Prospering in Times of Global Financial Meltdown

I have often wondered where all the money went in this era of global financial meltdown. Is it that some extraterrestrials zoomed in from outer space to spirit the money away, or did the cash turn to ash in bank vaults worldwide, or the gold bullion melted and evaporated or the money is cooling its heels somewhere in a few hands?

The money is alive and well somewhere. The quantum of money in existence has not reduced, rather it has increased (some countries have in fact printed more currency). The global financial meltdown did not melt any cash or gold bars. They are all intact. It is only the money in circulation that has been reduced. A lot of money has gone out of circulation in some instances but has not gone missing. No country has reported missing money so far.

What simply happened is that money changed hands on a global scale. There was a global redistribution of wealth. Most of the money ended up in China, India, oil-rich states, etc who were busy building their reserves while others kept spending. The US is the biggest borrower worldwide, and most of the debt is owed to, of all places, China. Sleeping with the enemy.

What has this got to do with you?

Plenty. Money is not static. It moves. This is its job. It circulates. If you do the right things, it will circulate in your direction. There is plenty of money still circulating, more than enough money to go around, the snag is, it is not circulating where you are. If you look around, money is still circulating in your neighborhood or somewhere close to you. Some people are buying/building new houses, buying new cars, going on vacation, etc. New buildings are going up, some of them architectural masterpieces.

Some companies are declaring mouth-watering results. Luxury car makers have experienced a boom and for some companies, 2010 is their best year in history. Fedex declared its busiest day in history a few days ago. They have a mountain of 16 million parcels to deliver. Business is booming. Back home in Nigeria, the banks are back in black and are declaring fantastic profits. Conglomerates like the Dangote group are building new plants. Different strokes for different folks.

“There is no money” is an excuse. Fortunes are being made every day. New money is gradually displacing old money. You only need to be more creative to make new money come your way. Let’s make a brief stopover in China, the seemingly number one destination for new money. China has a solid infrastructure backed by cheap labor. Chinese technology is not the best in the world. All China did was create an enabling environment for the inflow of direct foreign investment. China used what it had to get what it does not have. Today, almost everything under the sun is made in China (well, assembled in China).

At the individual level, we all have a solid infrastructure and cheap labor. We all have skills and talents we can develop to a world-class level, if we do not allow low self-esteem and laziness to kill it. Our labor is ultra cheap. When starting out, you work for yourself for free. When pursuing a dream, you don’t trip yourself up with how much to pay yourself every month. You work extra long, extra hard for love, knowing that payday is coming, big time if you can persevere to get to the finish line.

The best time to prosper is in a down economy. With depressed prices, the entry-level has been lowered to record levels in some instances. In the Nigerian stock market, some stocks are still trading at year lows. Property prices are down, as there are more sellers than buyers. Banks are pumping foreclosed property into the market at rock-bottom prices. Vendors are now ready to listen to creative financing options. The buyer is in a better position of strength and can negotiate deals that almost amount to no money down if one is bold enough to step to the table rather than rule oneself out.

It is truly amazing how we react to sales when it comes to assets and liabilities. If there is a half-price sale at the mall, there is a commotion as all rush in. If there is a half-price sale at the stock market, there is also a commotion, as all rush out.

I have come to realize that the herd almost always stampedes in the wrong direction. To get ahead of the crowd, you need to move in the opposite direction. I tend to watch the crowd before I make my move in investing. If everyone is rushing in, I know it is time to get out. If everyone is rushing out, I know it is time to get back in.

These stampedes usually herald a massive transfer of wealth. The crowd hardly wins. More often than not, the direction of the transfer of wealth is usually from the crowd to the few savvy investors who position themselves appropriately. To break away from the crowd, you need to shed the herd mentality.

If you stick with the herd mentality, you will always believe that the best time to enter the market is when prices are sky high, and the best time to exit is when prices crash. So you buy high and sell low. You will remain the sacrificial lamb wherever you go. You can prosper if you make the effort to change, and there is no better time than now.