By Eric Li
With prices at an all-time low for previously expensive stocks, such as Disney and Boeing, now is the perfect time to invest in the stock market. Economists have always aimed to follow one rule when it comes to the stock market: buy low, sell high. This rule is based on the premise that stocks can only trade at such a high price before dropping again which provides a good reason to buy. The same logic can be applied to the opposite; stock prices can only trade at so low before bouncing back which is a good reason to buy when prices are low.
Many influential Americans applied this “golden rule” during the 2008 financial crisis. After the housing bubble burst in 2008, economies around the world crashed, especially those in the United States.
One man who took advantage of the situation was Warren Buffet, the CEO and chairman of Berkshire Hathaway. One smart purchase he had was when he purchased $5 billion worth of perpetual preferred shares, a stock that pays a fixed dividend to the investor for as long as the company is in business, in Goldman Sachs with 10% interest during the crisis. His share of Goldman Sachs is estimated to be worth 5% of Berkshire Hathaway’s portfolio. “Be fearful when others are greedy, and be greedy when others are fearful,” said the billionaire when he was later asked about it.
Another billionaire who benefited from the 2008 financial crisis was John Paulson, the founder of a New York investment management firm Paulson & Co. Through his purchases of Bank of America, Goldman Sachs, and Citigroup stocks, experts believe that Mr. Paulson made $15 billion as a result of the crisis.
Now before COVID-19’s impact on the economy, stock markets around the world were projecting record-breaking growth. With the S&P 500 and NASDAQ both reporting record highs before the end of 2019. This caused individual stocks to be expensive. However, with the current pandemic, the global stock market has seen a dramatic drop in the price of stocks. Stocks that were initially doing well, such as Airbnb, did shutter, but with America opening up again, we will soon see its value begin to rise. Knowing this, buying cheap and undervalued stocks now seem to be a valuable opportunity before the prices rise to normalcy again.
STOCKS THAT WE ARE WATCHING
AMAZON
With Americans at home, demand for Amazon’s services has increased exponentially. Furthermore, because there will be friction even after the end of the pandemic, Amazon will continue to be profitable. This, as a result, has led us to believe that Amazon has the potential of substantial returns.
NETFLIX
With Netflix creating more content than ever, it is well-positioned to cater to the needs of the newly created demand for movies and shows. Especially with production companies starting to stream shows directly to streaming platforms, Netflix is bound to succeed well into the future. However, with that being said, Netflix’s stocks are also extremely fragile because of the competition in the streaming market, such as Hulu and Disney+, which are slowly eating away at Netflix’s dominance in the market.
Crude Oil
We are watching Crude Oil because it will be a long, and interesting, waiting game that will determine the direction that the fossil fuel industry will head in after this pandemic; before the pandemic, Oil Producing Economic Countries (OPEC) and Russia were playing a dangerous game of mass production with no end in sight. Only once planes, ships, and cars start to transport goods and services around the world will we know the future of fossil fuels.
The Lost Canadian 