Buying Blood in the Streets: A How-To Guide

Filed in BP, Gold, Gold Market, o, target by on January 31, 2011 0 Comments

There’s no cash in the ATMs, there’s something like 5,000 prisoners roaming the streets and there’s no security. — May Sadek, man on the street, Cairo In my financial trading service Crisis & Opportunity , I seek maximum returns by buying stocks when fear is the highest, and selling them when the panic dissipates. It might sound crude and insensitive to buy stocks in places where people are literally dying, but it works; and by supporting the stock market when everyone is fleeing, you are reducing the panic — which is a positive for financial stability.   Baron Von Rothschild is credited with saying, “The time to buy is when blood is running in the streets.” He’s been re-quoted by everyone from Mobius to Rockefeller. But through extensive research, I uncovered this bit from The New York Times circa 1931… It has been reported during the aftermath of the Franco-Prussian War, when the French had been defeated and the mob was looting Paris, a friend of his asked, “What are you going to do to protect your interests in this dreadful hour?” The Baron said to him, “Can you keep a secret?” He replied, “Yes.” The Baron said, “Well, if the truth must be told, I am protecting myself by buying real estate.” His friend responded, “Do you mean to say you are buying real estate with the gutters of Paris running with blood and the city in the hands of a mob?” Rothschild said, “Yes, my friend, I mean that very thing, and that is the only time, when the gutters are running with blood, that you can buy real estate at 50 cents on the dollar.” Istanbul to Constantinople Buying blood in the streets has become a hoary Wall Street platitude because it is extremely profitable. The thing about revolutions is that the countries don’t disappear… Sure, governments come and go, the names and lines on maps change and are redrawn — but the people and resources remain.   I can name a number of countries off the top of my head that had post-revolution stock market booms: South Korea, Indonesia, Malaysia, Sri Lanka, Russia, South Africa… the list goes on. When you invest in foreign markets that are in crisis, you get a bounce-back on both the equity side and the currency side. Here is an example: In 1998, the people of Indonesia took to the streets and threw off long-term dictator Suharto. The market crashed, and the currency went from 350 to the dollar to over 15,000 before it stopped trading altogether. One of the Indonesian blue chips — P.T. Telecom — fell from the low $30s to $1.50. The currency now trades at 9,047 rupiah to the dollar.   If you put $10,000 in TLK at $1.50 and held it to the top, you would have made $366,000 on the share price — plus another 30% or so on the currency…

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Buying Blood in the Streets: A How-To Guide

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