Really? Opportunities abound? In this market?
We have been hearing about the meltdown of the credit markets for the past couple of weeks. The government has authorized up to $700 Billion to be spent to “rescue” the markets from the Mortgage-Backed Security debacle. And the talking heads on CNN, MSNBC, and even Fox News are talking about the inevitibility of a recession.
And yet, opportunities abound. There are still plenty of people in this country who have plenty of money, much of it invested and losing value (some even gaining!), but much if it sitting on the sidelines, waiting for all of this turmoil to play out. More and more money every day is being withdrawn from the market and put in cash positions, so that it doesn’t lose any more value. Investors seem very wary of the huge gyrations of the stock market in recent days, not knowing what to do next with their cash.
It may be even worse on those who have large retirement reserves, in 401(K) accounts or IRAs. That’s the money you count on to be there when you retire. That’s the money that the financial planners told you, according to their “models”, would steadily grow over time at an average 10-11% rate. That’s the money they told you to invest for the long term and to hold on to during the short term storms.
But you never know with the stock market. Sure, stocks have returned 11% annual returns — on average — for the last almost 80 years. But tell that to the people that retired in 1978. Tell that to the people who retired in 2000. Tell that to the people who expected to retire at the end of this year, 2008. If they were/are invested in Stocks or Mutual funds, a significant portion of their wealth has been wiped away in these last couple of months.
But again, opportunities abound. They are all around us. For instance, I just read an article in Crain’s Detroit Business about commercial mortgages called “Conduit Loans” being in trouble. Some of these loans, just like loans that are packaged up in Mortgage-Backed Securities, cannot be renegotiated. Many of them in the Detroit area are coming due and payable in the next year and will have to be refinanced. But because of the decline in market values for commercial properties, the borrowers will not be able to secure conventional commercial financing due to the fact that they will not have enough equity to meet the new, more stringent borrowing requirements. And they will face foreclosure as a result. But why is this an opportunity?
This is where normal people with money, like you and me, come in to create the financing that these folks are going to need. Most of these mortgages are well-performing mortgages and the companies that are making the payments are good companies. Good credit risks. Just caught up in the unforeseen circumstances that are putting a squeeze on them.
Now, obviously, this would be an unconventional place for the normal investor to put his money. But, let’s imagine for a bit. You lend the money to these borrowers at a rate that is probably 8% or more. You get consistent payments coming in, month after month, like clockwork. The money is not at the mercy of the wild swings of the stock market and you can sleep at night knowing that. And you’re getting a pretty darn good return.
Here’s the best part. And here’s where I come in. Did you know you could do an investment like this in your IRA?
Watch this space for further details…
