When There is Blood in The Streets…

Feb 12, 2019

Will the bull market continue? Do we have a bearish outlook ahead? Many folks are warning of another financial collapse, that we are heading for another recession and a stalling of economic growth.

Be fearful when others are greedy and greedy when others are fearful

Warren Buffet

However as the above quote by Warren Buffet states, at times when the markets do crash and everything appears to be falling down around us there are and always will be opportunities for the smart investor.

I have known people who have essentially invested in areas where there has been an economic downturn, war, or in fact natural disasters. Whether you like it or not rejuvenation, re-building and the progress of technology during war times will attract investors looking to make money. This, in turn, will attract others looking to make their money work to their advantage.

 

“the time to buy is when there is blood in the streets, even if it is your own blood.”

 

As an example, BP shares stood at 655 pence on the day of the disaster, April 20th 2010. By the end of June 2010 they had dropped to 306 pence and presently they are trading at around 537 pence. The second quarter of 2011 they announced record profits of over $5.3 billion compared to a loss in the same quarter in 2010 of over $16 billion.

Just to highlight one last thing, the only people who were in fact capable of cleaning up the mess left by BP were in fact BP themselves. Now, god forbid we have another disaster but if it was to occur from another oil giant who would you say is the company with the experience and the know-how to bail them out? Who would people come to for advice?

To use another Warrant Buffet quote “The best time to buy a stock is when everyone else is selling” or to go on further and quote Baron Rothschild the 18th century British noble man “the time to buy is when there is blood in the streets, even if it is your own blood.” I am by no means telling you how or when to invest but informing readers that in times of a crisis it pays to be observant and to track historical patterns up until this point.

 

Japan

Let’s take Japan as another perfect example. The tragic earthquake and the following Tsunami devastated coastal areas in north-east Japan but the country’s stock market was still open for business. In fact, the Nikkei 225 which is based on the Japanese stock market fell 14.7 % from March 11th to March 15th  in 2011 closing at  8605 . This is a very significant drop in such a short period of time and the layman may think it would take decades to recover. Today however it is sitting at around 20,883 after hitting a high in mid October 2018 of 24,270, that equates to a total return of over 142% since the Tsunami devastation almost 7 years ago.

Now remember as an event like this unfolded there was a time of re-building requiring raw materials, job creation and increase in local infrastructure, precautionary measures were put in place for future disasters which lead to advances in technology as new safety measures were encouraged. This of course was combined with the resilience of the Japanese people and their world renowned work ethic that allowed them to bounce back.

 

Boeing

Another highlighted example is that of Boeing the aircraft manufacturer. Its share price fell from a high of $102 in late 2007 to a low of $30 by the beginning of 2009. It is currently trading at around $417 per share, that’s an increase of over 1290%!! If you had purchased 10,000 dollars worth of stock at that time it would now be worth over $130,000, not a bad little investment.

Of course in any of these situations one must choose the companies carefully and select the correct buying moment but there are always opportunities out there. Far too often we let the general media tell us when and when not to invest and as a result we buy in at the top of the market (the most expensive) and when it dives we panic and sell instead of possibly holding or buying more.

 

Emerging markets

Another area of interest, especially in the emerging markets, is western type consumerism. In China, India and Brazil, for example, there has been a huge surge in urbanisation as people move from the country into the cities looking for employment. They move away from perhaps a subsistence environment eating a range of home-grown produce and living of the land in many ways.

Now put them in a position of working in a large consumer driven city, they have a greater disposable income with a greater selection of goods and produce and it is no wonder companies like Coca-Cola, Nestlé and Cadbury’s are increasing their sales in these areas.

Of course, along with a westernised diet comes along the westernised problems those of diabetes, obesity and hypertension to name but a few. As a result many investment companies are indeed investing into both areas, westernised consumer products and health companies to ensure they will be exposed to all sides of the potential growth.

 

I guess we could talk here of the morals of investing when it comes to these types of investments. Indeed, the information discussed above can be a battle for people’s morals and at the end of the day it is up to the individual where they want their money to go.

 

As for the what to invest in and the when to do it, I am not a financial analyst nor a government economist; therefore, I cannot advise accordingly. I can say this, however: History repeats itself as we have seen time and time again and there are always opportunities to be had in any market.

Whether your morals will allow for those opportunities, well that is a question only you and you alone can answer.

Contact Me Today for an initial informal chat to look at ways in which we might be able to assist you with your current financial position.

About the author

Colin MacGregor is an independent financial advisor working across Europe for Professional Investment Consultants S.A. (Europe) www.pic-europe.com.

He has over 10 years experience in the advisory sector and currently resides in Prague, Czech Republic.

 

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