Investment advice? ring Rhett

There are opportunities for the young and the bold in the US sub-prime mortgage crisis.

The crisis, certainly, still has a long way to run, but the bargain hunters, who will eventually end it, are already emerging from the shadows.

Take the Millers, from Dublin, for example. They have just made a $US700,000 offer for a one bedroom apartment, in one of the less fashionable parts of New York.

Christine Haughney, writing in the New York Times, reports that the Millers are far from alone. She says the number of foreign buyers, picking up bargains in New York has doubled over the past two years.

Paying $US5 billion, for a 10 per cent stake in an investment bank which has just reported multi-billion dollar losses, might not seem like much of a bargain, to you or I. But it did to the China Investment Corporation.

The CIC’s investment, in Morgan Stanley, one of America’s biggest investment banks, gives the Chinese government a window into the heart of global investment finance. That could well have implications for BHP Billiton’s hopes of taking over Rio Tinto, a merger the Chinese strongly oppose.

The troubled US banker is putting the best face on it. Its chairman and chief executive, John Mack, said the Chinese move would:”help to further bolster (his) firm’s strong capital position and enhance growth opportunities globally.”

Morgan Stanley’s position, though, was not enhanced by $US9.4 billion worth of write downs, that it suffered, as a direct result of the sub-prime crisis.

What, though, are the possible implications for  Australian investors?

What might you tell a 30 something IT specialist, for example, assuming that he desperately wants to buy a home, for his young family, in Melbourne’s presently inflated property market?

Well, you might say:”Have a look at Cincinnati, son.

“You can get a nice, double story, house there for about $US150,000.

“That’s just a fraction of what you would expect to pay in Melbourne.

“And the US economy will, one day, be through its present troubles.

“America is still a land of opportunity, for the young and well qualified.”

Remember what Rhett Butler once said, in that 19th Century American classic, Gone with the Wind.
“There are fortunes to be made, as the world is crashing down around you, just as there are in the best of times.” Rhett’s advice, though, is definitely not for the faint hearted.