How to Buy Small Businesses for Free
Sep 30th, 2008 | By Andrew Gordon | Category: Stock Market InvestingThe financial sector continues to bleed out. But only part of the financial sector is on death watch, says Andrew Gordon in Investor’s Daily Edge. Small banks are doing better than ever. Some of them have price-to-book ratios of less than one. That means their going for free!
The government’s bailout is supposed to revive the patient. The government says it has no choice. Without healthy banks, it says, the economy will spiral into a deep depression.
But that’s a big simplification of what is happening. Only part of the financial sector is on a death watch. The other part is healthy and thriving.
While the big banks concentrate on survival, the small banks are doing better than ever.
The problem with big banks is that they made risky mortgage loans that are worth a fraction of their original value. On the other hand, small banks make few mortgage loans and their lending in the local community is fed by deposits. They’ve mostly avoided the problems which are now plaguing big banks.
And right now, investors are moving their money out of their riskier investments and putting it into these banks - giving them plenty of capital to loan out.
Amazingly enough, some of these banks have price-to-book of less than one. That means they’re going for less than their assets and you get the business for free. That is one heck of a deal.
Source: “We’re Drowning in Liquidity!”
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Andrew is currently the Editor-in-Chief of two monthly investment research services INCOME and The Wealth Advantage. He has also become a leading expert in utilizing Exchange Traded Funds to profit from rising and falling market sectors.
