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How To Sail In Current Economic Situation (PPT)

 

Nassim Taleb in his famous books Antifragile, he says anti-fragile gain from disorders of others, he gave an example of wind and fire, where he explained, fir will not spread itself, it needs wind to get it to spread, right, fire rides on winds…

Current Situation

Savers are losers,
Real estate is down,
The stock market is down,
The jobs market is down,
People’s are losing jobs,
Money is losing it’s purchasing power
Interest rates are down

Lots of bad news,. But always remember, there are seeds of opportunity in every difficult time… Let’s see how it unfolds…

Savers are Losers

If you are earning money, and you are saving that money… Soon, there are high chances that you will start losing money…
In a recent report of SBI … Says there are chances of negative interest rates.

What does that mean, negative interest rates mean, when you deposit money with banks you have to pay interest to banks, as a saver, the bank will not give you interest, which you might get it right now, on your bank saving account or on your FD… So if you are a saver you are a loser… So what is the way ahead,

2 Types Of Assets

Let’s understand… There are two types of assets

1) Appreciating Assets ( AA)
2) Earning Assets (EA)

1) Appreciating Assets:

Are those assets, which are appreciating at price, and not having earning power … These assets are mainly appreciated by economic issues, and mishandling of the economy, a lot of reasons… The best example of this asset is Gold, Growth Stock which are having low dividend yield…

 

2)EarningAssets

Earning assets are those assets, which are putting earning in owners pockets, i.e cash inflow in owners pockets, Example Real Estate which yields rent, Stocks with decent dividend yield, What happen in recent times, appreciation of assets are down except Gold, there are chances in future, appreciation of all assets will go down further ( Except Gold) Real Estate prices have already down, stocks are down,

 

2 Ways To Take Benefit

1) Buy GOLD: which will appreciate in price, which will gain from low or negative interest rates, because gold never loses its purchasing power, it gains from economic shocks, like the one which we are in right now,
There is only one issue.. it has no earning power, gold only appreciates, it has no earning potential, you can’t get money by renting gold or get dividends by holding it.

2) Buy Real Estate: yes I am saying real estate, don’t be in shock, there are two reasons

i) Prices are down: real estate in all parts of India are down, not drastically but it corrects a lot, and if you have a negotiation power you can opt for the best deal,

ii) Interest Rates are at multi decades low: Home loan rates are multi decades low, yes you are hearing it right, when at the first time, I bought a flat in 2011 I got a home loan interest at around 9.90%, The same home loan interest rates are down around 6.95% and there are again chances of going it down further,

So you have two edge advantage, price is down + low-interest rates, + Rent which is a passive income for the rest of your life, and whenever, the situation will improve, your real estate appreciates at price, also rent will improve, Till the more clarity of economic situation unfold, and how govt tackles it, till time keeps on buying gold, Gold price keep on rising, if situation become worst, Stocks price go down further, and dividend yield go up, and in the same condition, real estate prices and interest rates will go down further, so whenever you find a good deal in real estate, within say 1 year to 1.5 years, sell gold at a much higher price, and buy real estate at low price with very low-interest rates, or else buy the stock at the much lower price with very high dividend yield… You will gain from all sides… Else, if you already have a home loan, renegotiate it with your lenders, they will offer you low interest rates, and keep on buying gold, with whatever the difference with your EMI when you renegotiate your home loan and buy with your salary income. We are already near to the bottom, or worst will come soon, but, you will never lose money, because whatever you are doing it’s not on the higher price, and govt will not increase interest rates, the main condition to successfully execute this plan is, you have a concrete plan for repayment of EMI,s .. If you have employment issues, don’t do this, if you have cash with you, sooner or later, you will be losers if you will not Buy asset…

 

Come to our book Antifragile The current economic situation is exactly like this, you have fire and wind right now, how will you execute on that depends on your success …. you will gain exceptionally well from this condition, you need to become antifragile So hope, my thoughts will help you in sailing this current economic conditions,…

Disclaimer: All these are my personal thoughts, I may be wrong, my entire calculation may be wrong, I am not liable of your gain or loss. I am not a SEBI registered investment advisor. all are my opinions, and this is for educational purposes only. I am not genius or clever to understand all things, I may be wrong in interpreting the data and, take your decision on your own)

 

 

To Your Success with a Lot of Love!

 

Harish S Kawalkar

 

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