Why would 2009 be your most profitable year?

Did I say it right?

2009 to be your most profitable year?

When you listen to news, you will hear that "the second wave of financial tsunami is coming", "xxx has posted record losses", and "yyy is filing for bankruptcy".

How dare I even dream about profits in 2009?

However, if you choose to read further, it may make common sense to you.

Let us talk a little bit about economics.

First, in normal time most businesses make ZERO profit. To be more exact, it is zero economic profit - unless you are a monopoly.

Zero economic profit means you are only earning a profit that is equivalent to the market-rate compensation for your work plus the normal return for your capital. Nothing extraordinary.

This is because if there is any industry that allows you to make extraordinary profit, it will attract new entrants and existing players to expand capacity, as a result increasing supply and competition, driving down prices and ultimately making economic profit to zero again.

In reality, there is a time lag between investment and increase in output, giving windows of opportunity for businesses to post good profit and then followed by overcapacity and industry-wide losses and consolidation.

In 2008, the economy started to contract. Demand fell and there was excessive supply. The result, everyone had a tough time.

Moving into 2009, banks and investors are reluctant to provide capital. Businesses are either shutting down or cutting their production capacity. Employees are laid off and bridges burned.

This is, as Wealth Dynamics will describe it, the Winter phase of our economy.

What comes after Winter?

You got it. it is inevitably Spring, for as long as human beings exist, Spring has never failed to show up after Winter.

You may say that is just climate and our economy is different. Or isn't it?

There are underlying forces behind the economy, most noticeably the money supply and liquidity force caused by a cyclical loose/tightening monetary policy as well as then the fiscal policy that follows a 4-year/8-year political cycles. These two forces are like the sun and the moon, causing a repeat daily and monthly cycle of tides. The tides in our economy and investment fields are consumer/investor's sentiments - fear and greed. What makes the tidal waves bigger is the media, always creating over-optimism and over-pessimism and opportunities for entrepreneurs and investors who know this pattern to profit handsomely.

So what do we know for sure?

Babies will be born. Kids will go to school. Teenagers will seek mates. Adults will need to find housing and invest their excess savings for retirement. Retirees will need medical and health care. The dead will need to be buried.

This is as common sense as the sun will rise tomorrow from the east.

And the longer consumers delay spending, the bigger the pend-up demand is. When spring comes, they crowd the shopping mall like the school of sardine fish. The question is, will you be the dolphin there? Where? When? How? ...

What do you need to do to survive this harsh winter? What do you need to do to prepare for the spring?

1. Tune out of news. What you see is always what you get. When you see banks fall and factories shut, soon your shop will be shut.

2. Do not work hard. You heard it right.
Farmers do not go out to sow seeds in winter. Instead, they visit families, eat and sleep (nice tradition for Chinese New Year).
So should you. Take a vacation. Go away for a few months.
Reserve your energy and resources during the winter.

3. Minimize your expenses.
Any expense that does not produce profit must be cut.
Minimize your personal expense as well.
When your expense cut, you can last a lot longer for this seemingly long winter.
So take a cheap vacation.

4. Cut your expenses but invest more.
When you spend, the money and your time are gone forever.
When you invest, you expect to get more money and time back later.
Therefore, while you should seek to cut down your expenses, invest more.
The best return and lowest risk always come from investing in your own mindset and wealth network.
Meet new people and expand your wealth network.

P.S. I have been advocating people to invest in their mindset and wealth network and I have created Karisma Learning Institute and XL Foundation (Greater China) to provide people with a good platform to invest in their mindset and wealth network.

If you are an XL member, go meet XL members globally. In case you want a low-cost way of doing so, use skype, facebook and Ning.

Every winter is followed by spring. If you invest in yourself during this winter, you will be ready to make your 2009 the most profitable year.

Kong Hei Fat Choi! (Have a prosperous Year of Ox)

Until next time, let's make magic.

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