Buy Low

When the price of something drops, sales eventually rise.

Whether that item is big…

Resales of single-family homes increased 7 percent to an annual rate of 4.26 million. Sales of condos and co-ops rose 2.1 percent to a 480,000 rate.

The rebound last month was led by a distressed-property related jump in the West, including California, Nevada and Arizona, the NAR said. Sales of distressed properties accounted for about 45 percent of all sales last month.

Home sales have been falling since 2005 and prices peaked in 2006. Property values are down by about 23 percent, according to the S&P/Case-Shiller index covering 20 metropolitan areas.

…or small:

US fast-food giant McDonald’s said Monday its 2008 net profit soared 80 percent from a year, lifted by growing demand from consumers seeking low-cost meals in a deepening global recession.Net profit for the full year totaled 4.3 billion dollars, compared with 2.3 billion in 2007, the Oak Brook, Illinois-based company said in a statement.

World War II wasn’t won with a bunch of Dunkirks, and an economic recovery won’t be built on 99 cent cheeseburgers or fire-sales of foreclosed homes.

Still, down markets are not just a time for “creative destruction”; they are a good time to hatch new plans.  On NPR’s “Marketplace” a few weeks ago, it was noted that much of the hiring in IT in Silicon Valley is coming from small startups.  Down markets are a great time to be in startups; if nobody is making money, they there’s less pressure to turn an immediate profit, which makes the inevitably-lean gestation period for a startup a little more bearable than when the Joneses you’re keeping up with are lighting their cigars with $100 bills.

One thought on “Buy Low

  1. Left to its own devices, market will correct itself in due time. And this is exactly what we are seeing here. I just wish the government would stay out of the way of recovery.

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