There is no question the current economic climate has many negative aspects. Unemployment is up to 8.1%1 as of February, the Dow Jones Industrial Average is down nearly half of it’s record level of 14,164.53 on October 9, 2007–subsequently some have lost 40-50% of their life savings, and housing prices are severely depressed–a house is for most people the single largest purchase they will make. So at the risk of downplaying these very real and sobering negatives that exist, the current economic climate presents many opportunities, often times for the same reasons listed above.

Stock prices down 40-50% represents a remarkable buying opportunity for the long-term value investor. There is of course risk, Lehman Brothers was a financial institution with over 150 years of history and success and it plummeted from a 52 week high of $49.88 to bankruptcy, in which investors lost everything.2 However, for those with a long time-horizon, there are some amazing deals. For example, on March 5th, one share of Citigroup (ticker: C) cost less than a can of soda. A stark contrast to its 52 week high of $27.35. One could buy into an S&P 500 index at close to 50% discount pricing.

The same principles apply to the housing market. Although attaining a loan is much more difficult now, for those looking to buy their first home, houses are selling at fire-sale prices. Another nice bonus is that gasoline prices are much lower. This does have a negative effect of increasing complacency towards finding alternatives to OPEC supplied energy, however paying $20-$30 at the pump is much nicer than $50.

The Wall Street Journal has two recent articles covering additional opportunities: “It’s a Great Time to Start a Bank” and “How to Innovate in a Downturn.” So while the current situation is dire, and the losses of many cannot be downplayed, the economy will recover, as it always has, and there are many opportunities to be had for when it does.

  1. http://www.dol.gov/ [↩]
  2. http://www.pinksheets.com/pink/quote/quote.jsp?symbol=LEHMQ [↩]