Is it the buying time?

Posted by Boy on Nov 28th, 2008 | 1 comment home title

Yes, if you have the money.

Just had a discussion with my client. He said, this time of financial crisis is actually the best time to make investments, provided that you have cash in your pocket. This time, stocks are cheap, material costs are low, and people are willing to be paid relatively “cheap”. Pressure to most of business owners are high so most of them are willing to sell their assets at discounted prices. People are thinking to save their cash, while some investment-savvy guys are spending cash. These kind of people believe that the crash won’t be long. It’s a business cycle, up and down. They take long business horizon and believe this is a good time for expanding business.

The most notable example is Warren Buffet. Earlier this year he was rumoured to have USD 43bln in cash and he just spent billions for Goldman Sachs and GE. If I had such money, I’d love to buy Goldman and GE as well. He said to be fear when others are greed and to be greed when others are fear. Couldn’t agree more.

Back to the main issue, it is true that Debt business is being halted in the market, and CIB (Corporate & Investment Banking) jobs are being slashed elsewhere. But I think there are opportunities in Investment Banking area (this area is occupied by Corporate Bankers, Investment Bankers, and Private Bankers), particularly on acquisitions. There are people who are loaded with cash ( and you know who they are) looking for better investments. Instead of putting their money in private banks and stocks/derivatives, they are willing to provide private placements with decent returns or acquire the business.

So, in this time, savvy Private Bankers will survive. They are close to their Clients, who typically are business owners, and they should provide smart investment (acquisition) advice. They know who are loaded with cash.

Not only individuals, but some institutions are thinking the same. Some public deals are HSBC (Bank Ekonomi), SCB (Casenove Asia), and BNP Paribas (Fortis). Pharmaceuticals, which known to be cash rich, are looking for acquisitions too, and there are many stories about acquisitions in this time of crisis. (Another example, a Food & Beverage Group of Companies is craving to purchase a coal producer in Indonesia)

This is indeed buying time.