Following yesterday’s post, Ideas To Weather The Storms, I will share with you a few solution we help our clients with on a regular basis.
Solution: Better cash rates.
To put matters into perspective, current central-bank rates should be your point of reference. The ‘sea-change’ is on the horizon already. But right now, the banks still need your cash. For example (as of 23/4/09), you can secure a 1 year FD (10,000 currency deposit) with: Anglo-Irish Bank IOM at 3.5%pa for USD; or 4.35% on GBP; or 3.8% for Euro. Looking similarly at AUD, Bank of Queensland is offering 4.3%; for SGD, DBS Bank is offering 0.55%; for MYR, Citibank offers 2.5%; and for CHF, UBS offers 1.0%. So, all is not doom-and-gloom out there, provided you do some research (or have someone do it for you).
What may really surprise you are the rates we at Lighthouse have access to – but only for the next 4 weeks… 1 year FD (10,000 currency deposit): USD at 5.68%; GBP at 7.78%; Euro at 7.24%; AUD at 9.43%; SGD at 4.31%; and CHF at 5.04%.
We do have access to other currencies and terms too. But in 4 weeks time, all these great rates will be lower by 2-3%!
Solution: Participate and capitalise.
I mentioned before that the next economic cycle is expected be an inflationary cycle. Historically, higher inflation is usually good for stocks – and more so where interest rates are low. Such circumstances force depositors out from cash holdings into stocks and other assets in order to protect their purchasing power. Such a migration from cash creates increased demand on stocks and other asset classes, with the consequent upward pressure on price and values.
Just like with gravity, most people know instinctively that the above is what happens and will happen. What they don’t know is ‘when’. Unfortunately, most will wait to see it happening before they take action, in the hope that they can jump straight onto the upward trend. They also persist with the misguided belief that this ‘waiting to be sure’ represents lower risk. Together, this might explain why – statistically speaking, a good portion of investors buy at the top of the market and sell at the bottom.
So, if we accept that: a) the coming inflationary cycle represents substantial opportunity; b) in-action risks a physical loss in actual purchasing power; c) that most investors won’t know ‘when’; and d) that ‘waiting to be sure’ actually represents higher risk, not lower; then it follows that we need to actively seek out positive and proactive action before the storm arrives. When the storm engulfs you, would you prefer a novice or a veteran captain at your helm?
This is where Lighthouse really adds value. Our capacity for delivering real results has been built on strategies and tactics in-the-making these past 20+ years. It may not be perfect (what is?) but it does work. Ironically, the longer the current economic liquidity crisis lasts, the more profitable it will be for our clients.
So, since the storm is here and more is coming, we can help you position your ship to not only weather the storm, but to capitalise on it. Be not with your eyes closed relying on hope. Be prudent. Be guided. Be not on your own. Be a Lighthouse client and emerge from the storm in better condition than before.
We all know that someone, somewhere, will be making money, whatever the weather. Why shouldn’t it be you this time?
Tomorrow, I’ll further explore this subject and help you determine whether your captain is a veteran or not. Meanwhile, do feel free to drop us a line or give us a ring should you wish discuss this further – you can also react here under.
