10 Steps to Make Money from Thin Air!

Right now it is time to act while everyone’s selling off their positions for pennies pushed by the global panic. The volatility in stock market is as high as I have only seen in warrants before. And there’s our chance…

Liquidity is King in the times of crisis. If you have money to invest for the next few years, you will profit from the current situation. When the recession cycle has finished in 3-4 years, the stock will be back up again to their 2006-2007 levels. And in some cases we are talking about gains of +150%

What if you don’t have any money to invest? Here’s a recipe I have worked out and might put to work before the year ends:

  1. Select a stock from a solid company that has been very affected by the global selloff. Let’s say, Deutsche Bank. The price was over 120 EUR a year ago, 50 EUR a month ago and only 19 EUR this morning! The results they have presented were very solid (although affected by the crisis) and they are in full expansion right now.
  2. Now let’s make a very conservative statement: Considering their expansion and current trend in their retail banking division, the stock will be back up to, at least, 50 EUR level in max. 3 years - a 163% gain. (Note: we are not speculating! You should know what you invest in, as I wrote in a previous post about speculating vs investing)
  3. If you have a stable source of income, take a loan: Now, we do not want to pay a penny, but make money from thin air. So we have to calculate how much we need in order to (a) buy the stocks and (b) finance all monthly payments untill we sell the stocks. Here,s how (in EUR, but USD works the same):
  4. 10,000 EUR for 8 years at 7,5% per annum generates a monthly payment of 138,84 EUR. Now, let’s say we expect the stocks to rise back in 4 years. During these 4 years (48 months) we would have paid 138,84 EUR *48 = 6664,32 EUR.
  5. We put these 6664,32 EUR into a separate account to pay the loan for the next 4 years.
  6. We use the other 3335,68 EUR to buy Deutsche Bank stocks at 20 EUR - roughly 167 stocks.
  7. Let’s say, after 4 years the stocks have risen to 45 EUR and you sell them for 45 EUR *167 = 7515 EUR.
  8. The outstanding loan capital is 5742 EUR, so we pay it off.
  9. The difference, 7515 EUR - 5742 EUR = 1773 EUR is yours.
  10. Congratulations! You have just made money without paying a dime.

Here’s a simplified graphical chart for better understanding:

Loan Investing

Loan Investing

November 20, 2008 | Filed Under Stocks, Tips & Tricks 

Comments

One Response to “10 Steps to Make Money from Thin Air!”

  1. roman on November 20th, 2008 2:26 am

    Note, this strategy only works in the current high-volatility market that presents this kind of opportunities!

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