If my crystal ball isn’t fooling me, we can expect to see the stock market down for some time. More importantly, businesses are failing – and will continue to fail – at an unprecedented rate. Some of these are good businesses, short on cash. Weve talked about the importance of owning your own business. This may be a very good time to buy one cheap. Of course, you need capital to do so, and nothing is better than cash, or ready access to it.
Despite lower interest rates, it will be hard to borrow in the near future, particularly for investment purposes. If you have money to spend, buying a business will be a lot easier. When times are tough, cash is king. And taking advantage of troubled economic times has a long tradition in America. Many of our wealthiest and most productive citizens played this game.
* Blue chips selling dirt-cheap after the 1929 crash included GE, GM, Westinghouse, US Steel, and Union Carbide – companies that multiplied in value by hundreds of times in the years following the 1933 bottom. GE, in fact, is today the largest company in the world (worth over a half-trillion dollars).
* Mellon Bank of Pittsburgh picked up assets at pennies on the dollar in the wake of the crash. Andrew Mellon became one of the worlds wealthiest men as a direct result of these investments.
* A bottom-feeding investor group called “The Gold Coasters” did the same thing as Mellon and ensured their individual prosperity. And lets not forget J.P. Morgan, who saved the American economy by providing credit during the economic panic of 1907 – and also seized the opportunity to buy Tennessee Coal and Iron (TC&I), the most cost-efficient producer of iron in the world, for $74 million, a fraction of what it was worth.
Or Joe Kennedy, who increased his fortune by more than $15 million during the Great Depression and another $100 million after the crash – a fortune that created Americas most celebrated political family. (See “The Day America Crashed,” by Tom Schachtman; “Panic on Wall Street,” by Robert Sobel; “A History of the American People,” by Paul Johnson; and “The Day the Bubble Burst,” by Gordon Thomas and Max Morgan-Witts.) Dont do anything in a rush, but look and ask around – particularly in your own back yard. Sooner or later, something will make itself available. Buy the very best business you can and expect to get a substantial bargain.[Ed. Note. Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]