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Blood in the Streets Investing

Written By Brian Hicks

Posted December 28, 2007

Instead of talking up small cap investing, I wanted to bring your attention to the “blood in the streets” crisis investing technique I’ve used for years.

Former Prime Minister Benazir Bhutto was assassinated Thursday in an attack in Rawalpindi. And, as a result of the cowardly act, Pakistan’s financial markets are being plunged into economic and political uncertainty, as fears of waning foreign investor sentiment rage.

But where there’s crisis, there’s wealth.

As with the case of the sad Bhutto assassination, you wait for news to be fully disseminated, and for the news to begin tapering off. At that point, you buy the damaged stocks, and wait for a recovery. We’re already hearing chatter that New Delhi analysts believe the assassination will only have a temporary effect on regional markets.

So, you’d buy now.

Sure, it may sound cold, heartless, and a cheap way to make a buck, but we’re investors. We’re looking for the political turmoil… financial hardships… assassinations… bloody uprisings… the instances that seed wealth.

Unfortunately, Pakistan is another country too familiar with violence. But, in many cases, as with Pakistan, one country’s extreme pain is a trader’s gain.

In 2001, for example, severe political and economic crises stripped 50% off the Turkish lira, as hundreds lost their jobs. But had you bought the “crisis” opportunity, buying shares of strong, but beaten down companies you’d have made a small fortune. Turkcell, for example, plunged from $24 to $1.50 only to recover to $16.52 following the crisis.

Even George Soros has used crisis investing to his advantage. The man made a billion dollars in a day playing England’s Black Wednesday currency crisis.

Truth told… When crises, such as Bhutto’s assassination, occur, be prepared to buy. Buying “blood in the streets” may sound cold, but it’s proven to be profitable.

On the Bhutto news, we’d recommend buying the following. These may be India stocks, but they, too, we’re negatively impacted, but have upside potential.

  • Morgan Stanley India Investment Fund (IIF)
  • The India Fund (IFN)

Ian L. Cooper

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