It’s one thing to read about a disaster. It’s quite another to live through one.
Everyone living in Russia in the 1990s experienced total economic collapse firsthand. I was there – the devastation was everywhere.
But a few investors (myself included) also recognized the opportunity. We saw the seeds of one of the world’s greatest stock market rallies… and pounced.
This wasn’t just any rally. A $5,000 investment would have grown into nearly $326,000 in less than 10 years.
Today, I’ll show you what I mean…
For most of the 20th century, Russians lived under repressive communist regimes.
The government prohibited private property and market-driven businesses.
After the Soviet Union dissolved in the early 1990s, Russia tried to adopt a form of free-market capitalism.
It was like a child learning to walk.
Inflation skyrocketed and impoverished the middle class. The government amassed huge debts. The price of commodities (which represented the majority of Russia’s exports) sank to new lows, adding to the country’s economic troubles.
In August 1998, the Russian government defaulted on its debt. Within a month, the currency’s value fell from 6.26 rubles to the dollar to 20.83 rubles to the dollar. Millions of people lost their life savings.
During the crisis, the Russian stock market fell 93% from the previous year’s high. Local daily trading volumes sank to less than $1 million per day.
“Last one out the door, turn off the lights,” read the headline of one broker’s weekly market update in the depths of market despair a few months later.
At the time, I was in Moscow working as a stock analyst for a local investment bank. To get to my desk, I had to walk through what felt like acres of empty cubicles, some with the photos of loved ones on abandoned desks.
During the crisis, if you found an ATM with cash, you quickly took out as much as possible and told your friends about it.
I spent hours writing letters of recommendation for Russian colleagues who were applying to graduate school abroad. They all wanted to escape the sinking ship.
This was the point of maximum pessimism. It was one of the biggest financial disasters of the century. Things couldn’t get any worse.
But when things can’t get any worse for a country, investors flee and prices become extraordinarily cheap. It’s one of the world’s greatest investment secrets. You can find assets that are trading at tremendous discounts – which can lead to life-changing gains…
The Russian stock market hit bottom in October 1998, in the middle of the worst investor sentiment imaginable. But over the next 10 years, Russian stocks rose an incredible 6,357%…
Most investors will never see that type of gain. However, these kinds of opportunities come up more than you might think.
You see, you can almost always find a market – in some asset, in some country, somewhere – that’s poised to deliver life-changing gains.
However, you will rarely hear about these opportunities in the financial media – or from your financial advisor. And if you do, it will probably already be too late to make huge profits. By the time you read the headline on the cover of a glossy finance magazine, or your taxi driver tells you about everyone’s latest hot idea, it’s probably not something you should invest in.
You want to invest long before then… when the headlines are still blaring those words of warning: “Last one out the door, turn off the lights.”
Today, many markets are close to all-time highs. But plenty of assets are in crisis… or – maybe even better – they’re unloved and ignored, and trading at crisis-like levels as a result.
That’s a great starting point for investors. Recognize these opportunities… Look past the fear, and take advantage of them!
Good investing,
Kim Iskyan
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Source: Daily Wealth