Here’s a great example of how, no matter what’s happening in the world, there’s always an abundance of compelling, lucrative opportunities.
Lately the British pound has plunged to historic lows.
The pound recently touched a 31-year low against the US dollar, and an all-time low against the euro.
For much of the past decade, Crispin Odey has been waiting for inflation to rear its ugly head. The fund manager has been positioned to take advantage of rising prices in his flagship hedge fund, the Odey European Fund, and has been trying to warn his investors about the risks of inflation through his annual Read More
And earlier this month the pound shed nearly 3% of its value in the course of a single day.
That’s simply not supposed to happen to a major currency.
A move of just 1% for a major currency is considered shocking. Currencies are supposed to be stable, not ultra-volatile like a penny stock.
Yet these sharp swings keep happening to the pound, mostly out of Brexit fears.
Emotion has taken over. There’s no rational basis for the pound being this cheap—merely panicked selling on the assumption that everyone else is going to be selling.
This is a broken market. And I imagine it must be nerve-wracking to be living in the UK and watching your currency knocked around like some third-world peso.
Yet anytime markets break down like this and emotions take over, great opportunities almost invariably emerge.
We’ve discussed our deep value investment strategy before; financial markets in some parts of the world are so fractured that it’s possible to buy shares of a profitable business for less than the amount of cash it has in its bank account.
That qualifies as a no-brainer– an extremely LOW risk way to generate a built-in profit.
Some colleagues and I are taking this a step further, in fact, and working on a deal to purchase a controlling stake in a listed company that is selling for a fraction of the value of its assets.
(SMPI and Total Access members– watch out for more information on this one.)
These types of opportunities exist almost everywhere that markets have broken down, and the UK is no exception.
I’ll highlight a few simple examples that don’t involve investing tens of millions of dollars.
One asset class that makes sense to consider is collectibles, things like rare coins or wine.
Like gold and silver bullion, collectibles are real assets. And scarce. They’re not making any more 1982 Chateau Petrus.
With collectibles, I prefer to stick to assets with a wide base (i.e. nothing too niche) that are fairly easy to buy and sell.
Art and antiques, for example, can be difficult to value and sell without going to an appraiser and broker.
But certain luxury watch brands, on the other hand, can be sold in minutes, especially the historic high-end Swiss manufactures like Patek Philippe, Rolex, Jaeger-LeCoultre, IWC Schauffhausen, and Vacheron Constantin.
Many of these watches are hand-made and they are NOT mass-produced, so they’re scarce and extremely popular.
Right with the British pound at around $1.22, luxury watches being sold in London and priced in pounds can be had at a steep discount to their US dollar prices across the ocean.
A recent year Patek Phillippe Calatrava model (5119G) is selling for about GBP 12,300 in the UK right now, or right around $15,000.
(And that doesn’t include the benefit of receiving a VAT refund.)
This same watch can easily sell for more than $20,000 in the US.
You could even sell it yourself on Amazon or eBay at a steep discount to that price and still make a very healthy profit.
Technically it should even be possible to sell the watch first in US dollars, and then purchase it in pounds from a UK vendor once you collect the money from your buyer.
That way you can generate a solid profit without actually using any of your own money.
It’s easy to be fearful when markets break down, when terrifying political candidates emerge, and when it seems like World War III is breaking out.
But as a result of all that fear, there are countless opportunities like this to generate low risk, built-in profits.
And thanks to our modern technology, these opportunities are available to anyone in the world who has access to the Internet… and a little bit of hustle.
Photo by RonPorter (Pixabay)