Kaushal Majmudar of www.guruforum.com with Warren Buffett

The current recession, where the employment rate just hit 7.2%, is the perfect time to spend money. Rather than following the patriotic mantra of buy American, those with disposable income should buy everything at fire sale prices.

Even stocks are a good bargain provided the companies are run by competent managers. Blue chip stocks in particular are at attractive prices during the general market chaos. A safe move would be to buy what Warren Buffett is buying such as GE and Goldman Sachs (GS). While individuals may never get Buffett’s sweetened deals, it is comforting to know that a legendary value investor is holding the same stocks. A shorter route to Buffett is to purchase Berkshire Hathaway. Recently hit by a devastating earnings report, their B shares may be affordable for college students. The risk in this is that if Buffett dies, the stock will sink like Iceland’s currency. Now is the most inexpensive time to visit Iceland ever since the global financial crisis sunk the krona’s value. Another solid strategy is to invest in exchange traded funds tracking the Dow Jones Industrial Average or other popular indexes.

For those with high tolerance for risk, high yield bond funds and bank loan funds are a good value during a credit crunch. With companies unable to easily borrow money from banks, they will be forced to pay higher yields on fixed income securities to attract investors. The recession also includes higher default rates, meaning a larger chance of companies unable to pay their debts. Young investors is the preferable demographic for such risky investments.

Retailers are intense competition to slash prices, benefiting the bargain hunting consumer. Stores with December inventory are selling items at deep discounts to clear shelf space for spring stock. Buying clothes for next winter’s wardrobe at this moment will result in drastic savings. Two percent cash back credit cards, the Fidelity Retirement Rewards American Express card, the Schwab Bank Invest First Visa card, and other credit cards with reward programs are an ideal purchasing method if, and only if, one pays off the balance every month. 

Asian cultures typically emphasize savings so those with large amounts socked in bank accounts should consider alternative uses for the money in the current economic climate. A downturn means greater bargains for individuals with money to spend.  Buffett puts it simply, “Be fearful when others are greedy, and be greedy when others are fearful.”