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From adversity to opportunity

Despite the global economic downturn, not everyone at Davos sees
doom and gloom on the horizon

Opinion

By Trevor Kiedan
SOME of the world's most influential business and political leaders have been meeting at the World Economic Forum in Davos, Switzerland, and predictably the topic that was at the top of their agenda was the global financial crisis.

However, for some of them, the meeting was not all about doom and gloom.

More than just a few of the participants believe that there are opportunities amidst all the adversity.

One such optimist - albeit a cautious one - is Thomson Reuters CEO Tom Glocer, who claimed in an interview with the BBC that there were "spots of light" in 2008 in the Middle East, Asia and in foreign currency markets, which "were very volatile and active".

And, even though he said that "2009 is a challenging year", he also claimed there would be opportunities at "less cyclical" businesses.

Developing opportunities

Another area of opportunity lies with the growth prospects in products and services for the developing world and the world's poorest communities.

According to reports released by the World Economic Forum, "companies can find growth opportunities among the 3.7 billion people at the ‘base of the pyramid' by adopting ‘innovative strategies that benefit local communities'".

To begin with, there has rarely been a better time to invest in property – in

certain markets.

And, although this might sound somewhat philanthropic, there are some business leaders who look at market downturns with relish.
They see an opportunity to increase their market share against a weakened competitor.

Others see an opportunity to buy up cut-price assets.

And as for us - as investors - how should we view such adversity?

Property downturn

Well, to begin with, there has rarely been a better time to invest in property - in certain markets.

There have been huge corrections in prices in the United States as a result of the economic crisis.

In the United States in the second quarter of 2008, there were approximately 739,714 properties with foreclosure warnings, according to property specialist IP Global Ltd.

This was an increase of 121.4 percent on the year before, and the situation looks like it will get worse before it gets better.

As a result of the economic downturn, IP Global, a risk-management consulting firm, believes that there are excellent investment opportunities in property in the United States.

The company claims that well-known locations such as Los Angeles, Las Vegas and New York "present, rare, attainable opportunities to get a toe on the property ladder". The company also recommends looking at places such as Phoenix, Arizona, and Palm Springs, California.

The United States is not the only property market that has suffered corrections.

Other countries that are worth watching are the United Kingdom and Spain.

In addition to property, there could also be excellent opportunities in markets overall.

As a result of the global downturn and the overall uncertainty, many assets are now heavily discounted.  

The major stock market indices have taken huge tumbles - London, for example, fell by 31.3 percent in 2008, while New York was down by 33.84 percent and Singapore was down by a massive 49.2 percent.

Such volatility can be unnerving, but for those of us with strong stomachs - and a long-term view - such discounts could be a buying opportunity.

However, no one really knows whether the markets have really bottomed out, not even the business and political leaders in Davos.

So perhaps the best way to enter the market is to put aside some of our monthly disposable income into a regular investment program. By doing this we remove the risk of purchasing at the wrong time.

Instead of focusing on the adversity, let's try and highlight the opportunities and make the most of the current economic situation, however bleak it may look. As always, it pays to take a long-term view.

_____________________________

Trevor Keidan is managing director of Infinity Financial Solutions. Contact him at tkeidan@infinsolutions.com.

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