Buying Low

Looking around in the current economic landscape there are many opinions on what to do with your money, if you happen to have any. There are many actual examples as well. There are lots of mergers, acquisitions and smash-and-grabs in the corporate world of course, and the more basic if unconventional example of Morgan Stanley just buying a lot of oil. It is not by accident that this is happening.  It is the basic principle by which any investor makes money, buy low, sell high.

It is also not by accident that some businesses seem to be doing more of the merging and acquiring than others. When a recession hits, there are a few categories you can group firms into. Those that saw it coming, those who didn’t, and those who did that expect political connections to bail them out.

The ones who didn’t see it coming are the ones probably going bankrupt or getting bought out or perhaps finding themselves the unwitting recipient of some TARP money. The ones who saw it coming are the ones who were prepared for it and got their house in order. Those are the ones who are most active now.

Companies like GM and Chrysler surely saw this coming, no company that big fails to forecast such drastic changes in the economy. They are obviously now relying on political connection to keep them afloat despite their mismanagement.

I guess the point of this post is to remind myself and others of two things. Pay attention to the future and remember that there is always opportunity. When you see bad times ahead and you either save an extra penny a day or you make friends with the local politician, be prepared.