Make Money on the Chaos
Even in this chaos and financial ruin, there is room for the shrewd investor to make a profit. These three strategies may not make you rich but it will let you survive the recession in comfort.
1. Long Term Investments - If you can afford it, invest now in condos, ranch style homes and apartment buildings that have many small apartments. There are still some places where you can buy a property and then rent it at or above the mortgage. (that is what I did in Vermont) There are other places that are now so depressed that real estate prices have crashed. Small to medium size towns in which the primary employer (factory, assembly plant, mine, etc.) has left town - usually to be reestablished overseas to take advantage of cheaper labor or because foreign goods can be made cheaper. If you find a place that is structurally sound but is a “handyman’s special”, then reduce the rent to someone in exchange for them working on the property. I lowered the rent by $100/mo on one of my properties in Vermont in exchange for work - the tenant has since painted the entire house, landscaped the yard, installed a new furnace and hot water heater (no labor charges) and done numerous small jobs around the house. The idea is to acquire these properties now and then rent or sell them when the boomers place their peak demand on this kind of housing - in about 10-15 years (the statistical peak will be 2019). But be careful not to get sucked into the mass overstock of large (over 3000 sq ft) or second homes that will flood the market for a decade or more and will drive housing prices way down. This is also not the time to invest in any real estate related stock, ETF, mutual fund or a traditional “investment property”
2. Mid-term Investments - Not all of the stock market will crash. Those industries that are funded primarily by the federal government to provide public services (contracted medical services, outsourced housing, food and transportation) and those that cater to the geriatric market will flourish. There will be mutual funds and ETFs specifically designed to invest in the industry of old age. If you keep tuned in, you will know when these are first started - the mutual fund or ETF equal to an IPO - that is when to invest. This could occur anytime in the next decade but will certainly increase in the rate of creation in the period from 2015 to 2025. Don’t get into these any later than 2015 and don’t stay in them any later than 2023 or your will be chasing your money down a hole. Avoid individual stocks. The loss of high quality experienced management talent (as the boomers retire) and the rising costs of health care plans and pensions will bring down lots of companies - even ones in the old age industry.
3. Short Term Investments - I have reported many times on the usefulness of selling short and buying long. As we approach the depression years, this will be a very lucrative opportunity for the affected industries. One perfect example of this is that the price of gold has risen from just over $400/oz to over $1000/oz in the past 18 months. Taking options to sell short on gold anytime in that period would have resulted in a substantial profit. In 2007, I took a contrary position to take advantage of the January Effect and bought an option on 1,000 oz of gold on Dec 14th when the price was $795. I sold on January 14th at $900. After the cost of the option and call orders, I made about $100,000 in 30 days.
“Event Investing - If you know an event is going to happen, you can profit by it“.