As the United States economy continues on its downward spiral, it is natural to be frightened, frustrated, and depressed as we watch the value of our assets dwindle. With so many changes taking place now and in the near future with the new presidential administration, newly enacted monetary policy, and ever-changing economic situation, our lives are filled with uncertainty. One thing that we can be certain of is that in light of all of the turmoil and worsening economic conditions, there are opportunities out there to be taken advantage of.
Now I’m not saying that all the economists and media are lying to you when they say that we are heading straight into a recession or even a depression, but what I have noticed is that things may not be 100% doom and gloom everywhere in the US. For example, I am in a position where I underwrite loans for my bank, mostly commercial, but some retail scattered in here and there. What I’ve seen recently is people taking advantage of the abundance of distressed real estate on the market. There are so many homes for sale that are put on the market at very low prices. Often this is because the bank has foreclosed on the owner and wants to recover any amount of money from the defaulted loan, or maybe the owner has had the house on the market for a long time and just wants to get rid of it. One particular group of guys who each know a little bit about something in real estate, joined together to form an entity for the sole purpose of buying undervalued properties, fixing them up, renting them out, and eventually selling them when the market goes back up….that’s right, WHEN the market goes back up. There is a natural business cycle to our economy that causes periods of expansion and contraction. We are obviously in an economic down turn right now, as can be seen by several of the leading economic indicators, but we can be comforted by the cyclical nature of the free market system that will lead to an eventual up-swing. Which brings me to my next bright spot in all this gloom, invest in the stock market.
Obviously not everyone is in a financial position, nor real estate savvy enough to invest in such an endeavor, so if that isn’t an option for you, why not take advantage of the low stock prices right now? I understand it’s painful to buy into the stock market at a time like this, especially when the value drops about 5% just about every other day. If you can spare at least $3,000 (usually the minimum amount required to invest in a fund) that you don’t need access to in the near future, throw it into an index fund! Broad-based index funds are a way to automatically diversify your investment. You can choose a fund that divided into a percentage of stocks and bonds, based on your risk tolerance level, age, and other various factors. To elaborate, a person with a higher risk tolerance would opt for an asset allocation that is more heavily weighted with stocks, versus someone with a lower risk tolerance would opt for a larger portion of bonds. Just as I mentioned with investing in real estate, not everyone has the opportunity to invest in the market right now. If you don’t have an excess of liquid assets lying around, now is not the time to jump in. However, given that the market will one day bounce back and return to its natural state of 8% average annual growth, this is the perfect time to buy in if you have excess cash sitting in your savings account.
Don’t get me wrong, I’m not trying to belittle the struggle that many Americans face right now. I am aware of the high levels of unemployment, not to mention underemployment as people aren’t getting the hours they need to support a family. I am aware of the families being foreclosed upon, left with nowhere to go, but my point is that as individuals there is nothing any one person can do to change the state of the economy. For that reason, I believe it is important to seek out the opportunities for growth in these financially trying times, rather than worry about what will happen over the course of the year.
The are opportunities to make money in growing or shrinking economies and markets. The loss of jobs and strain on budgets spurs creativity which wouldn’t have came about without such poor economic times. One of the most interesting articles I’ve found about someone finding an area as a result of the poor economy is a story about a guy who started spraying dead lawns of foreclosed homes. Since the banks can’t afford to pay the upkeep on many of the homes, they pay the lawn sprayer to come by and turn the dead grass green for a few more months. Check out the whole article here.
Have any stories of your own of people finding opportunity in the recession? Please share in the comments!




