It's Time to Purchase Like It's 1999

by Stacy Johnson on 9 October 2009 16 comments

If you believe the US economy is never going to recover, grab some canned food and a gun and head for Montana. But if you do, it’s probably time to invest. Or at least spend.

As I point out in the accompanying news story, prices on some major assets are priced like it’s 1999. And if past is prologue that means there’s money to be made. Perhaps major money. I live in South Florida, so many of the recession’s effects may be amplified here. But we’re seeing housing prices not seen in this century. I just looked at a house for $300,000 that sold in 2005 (note: this was at least a year before the market peaked) for $570,000. Commercial properties that made no economic sense just a few years ago now present a better cash-on-cash return than most other investments, and they come with tax write-offs that make them even more appealing. And stocks? As the market tanked earlier this year, I started buying.  Since January, I’ve invested about $90,000, and as I write this I’m up about $31,000: an unrealized gain of about 35%.  (I’ll share my exact portfolio in future posts.) And if you think the stock train has already left station, check this out: even after gaining more than 50% from this year’s lows, the stock market today is still below where it was in January of 2000. If you could go back 10 years in time and be able to buy stocks, wouldn’t you want to? 

And if spending sounds more fun to you than investing, you’re still in fat city. Boats…especially used boats… are way cheaper than they were a few years ago. It’s much easier to drive a hard bargain on cars, both new and used. Same with motorcycles. And if travel’s your thing, hotels, planes and cruises are a lot easier on the pocketbook today than they were a few years ago. They’re also less crowded.

The media loves to shout the blues with headlines about how life sucks when the economy tanks. Don’t get me wrong: it does suck for those who can’t find work. But for those who do have a job, a healthy savings account and some optimism about the long-term, it doesn’t get any better than this.  Opportunity in the form of lower prices doesn’t knock all that often: if you have the wherewithal, my advice is to answer the door. 

I leave you with the words of legendary investor Warren Buffet. Be fearful when others are greedy and greedy when others are fearful.

Are you making smart buys in this recession? If so I would love to hear about your picks and tips in the comments!

0
No votes yet
Your rating: None
ShareThis

comments

16 discussions

Add New Comment

CAPTCHA
This test helps prevent automated spam submissions.
Guest's picture
Bobby

Love it. On a more micro level than stock market investing: Bargaining is returning as an art form. You can negotiate prices on goods and services--it never hurts to ask if this is "the best price?".

Guest's picture
Big Spender

Wow, I can't believe my eyes. This article seems to have found it's way onto the wrong blog.

Buying a boat?!?
A hole in the water where you throw money into.
When the market has no actual reason to recover?!?

Crazy talk.

Keep saving people. Live well within your means.

Guest's picture
jon

Always buy used. Especially for depreciating assets likes vehicles. You can get 50% off the price after one year to a few years!

That money can go to non-materialistic things, like vacations with loved ones

Guest's picture

Yes, it is hard for some people.... For the ones not prepared financially speaking. Definitely a tough wake up call there.

But for those who weren't on the edge, who didn't need a small push to go off the cliff... (Or on the verge of retirement, that kinda sucks.) It's a great time.

We did buy our third car this year, a very used car at that. (A 1990.) We got her for ridiculously cheap and in order to build my credit, since I'm only 21, we got a loan to do so at an awesomely low rate... Meaning I can build credit for fairly cheap!

The economy's reinforced my savings beliefs, and we've been doing great. (Albeit we're in a fairly unique position, age being one of our biggest benefactors here.) I'm glad that not everyone has the doom and gloom outlook, especially since the worst is probably over.

Guest's picture
Value Investor

I am 85% up since I bought in March !

Guest's picture
Alex

I started buying back in 2008 and early this year and still buying. It's great having a healthy account and zero debt. The economy will always balance itself out in the long run. In the meantime, it's great to look for anamolies in te sectors and grab what you think might do well. Anyone can make money in this economy, you just have to b willing to do the research and take risks.

Guest's picture

If things are priced like 1999 does that mean we are going to have another stock market crash like we did after 2000? I think I would pick a different time frame to compare for the market.

It is true that you are starting to see some deals in real estate and luxury items such as boats. Negotiating will always be a key skill to have in buying.

In regards to the stock market I have a couple of blog posts that you may want to read before jumping into the market.

http://www.askthewealthsquad.com/blog/why-you-should-get-out-of-the-stoc...

http://www.askthewealthsquad.com/blog/stock-market-prediction-year-2009/

Caution should always be exercised when investing.

Financial Samurai's picture

I wish prices in San Francisco were down 50% like in wherever you live in Florida. It's absolutely NUTS right now with traffic, job offers, packed restaurants.

You're right. If you survived this downturn, the leverage on the upside is huge.

Keigu,

Financial Samurai
"Slicing Through Money's Mysteries"

Guest's picture
Timotheus

People are starting to get greedy now, 6 months ago people were fearful, but that doesn't mean that the market won't keep on going up.

Guest's picture
Zorak TG

I am "only" 45% up, only because i sell too soon. But this way is better, dont like to take great risks.

Guest's picture
Ken

Post #7 in this thread was authored by someone who thinks they know the stock market better than others. What's funny is the links he provided takes you to pieces he wrote in which he makes a stock market prediction which is just way off the mark and then a funny follow up statement in the next linked story.

"...just that for the next 60 days we have a downward bias in the market."

In August he predicted both September and October to be dismal months for the markets. He was inarguably wrong about the September call. Dead wrong. October has certainly gotten off to a promising start. Appears he will be wrong. Again.

The second link takes you to another worthless piece by this author who stated the following:

"First let me say I have absolutely no idea which way the market is going to go."

I guess I would say two things about this. First, you have proven conclusively in the first piece you linked that you, indeed, have no clue about which way the market is going. Second, if you admit that you are clueless as to the direction the markets will take why are you making multi-month predictions about the direction of the stock market? You are a joke.

So here is my recommendation - don't bother with any predictions or lend any value what so ever to the market calls or supposed insight of the individual who produced post #7.

Guest's picture
Scott

Hi Ken!! Thanks for the kind words. Maybe I can answer some of your concerns.

Yep my call on September was off. Pretty badly. October is just starting so what say we wait until the end of the month to determine if it is off.

None of us know which way the market will go. My two "worthless" articles were presented to show a historical basis and a potential for downside in the markets. I fully admit they may be wrong.

I won't be the first person to get a market call wrong... and won't be the last. I will say that I have been out of the market for quite a while and missed last years crash so am ahead of the game.

I used analytical data to show why the market appears to be over valued at today's prices and why historically September and October are bad months to be in the market. September proved otherwise this year.

Do you have analytical data to show why now is a great time to be in the market? The article says we should buy like it is 1999.. remember what happened to the market after 2000?

I enjoy a good debate and am always willing to discuss data, theory, hypothesis, conjecture, etc. Please take the posts I wrote and ignore them if they don't suit your views. I hope everyone that reads them uses them to broaden their knowledge and have logical reasons to be in the market.

Thanx
Scott

Guest's picture
Debbie M

My dentist sent me a coupon good if I made another appointment by a certain date. I already had an appointment before that date, so I called and said that sending me the coupon was a mistake, but I could still use it. Apparently people are putting off dental work during the recession, so this may be a good time to catch up if you have the money.

My boyfriend's car's finish is coming off in a way that could eventually lead to a break in the integrity of the metal underneath. He got a really good deal on re-painting the car.

Anything that people can put off when they are worried about their next pay check is probably a good deal right now. It's probably a good time for home repairs, re-roofing your house, and doing planned renovations.

Most self-employed people are also hungry. You can probably get a deal on massages, having your web-pages redesigned and stuff like that.

Guest's picture
Steve in W MA

Debbie M, tell your boyfriend about the miracle called "primer" and "spray paint".

they will protect his car at a much cheaper cost than a pro paint job.

of course, it will not look as good of course as a pro paint job. But will save him $600.

If the car is old enough to have a failing finish, having a paint job is a luxury (unnecessary) expense, unless of course he can't stand to have his car look super nice. Which is a view that has its merits I will admit.

Guest's picture
Ken.

Disregard Scott's comments.
We are going through a bad separation.

BTW Scott, I'm keeping the Benz and Mr. Biggles.
Was he worth it? Drunk or not, I don't care.

Guest's picture
Mia

I like the first comment "A boat? A hole in the water where you throw money into" - we think alike ;)