandoned. Speedy’s familiar with the area since he passes there often. He said the project had indeed been abandoned having been hit by the real estate slump in 1997. I mulled over the information and then I told him essentially what Berenson is saying in the New York Times article — for those with surplus cash and the stomach for risk, an economic slump is an opportunity for investment. People are in a panic and selling everything they don’t consider essential and they are selling at low, low prices.

I know, it sounds heartless. It’s almost like taking advantage of those in dire straits. It’s like being a vulture while the dying are still gasping for their final breaths. But business has no heart. It only sees opportunity. Anyone who feels the need to inject a little morality in the situation can always say that it’s not like stealing where the property owner gets nothing. In fact, the little purchase price may actually tide the needy seller over and that’s better than dying hungry but with the titles to all his properties intact. But you can already imagine where the phrase “it’s a steal” comes from.

It’s just like war. Do some research and find out how many millionaires sprung from the ravages of war. Excluding, of course, the real vultures — businessmen who actually had a hand in creating wars to take advantage of business opportunities after the dust of war had settled.

Anyway, this is not about morality. It’s just interesting to think about whether we can actually turn the current economic hardship into something that can make us more secure in the future. You know, about investing at the right time and whether that time is now. Speedy and I have discussed so many times about the right time to start our own business but we had been putting it off because we’re still not sure what kind of business we want. For sure, it has to be something that:

1. won’t break our aging backs and knees (we’re too old to be a latter day Ma Mon Luk);

2. we are passionate about (anything sex related may be profitable but that’s bad example to our kids); and

3. is not way too risky (like become fire eating performers).

Kidding. But you get the drift. It’s just that employment won’t provide us with a safety net when we’re old and no longer able to earn. And with the way insurance companies are folding up these days, that’s no way to go either.

Of course, the wisdom in investing now is not the same as saying we won’t feel the hardship that everyone else does. We will still have to ride it. Investing now does not mean we can recoup the profits instantly. We will all still be scrimping and trying to stretch our budget as far as it will go. In fact, we may even feel poorer after investing since we will be parting with cash we sorely need and what we get in exchange for it won’t probably buy us food — yet. The question is, when the slump ends — and it will, as everything else does — where will it find us? Are we going to be even poorer or will our investment be the start of real financial security?

Parallel to that is knowing what to sell and what to hold on to. People are selling right and left but I don’t think that’s wise unless you’re really, really strapped for cash. Investment can also mean KEEPING what you already have because it might be the source of future security. Some things might not be profitable now but when the slump is over, there are bound to be some changes and what looks useless today might be a gold mine in, say, ten years.

Just thinking, really. It’s not uncommon to feel depressed during hard times but depression is so, so unproductive. So is self-pity. So is helplessness. So is panic. I’d rather consider how the hardship can be overcome, how to use it to create something better.

In the archive

• The amero and the North American Union
• Buy Filipino
• Fixation with milk
• Overacting
• So, how are you coping with the global financial crisis?
• Understanding the origin of poverty
• If you’re very hungry
• Investment lessons
• Ever heard of Natalie Dylan?
• Kids and money management