Financial Crisis Update

Overnight the US government has delivered a $20 Billion US dollar rescue package to keep Citigroup solvent. They have also guaranteed another $306 Billion in Collateralised Debt Obligations held on their books to keep this once mighty titan of the finance world solvent. Don't think that the US Government has paid $326 Billion to Citigroup, far from it, but without government support it may well have become insolvent.

This action coupled with the Obama rescue package expected in January 2009 has given much needed confidence to the global share market. It is confidence that the markets lack, without that no-one will buy shares or property, and in fact they will sell at any price to "cash up" for the possible bad times that may be upon us. However no-one really knows, and that is the real problem. The sooner that a market is created for the toxic CDO's the sooner we will have some idea of what the extent of the damage to the system really is.

This period is bringing serious change to the markets, and with change comes opportunity. For those with courage and a well thought out plan will prosper where others without either will run aground. That bargains abound on the share market is a given, although there will be a lot more pain for many companies that won't be able to weather the storm.

Many will see a safer option in property, especially commercial property, over the next 12 to 24 months as investors look to sell unwanted property. Take care with tenants though, as some tenants will collapse financially, and others will give up expensive leased premises that they can no longer afford. Imagine if you owned a childcare centre leased to ABC Learning. Only one year ago you would have considered that a safe tenant, but now you would be worried. Look for tenants who are recession proof. For example a food wholesaler selling to the lower end of the market has a better chance of hanging on than a wholesaler who sells Champagne and Caviar in a recession. Your tenants are your customers, and you always need to know your customers. Make sure that you hold a bond for up to 3 months to help if a tenant leaves you in the lurch. At least that gives you some time to find a new tenant without suffering financially.

Any questions, email me peter@rescueme.com.au or call at our website www.rescueme.com.au to see more helpful information