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Eureka: Taking advantage of political disorder Eureka: Taking advantage of political disorder
by Akli Hadid
2017-02-24 10:53:29
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Politicians leave. Land and businesses stay. When politicians don’t seem to know what they’re doing, when businessmen don’t seem to know what they’re doing, the cost of the business goes down. That’s when you buy the land, buy the business.

politic01_400In times of optimism, consumer ratings tend to go up and business is more robust. That’s when it’s a better idea if you have a business to sell it, as you might get very good offers. In times of pessimism, when consumer ratings are sluggish, it’s a better idea to buy other businesses, as they will sometimes be offering ridiculously low prices due to slow business. You can keep the land, and wait for business optimism to be back so you can sell the land slash business at a much higher rate.

Let me give you an example. I’ve studied the language learning business, that is businesses that have classrooms and whose mission is to teach foreign languages such as English to non-native speakers, French, Spanish etc. Back in the Clinton years in the US English had a robust reputation worldwide, Hollywood was selling dreams and globalization started meaning Americanization. That’s when language business started springing, as American consumer rates were high. The good idea for a smart businessman would have been to buy language learning businesses when those were struggling and to sell them at a higher when optimism and demand sets in. You always had dreamers with mom and pop savings or business loans who want to start a language teaching business.

During the Bush years, English had a bit more of a bad reputation after the Iraq war, and that was a good time to buy language learning businesses, as such businesses were complaining about a dwindling demand. Then, globalization picked up again and so did language learning. So you sell again. Then the 2008 crisis hit. Buy language learning businesses as demand dwindles. Then the economy recovered. Sell. Then terrorist attacks meant fewer people wanted to learn languages. Buy language schools. At some point, you’ll hear the globalization chants again and you will find more people with mom and pop savings wanting to open language schools to teach languages to people. Sell again.

Let me sketch this for you.

1980s-early 1990s: Language learning is a low supply and low demand market. Don’t buy and don’t sell language schools.

Mid 1990s: Clinton era globalization chants. People start language learning businesses. High supply and high demand. Don’t buy, don’t sell.

2004: Bush invades Iraq. Americans and the English language have a bit of a bad reputation. Fewer people want to learn languages. Language learning business demand dwindles. Buy struggling language schools.

2005-2007: Europeans spend less time learning English and other languages, but the demand shifts to Asia. Very high demand in Asia. Sell the language schools you bought.

2007-2008: Recession. Language learning clientele dwindles. Buy language schools that are about to close down.

2009-2012: China and Korea enjoy high growth rates but uncertain job prospects. They want to learn languages. High demand, high supply. Sell the language schools you bought.

2012-present: Recession in China and Korea. Demand for learning languages slows down. Buy language learning schools.

Some time in the future: language learning will pick up. Sell the language schools you bought.

Of course, when you buy language schools, the idea is you don’t actually teach languages in them. You know demand is low, so you keep the schools clean and wait for demand to rise before you get people eager to spend their life savings on starting language schools.

Let’s use a three other examples to make this more lively: supermarkets, coffee shops and restaurants. Note that these are sweeping generalizations but you get the idea.  

Supermarkets:

1970s: Inflation means supermarkets have trouble breaking even as stingy housewives only buy what is necessary. Buy supermarkets.

1980s to mid-1990s: Inflation in Europe and North America under control in most areas. Sell in the booming areas.

Mid-1990s to Mid-2000s: Inflation up in many areas. Buy struggling supermarkets.

Mid-2000s to 2008 recession: Inflation under control in many areas. Selling supermarkets in booming areas.

2008 to 2012: High inflation. Buy.

2012 to 2015: Inflation controlled in many parts. Sell.

2015 to present: High inflation. Buy.

Coffee shops:

1980s: People prefer pubs and drink coffee in pubs. Buy struggling coffee shops.

1990s: Underage and younger people prefer hanging out in coffee shops. Coffee shop boom. Sell the coffee shops you bought.

2000s: Franchises become the norm. Don’t buy and don’t sell. Wait for the confusion.

2010s: Fierce competition means coffee shops start collapsing. Buy struggling coffee shops.

2017: Wait until the next coffee shop boom before you sell.

Again, don’t open coffee shops, simply keep the area clean.

Restaurants:

1970s: Restaurants culture starts booming. Don’t buy don’t sell.

1980s: Restaurants have trouble competing with pubs in many areas. Buy.

1990s: Coffee shop culture sets in. People go out for a cup of coffee then go to restaurants. Sell.

2000s: Too many restaurants. Restaurants have trouble competing. Survival of the fittest. Buy struggling restaurants.

2010s: Restaurant scene booms again. Sell.

This model can apply to pretty much every niche. Again I made sweeping generalizations above. As you know no two cities have similar trends. Restaurants can boom in one city and bust in another. In some countries, the government occasionally floods young entrepreneurs with loans and such entrepreneurs look for venues to start their business. That’s when you have to sell. Keep in mind that several factors can lead one business or the other to start booming. That’s why the idea is to hold land and to be flexible about its potential use. When the economy booms, sell. When the economy recedes, buy from those who are struggling and will sell their business for a fraction of what it cost them. The idea is to know the market, to buy for the land and sell for the business. So in pessimistic times like these, it’s a better idea to buy struggling businesses, and to sell them when optimism sets back in, say when better politicians are elected.  

Good luck being an investor!


      
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