investment in Residential Land – Green Energy – High Technology
By Christopher Violaris,
CEO, Eurolink Investment Group Plc.
Christopher Violaris
It is by now obvious that the world economy has entered into a recession the depth and the duration of which only very few are prepared to risk a forecast and much less are those who dare to identify the causes. Seeing the consequences affecting our lives and actually knowing that we will pay for them, others more and others less, this become obvious as the problem unfolds and a serious question comes up! But the answer and its cost, is for us all to pay. The question is, “I am not guilty for anything, above all for the economic crisis, why should I pay the mistakes of others”. The question becomes more acute after the discovery that those who caused the economic crisis, not only will not ‘pay’ but the ‘evil’ is that they have been paid or will be paid generously for their disastrous mistakes! How then can someone protect himself from the crisis and how to protect his fortune and property? To answer this key question, we must see why, how and what caused the economic crisis.
As the crisis unfolds, the causes that provoked it become more visible. Specifically, the last two decades have brought about dramatic changes and economic upheavals such as the collapse of the Soviet Union and communism, the global monocracy of the USA, the dramatic industrial growth of China, India and other countries in the Far East, the two Gulf wars and the return of Russia as energy superpower, this time.
Generally all these events have cultivated a climate of euphoria and a sense of economic security, which in turn led to a rampant consumerism and to fatal dance of borrowing. In short, people were buying whatever they found before them, not concerned if what they had purchased was beneficial and useful and if the price paid represented the actual value of what was bought.
This market situation has given an opportunity to some, unfortunately there are many, to profiteer at the expense of the consumer-investor. In short, the principle of ‘value for money’, which traditionally functioned as a regulatory factor in the smooth growth of the market and the economy, has been overturned violently! For example, 17 million homes in the USA do not have a buyer, although there are 20 million homeless.
The reason is simple! A house the normal value of which was $ 100,000 dollars was purchased with an ‘easy’ loan for $ 300,000 dollars, 3-4 years ago. Now back in the market because of the seizure by the Bank (the borrower failed his repayments) can not be sold in excess of $ 100.000 – 110.000 dollars! In plain English, $200.000 worth of thin air!
So the price of it was false and highly inflated. The same, of course, happened in Great Britain and other countries, obviously, to a lesser extent.
The same phenomenon we have in international stock markets. We have seen the value of the shares to rise sharply, not as a result of the profitability of companies that have floated-issued them, but because of strong demand which was created by disseminating false information or events of purely political content, which in the end may have only negative consequences on global economy (the invasion of Afghanistan, the war in Iraq, etc.). Alongside the inside dealing, a criminal offense, which became the rule in the stock markets than a punishable exception, the huge bonuses and rewards paid to the “loser” executives and the luck of basic state or public supervision, have led to the continued production of «bubbles» while the lucrative profits made through this practice have not been reinvested in the stocks, shares or other risky equities, but are withdrawn in cash of some form, ending in emerging markets like China, India and others in the form of “direct investment” for the purchase or acquisition of profitable companies with long-term perspective. For example, the “General Motors” which certainly at some point will put a padlock on its USA factories, has moved the company’s «eggs» in China where the “Great Wall Motors” was created and is fully controlled by them, directly or indirectly and which are ready to supply the U.S. market with good and cheap cars.
American car industry experts, who watch the industry closely, believe that even if the American Government gives the financial assistance requested in order to keep jobs in the sector, this will only slow down the closure for just a few months because the industry, as it is today, is committed to certain death. But this development does not automatically mean that the USA will stop producing cars. Just some new industries, probably created by the present existing giants, but more flexible and free of the labor contracts, the financial commitments of the past and the stranglehold of the Trade Unions, will take their place and finally be shown as the product of the recovery “miracle”.
The financial sector, stock exchanges and insurance companies seem to have irretrievably lost the confidence of investors and the broader market, and regardless of what they do in the near future or do not, what will follow will not in any case be the same as in the model we are familiar with. In addition, the small and inherently weak stock markets will be forced to close with all the consequences that this implies. Those, which will survive, will necessarily suffer erosion and will come under intense government and public scrutiny.
Many are talking about the need for a new economic model, with strong and wide global acceptance to replace the present, which is obviously corrupted. If we accept that any type of protectionism will only bring conflict and negative results, the new economic model should be based on a universal visible competitiveness, which in turn to be persuasive and effective should be based on the proven value (proven and tested value), something that certainly was not the hallmark of the markets so far.
Some talked about the overthrow of capitalism and the free market economy, as a consequence of the current crisis! This is a big mistake. If today we are facing an intense crisis, this is largely due to the fact that the rules of capitalism were overturned, ignored and greatly bent by the various cartels and monopolies and free market turned into «remotely controlled» vehicle the course of which was determined by the stock exchanges and banks while nobody particularly was interested in how effectively the remote control was performing or who had it in his hands. In fact, it looks that they were all playing with it, trying to drive the “vehicle” their way! A Classic example was the explosion in oil prices last summer, with all the known devastating consequences for consumers and the producers alike!
Wll there ever be a recovery and when?
To answer this key question we must first ascertain the depth of the crisis and then do an assessment of the current state of the real economy.
First of all, we have to make a very logical and simple conclusion. Money is neither steam nor smoke to disappear! Simply money moves around, some lose it and some win it and take it from the losers! So, when a huge amount of money is missing today from circulation and the world market is dry, the missing money should be in the hands of some people. Which people? I believe it is easy to assume! What is certain is that it has neither gone for stocks and shares nor deposited in the banks, otherwise why should they have the problems they are experiencing today?
Lately the UK Government in an effort to revive the economy is considering the printing of massive amounts of inflationary money with all the risks that this entails! Such a measure could flash the hidden money out into circulation, at least a big part of it, which in turn will eliminate any negative consequences of this measure. But things could be driven in the opposite direction and the hidden money to hide even more deeply …
Money can not remain hidden for long, it ceases to play its normal role. If left hidden and idle not only it is not playing the role it is destined to play, that is to multiply, but it can lose a good part of its value and purchasing power. So money has to be out in the economy and circulate as fast as possible!
No doubt the current crisis has already begun to create the perfect conditions (collapse in the price of real estate – corporate bankruptcies – bank closures – collapsing pension funds – state budget deficits – financial markets and petrol prices hitting bottom lows) for an impressive come back (re-bound) and the recirculation of the hidden money, the increased purchasing power of which will pay for all the “lost “dividends. The capital and capitalism, will once again triumph to the expense of the “regular loser”, namely the consumer and the “uneducated” investor. The expected new «global economic discipline», not only will not prevent the hidden money to return, on the contrary they will be met by a “red carpet” treatment! Let us not forget that whatever the rules of the new “global economic discipline”, those will be dictated to suit the capital and the new economic order.
I believe that sooner or later the governments of the countries hardest hit by the economic crisis and paying the consequences of recession, will have one way or the other to go for a «tax amnesty» so as to encourage those who hold the hidden money, to bring it out into circulation. Ultimately, that would be cheaper and more effective in most countries than the state cover of the cost of recession.
At the same time and besides the predictions, this does not happen, regardless of government assistance and the endless funding given generously to different economies, recession will not halt in time and efficiently and eventually a large percentage of state funding will again fall in possession of who keeps the hidden money, thus increasing and prolonging the economic crisis.
But it is not natural money to be hidden for long. Soon it will be the time to be released and go for productive investments in countries and regions which offer better conditions and prospects and the investment climate is ripe. While some countries (especially the highly developed) and some areas of economic activity (stock – bank deposit – traditional industries, etc.) will be excluded from the choice of investing this money.
A very representative example is that of MIG (Marfin Investment Group) with the acquisition of Olympic Airways (sold for ca. 172 million euros) and its intention to invest in major tourism infrastructure projects such as the new Marina at Limassol – Cyprus.
In the meantime it has become known that a subsidiary of an American financial giant which was bailed out by the Obama administration, intends to invest 8 billion dollars in Libya in tourism projects and energy infrastructure with emphasis on green energy.
Investing in times of economic crisis – a must!
Thus a reasonable question arises, which is the substance of this article. Should one invest in times of recession? Where and in what to invest? What gains can be expected and when?
For many institutional and successful investors, specific periods of economic crisis are considered the best time for careful and long-term, high yield investments. The reasons are many, but I will mention and comment on the most important.
a) It is a basic rule that periods of recession are followed by years of strong economic growth and reconstruction. In such periods, the most significant social, industrial and technological changes and upheavals take place, in short, a whole cosmogony. The new period which has already begun to define itself will be characterized by giant investment in green energy, organic products, in digital technology and what it has to do with protecting the environment and our planet. The arid deserts of the Sahara, Colorado, and those of Australia, etc., will replace the importance of the oil fields and nuclear power stations and they will be geared to produce renewable green, environmentally-friendly energy, while the areas around them will again thrive with life after millions of years of silence. It will not be long before electricity produced from the solar energy in Sahara will light the households and run the factories of Europe and from Colorado those of the United States of America. The digital technology has already entered and improved enormously our lives. Scientists, researching the potentials of this sector, claim that what we have seen and witnessed up to now, is just a extremely small part of what is to follow! All these will be useful and promising provided we have a planet to live on! The world is becoming rapidly conscious of the dangers our behavior is causing to our Earth and nobody wants the planet to die, technology, industries, products and means that are purposed to protect and save the environment, will be the money makers of the future!
Investing in these sectors may sound a bit romantic, but those are the money-makers of the future and we strongly advise you to consider it.
b) The current economic crisis will finally leave lasting scars and indelible impact on communities and population composition of a large number of developed countries mainly in Europe, not to exclude some countries of the Americas. Britain, Denmark, the Netherlands and Belgium will take over 20-25 years to recover financially from repercussions of the recession, while some central European countries like Poland, Hungary, Slovakia, the Czech Republic and Romania will see much more difficult days before they manage to adapt and function properly in the new economic climate and facilitate the new economic order.
In the next coming years we will see a mass exodus and flight of millions of people from the developed countries of northern, western and central Europe to the south and especially to Bulgaria, Croatia, Serbia, Greece, Cyprus, southern Italy, even to the countries of North Africa. A recent survey conducted on behalf of the insurance giant AXA in early autumn 2008 (before the recession showed its teeth), predicts that 500.000 Britons, mainly from the middle and middle-upper class, will leave the British shores for good and relocate south, with Bulgaria and the Black Sea coastal town of Varna coming first in their preference.
Simply and clearly, the economies of the Northern, Western and Central European countries are unable to maintain and feed the aging population, and will not be able to pay such pensions, enabling people to live a tolerable life. Furthermore, additionally to the failure to keep up paying reasonable pensions, these countries will encounter a sharp increase in the cost of living, which will make things more difficult, I would say unbearable, for millions of citizens. These people will have no other choice than to move south in countries with less population (Bulgaria in 2015 is expected to have 5 million indigenous people from 8.5 million today) and a significantly lower cost of living (cost of living in Bulgaria today is ¼ of that in Britain, Germany, Denmark, etc.).
The exodus has already begun and will continue with an increasing rate, specifically to Bulgaria. A Welsh doctor wrote to me a few days ago the following …”the moment I can release some equity on my properties and get to some decent money…I will be on the next flight to Varna “. Enquiries to our offices from “to be retirees” seeking information to plan their forthcoming retirement, has increased during the last 4 months by 600% and is still on the rise!
It is natural that this phenomenon will not only boost the ailing construction industry, but will create a new and growing demand for residential units, mostly in or around major urban centers. Statistically, it appears that the cities of Varna and Veliko Turnovo top the specific preference of the British settlers.
All those facts lead to a very reasonable and valid conclusion, that investment and investing on rural land that has been annexed officially to urban areas, especially by big and thickly populated cities, in a few words, land that can be used for residential developments, commercial and industrial centers, preferably empty, with potential for urban infrastructure, offers exceptional prospects for future impressive returns and phenomenal profitability on investment. Investors should be extra careful when reviewing information or investment proposals made by agents or even principals and developers. You should always ask for a proof of the statements made and of the information given to you. In particular when it comes to investing in Bulgaria, you should know that over 90% of the land sold recently by “traveling and wandering” agents has no investment value whatsoever. These days hundreds of speculators mainly from Cyprus, who have seen Bulgaria as a huge gambling table and bought land or properties, are finding out that they simply lost their money and their investment of no value. Investors even of the most prime and a lot promising land, should be prepared to wait for the right conditions in the property market to come, this may take a year or five or even ten. Naturally, the longer they wait the better returns they will have. I can give an example from a very true story. A plot of land on the shores of Varna Sea Lake consisting of 16.000 m2, was bought by a Cypriot Investor for € 36.000 in the Spring of 2004, in the Summer of 2006 the same land was sold to an English investor for € 320.000, it was sold again to an Italian Investor one year later for €640.000 and at this moment is about to be sold to a Qatari Company for €2.400.000! The reason for this phenomenal performance is that the new Varna Master Plan provides for the construction of one of the three private marinas which will be authorized to be build in the wider boundaries of the city. Any of you wishing to invest in the city or the wider region of Varna, has the possibility to check and double check the prospects and potentials of your investment or check out any land offered to you for investment. The approved Master Town Expansion Plan will give you all the answers you need!
In our future article on the same subject I will refer to fields for a successful investment with minimal risk and high returns.