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Home » Wall Street News

10 Opportunities Created by a Slowing Economy

Last updated by on 6 Comments

How to Stay Positive During Tough Times & Take Advantage of Opportunities

Kiplinger.com recently made the argument that despite all of the market turmoil, there are some things going right. I thought the list was worth repeating, since we need some positives in these tough times. Rather than trying to fool yourself into thinking that things aren’t so bad, you may want to look at these as opportunities to take advantage of. I’ve added some personal commentary and thoughts on how to take advantage of some of these opportunities.

1. Oil Loses It’s Swagger

Sure, gas has fallen to under $2.50 per gallon. On the surface this looks great, but I worry that if this trend continues, then buying habits are going to trend back towards large gas guzzling vehicles. Look at this as an opportunity to perhaps get a fair value for a gas guzzler that you’ve been trying to unload. I don’t see oil staying this low for long.

2. A Tipping Point for the Auto Industry

A dip in auto sales is a positive in that if you are in the market for a new vehicle you can surely find some great deals out there on 2009 models, and even better deals on 2008′s. Automakers are using these incentives to lower their inventory. As they cut production capacity to align with lower sales, incentives will be harder to find. If you were going to buy a vehicle in the next year or so, now would be a good time.

3. Interest Rates are Low and Headed Lower

The fed just lowered rates again, and they don’t have much lower to go. Rates on long-term loans may have a little further to drop (30 year fixed is a 6.5% at the time of this post), but they are still near historical lows of 5.8%. This presents a good opportunity if you plan on buying a home.

4. Homes are More Affordable

I can see home prices dropping a little further in the next year or so, but not too much. The housing market has really taken a hit, and it looks like we’re nearing a bottom. These things are always hard to predict, but if you’re in the market for a house, now might not be a bad time to become a homeowner.

5. Your Bank Savings have Never Been Safer

As part of the financial bailout, the Fed raised FDIC insurance coverage from $100,000 to $250,000. I don’t see this as much of a benefit to readers of this blog unless you had more than $100,000 in a bank account. If you’re under 60 years old, you probably shouldn’t have that much in a bank account, your money should be working for you elsewhere.

6. Stocks are on Sale, and Many Bonds Offer Terrific Yields

This is indeed a great opportunity to buy great stocks at a steep discount to where they should probably be priced. I’m not an expert on bonds, but if someone reading this is, please chime in.

7. The Miracle of Technological Innovation Continues

Kiplinger refers to tv’s, laptops, and home theaters being cheaper than ever. Not sure why they raised this point, considering the fact that they are a personal finance content publisher that advocates frugal spending. One of the biggest drivers of debt is the feeling of need to own the latest technological gadgets. Save your money, keeping up with technology isn’t a battle that can be won without high expenditure.

8. Prosperity Reigns in the Heartland

The fall harvest is shaping up as one of the best ever, despite the destructive weather and floods in the Mississippi River corridor since last spring. Exports of U.S. farm products will increase more than 40% by value this year. And recent years of high profits have allowed farmers to pay down debt so low that it accounts for a measly 9% of their assets — providing all the credit they’ll need for 2009 operations. At home, while food prices jumped sharply earlier this year, the weak economy is now expected to slow further price increases. (Consider Maine Lobster, now selling for only $5.99 a pound).

I have nothing to add to this other than I think it’s great that prices increases will slow, but with the price of oil sliding and the economy slowing, we should truly see food prices decline. Unfortunately, I seriously doubt this will happen.

9. A New Tone and Direction in Washington

Financial markets should see a boost with a new President in office (things can only get better, right?). This is just another reason why stocks might be in buy territory. It also looks like you’re probably going to be seeing less of a tax burden over the next four years despite who wins the election.

10. Shoppers Can Expect Great Gift Buys this Season

This is a good thing if you like to buy people a lot of junk around the holidays. I tend to opt for experience gifts such as tickets to entertainment, dinner and movie, sporting events, etc., so I personally don’t see much of a benefit here, but you may.

What other opportunities do you see right now that could have a positive impact on your finances?

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I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


6 Comments »
  • Craig says:

    There are a lot of factors and nice list of mention the main ones that we are seeing. I agree that just because prices may be lower shouldn’t mean we should be silly about it. This is a good time to take advantage of low prices for long term investments.

    Craig

  • Steve says:

    I’m actually taking this opportunity to start looking for a house. I’ve already started buying stocks also.

  • stephanie says:

    I’ve been meaning to invest some extra money while stocks are “on sale,” but so far I haven’t done so. I think next week I’ll figure out the best way to add extra money to my Roth IRA before the year ends!

    I think bonds usually have interest rates that mirror overall long-term interest rates. So, when dips with the stock market lead to the Fed lowering interest rates (like now), the bond market increases not because people expect to make much profit, but because they consider bonds to be a safer investment of their money (even at a lower rate). They are “safe” in the sense that you can be certain of how much you will receive upon maturity, however, they are not “safe” in the sense that since interest rates change, you don’t know what that amount of money will buy you upon maturity. I could be wrong here, but this is how I have understood the bond market to work.

  • G.E. Miller says:

    @ Stephanie – in response to contributing to your Roth IRA before the year ends, contributions for the present year can be made until the day your federal tax return is due (usually mid April of the following year).

    Also, I wouldn’t consider bonds safe for anyone who is not in retirement or close to it (because they have a hard time outpacing inflation).

  • John says:

    Thanks for the points.i thought of buying a house but the dipping interest rates is triggering the realestate industry..

  • Drew says:

    In this climate you certainly need to be careful and slow going
    with any kind of investment but those are some good ideas.
    Thanks,
    Drew

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