What do you invest in when everything is over valued?

80 Replies

What do you invest in when all the cyclical investments seem to peak at once?

In my humble opinion:

Real estate is due for a correction.

The stock market is due for a big correction. 

Every currency is on shaky ground.

Precious metals no longer seem to be the contrarian investment.

Crypotocurrencies are just too new to know which ones will have a future.

Inflation or hyperinflation is a real possibility so sitting in cash is suicide.

If everything goes really really bad then the only universal form of "monetary" exchange will be canned food and shotgun shells. I'm not enough of a doomsday prepper to go that far.

So what does that leave?

Does one diversify so that when 9 out 10 investments tank one has enough left over to buy Scotch and wallow in drunken misery? (Ok, perhaps that's a little too pessimistic).

It's just when I look at my portfolio I think "man, I should sell that (real estate, stocks, forex, metals) before it drops like a rock" and then do what with the money?

It has no the most overvalued; it has the more overvalued.

Crypto was in a fever crazy stage last year before it burst a few months ago.

Stock market was in a crazy stage last year until January 2018, have not burst yet; but I think big correction is coming pretty soon.

Housing market just begin the crazy stage.
It is only the beginning of the crazy stage.
Still have a long way, more and more crazier new record price coming.
Get off the housing market train now is too early. Can’t wait to see the new record price, another new record price, another new new record price.
I would keep investment in housing market until it is in fever crazy stage; may be a few years from today.
Still have a lot of money to be made between now and the much more overvalued fever crazy stage in housing market.

"Precious metals no longer seem to be the contrarian investment."

My current plan is sell off all my rental properties in the next year or so, and buy properties only for  flips with 2/3 of the funds from my portfolio and use the remaining 1/3 of funds from the portfolio to purchase gold. Gold historically peaked at different times than real estate, and it seems to always increase in value when real estate declines. 

Pokemon cards, kendamas and beyblades.  j/k  I have teens and those were so 4 years ago 

Of all your well thought-out choices, RE is still the one for me of you can get it.  Supply/demand this time is driving and sustaining it. But I did sell 3 of my least faves over the past 11 months so am no longer all in.

Since I'd rather take a nap than scour 200 RE deals, I'm also getting into small business lending, higher end personal property flipping and old hobbies like cards and coins, mostly for fun. Buying stocks on dips a bit, consulting for free on BP (and the advice is worth what you pay for it), considering a crypto dab below $7k, maybe notes, maybe another nap or a franchise of lemonade stands now that it's getting hotter.

Seriously, stick with good real estate. It has made more people wealthy than any other asset class and the sky is not falling yet. Too many buyers, not enough inventory.

And Robert R above, Uncle Sam and the entire country thanks you in advance for the tax windfall he/we will be receiving when you sell so much in the same calendar year. Appreciate it!

Steve, have leases in place on most of the properties, so doubt it would work out well to sell all in one calender year even if I wanted to. Plan to only sell one property this calander year, that was on a month to month lease. My tax rate for long term capital gains would not change though if I took the hit all in one year. Biggest challenge for me is giving up good tenants, I have several tenants for years that I really don't like telling them they need to move.  

Gold bullion coin in own storage will be good enough during any major inflationary scare until they start mining the asteroids for it.

But for your societal collapse escape hatch, you should keep a hermetically sealed stock of maybe 50 Kalashnikovs and 100,000 rounds of 7.62 x 39mm ammunition for them right in next to the gold. If it gets really bad the warlording will tide you over until you get the human trafficking up and running. Your basic reserve cost at today's prices for this start-up is $40,000.


"No arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death: and the life of man, solitary, poor, nasty, brutish and short."

@Gordon Forbes , I'd say that you look at the assets you currently hold and decide the percentage you would like to have in each.  Lets say for instance that you want to have 50% real estate exposure, 25% stock, 15% bonds and 10% in precious metals for example.  You simply look at your current allocation and sell/buy what you need to in order to get those percentages to where you want them to be.  That way, you don't have to worry too much about the market but can keep the focus on allocation instead.  

What I do with my investments is try to have 40% US Index Funds, 30% International Index Funds, 30% Bonds.  For my house flips and rentals, I use 1/3rd of the profits to go back to those aforementioned stocks/bonds, 1/3rd for future real estate ventures and 1/3rd as discretionary/emergency cash...it works for me and takes the guess work out of what I do.  

It's possible to short sell those markets. Or....

If you just wanted to mitigate downside risk you could purchase put options against your positions.

I'm not recommending either of these as an investment strategy. Just bringing up possibilities.

OP I understand completely

I’m fortunate that I got into crypto and out before the big crash and made some nice money

I’ve recently flipped a few places with better profits than I expected because the market went crazy

So here I sit with cash and just don’t see the opportunities I saw in the past two years.

So I too am wondering what investments to make. Tough to be happy with 20% returns after such big gains in the past couple years

@Gordon Forbes

Start by investing in yourself. There are a lot of positive things you can do to put yourself on a good track for the next down cycle.

Beyond that. Think of the kinds of businesses are assets that fare best in a downturn... particularly things no one is really that interested in at the moment.

Originally posted by @Gordon Forbes :

What do you invest in when all the cyclical investments seem to peak at once?

In my humble opinion:

Real estate is due for a correction.

The stock market is due for a big correction. 

Every currency is on shaky ground.

Precious metals no longer seem to be the contrarian investment.

Crypotocurrencies are just too new to know which ones will have a future.

Inflation or hyperinflation is a real possibility so sitting in cash is suicide.

If everything goes really really bad then the only universal form of "monetary" exchange will be canned food and shotgun shells. I'm not enough of a doomsday prepper to go that far.

So what does that leave?

Does one diversify so that when 9 out 10 investments tank one has enough left over to buy Scotch and wallow in drunken misery? (Ok, perhaps that's a little too pessimistic).

It's just when I look at my portfolio I think "man, I should sell that (real estate, stocks, forex, metals) before it drops like a rock" and then do what with the money?

Easy answer: depends how old you are.

Private lending is the safest place to be. Let the borrower take the market risk and make sure you have a low loan to value. You want to come out ahead whether the borrower defaults or not and even if the market collapses. If you are an accredited investor, there are lots of lending funds that remove the underwriting responsibility... buy you'll still need to underwrite the fund as part of your vetting process.

Originally posted by @Trevor Ewen :

@Gordon Forbes

Start by investing in yourself. There are a lot of positive things you can do to put yourself on a good track for the next down cycle.

Beyond that. Think of the kinds of businesses are assets that fare best in a downturn... particularly things no one is really that interested in at the moment.

 What do you mean when you say invest in yourself?

Originally posted by @Aaron Hunt :
Originally posted by @Gordon Forbes:

What do you invest in when all the cyclical investments seem to peak at once?

In my humble opinion:

Real estate is due for a correction.

The stock market is due for a big correction. 

Every currency is on shaky ground.

Precious metals no longer seem to be the contrarian investment.

Crypotocurrencies are just too new to know which ones will have a future.

Inflation or hyperinflation is a real possibility so sitting in cash is suicide.

If everything goes really really bad then the only universal form of "monetary" exchange will be canned food and shotgun shells. I'm not enough of a doomsday prepper to go that far.

So what does that leave?

Does one diversify so that when 9 out 10 investments tank one has enough left over to buy Scotch and wallow in drunken misery? (Ok, perhaps that's a little too pessimistic).

It's just when I look at my portfolio I think "man, I should sell that (real estate, stocks, forex, metals) before it drops like a rock" and then do what with the money?

Easy answer: depends how old you are.

 Ok for a 55 year old person who has been retired for 8 years 

What investments?

Originally posted by @Thomas Rutkowski :

Private lending is the safest place to be. Let the borrower take the market risk and make sure you have a low loan to value. You want to come out ahead whether the borrower defaults or not and even if the market collapses. If you are an accredited investor, there are lots of lending funds that remove the underwriting responsibility... buy you'll still need to underwrite the fund as part of your vetting process.

What sort of returns?

It’s tough to accept low, less than 20% return after such a great run the last few years 

@Michael Plante - if you can't accept less than 20% returns, you'll probably have to keep your money in the market and at risk. 

If you wan't to keep your money, you need to hedge your risk. I'm sure there are a lot of investors that, looking back, wish they would have put their money on the sidelines in 2006. Most probably would have been pretty happy to simply not lose money when the market crashed. 

You need to understand risk-adjusted returns. 

Agree about being the bank in this part of the cycle.. Very good PEFORMING first trust deeds are a solid bet these days.

return COC will be greater than rental returns in most cases and risk and hassle factor a fraction to non existant compared to landlording.

a few other things.

If your accredited there are still some decent syndication investments out there ( choose syndicator wisely) But BP is well represented in that space.

@Mike Hartzog has a NPN fund and is in Seattle with history and track record.. Not sure if he can accept non accreds but he can comment or you can call him

@Dave Van Horn   Has some note products as well.. 

In Oregon you can check with some of the larger HML in the state they usually have a opening for private investors you can talk to Iron Bridge in PDX Girard solid company and guy..

And there are others if you want to ping me.. Roseburg finally picking up.. one of my collogues has done a lot of land development there he has the project up above the HOME depot the big view lots on the East side of town.. its been a slow go though.

@Michael Plante I think it depends on how active someone wants to be. A while back I posted a question asking about what realistic returns for a passive investor would be and the consensus was 8-12% a year for a purely passive investment with a few saying that they had been able to get 15% before. But actively it is possible to get much higher returns. Our niche is lease optioning single family homes under 200k (under the medium price point) where our all in is less than 140k and we are able to lease them out for $1250+ per month.  This strategy creates a really high rate of return for us, often 100% or higher per year but that is because it is an active investment rather than a passive investment strategy.

If you believe everything is overvalued and you do not believe hyperinflation is coming, then cash is what I'm holding on the sidelines (whenever I sell an investment that has run its course).

Cash is liquid (meaning it can be converted quickly into other assets when you are ready to pounce and you can earn 1.5% interest in an FDIC-insured high-yield savings account while you wait).

If real estate is due for a correction in your area, one solid move is sell some property to pay off your debts. That's guaranteed to save you at the very least the interest you no longer owe. Also, it boosts your credit rating so you a have a green light to expand when the market bottoms again.

Thank you all for your thoughts. I used to be so optimistic. Now?, Grumpy old man. 

Regarding Mary and waiting to sell at the peak: I am reminded of the words of Baron Rothschild when asked the secret of his success. He said "...I always sell too soon."  I agree with you, Mary, that now is too soon, which is why I want to sell before it's too late.

Regarding Robert and gold rising when real estate falls: Well, sort of. While the 20% to 30% gains for a few years during a crisis, such as in 2000 and 2008, seem like a hedge I'm disillusioned with gold. When one accounts for inflation (hey kids, google that word) the buying power of an ounce of gold from 30 years ago to today is only double. So "double my money in 30 years" just isn't enough ROI while holding gold waiting for it to spike up 30% in a crisis while my stocks and real estate dive 50% for example. That scenario does however leave me enough money to drown my sorrows in whiskey. But only after I pay taxes on the windfall gains in gold that I sell at its peak while unable to offset that income with the paper losses on my real estate because only a fool sells at the bottom. So then I wait for real estate to take 25 years to recover its losses. In our last "big" recession real estate recovered in only 10 years. It took 25 years to recover after the 1928 depression. I'm reminded of how my grandfather decided it was better to let people live in his rentals for free versus having them empty and vandalized. It really was that bad in the 1930's. Those "gratefull" tenants then tore up the floorboards and anything else that would burn in order to not freeze to death during winter. Nobody had any money.

Sorry I'm rambling.... anybody still reading?

Regarding Jim and his sick sense of humor: yeah, I'm with ya. Let's take a chemistry course and go "Breaking Bad" and sell drugs till we go to jail. At least then we'll have 3 meals a day and all the sex we don't want!

Regarding Aaron and diversification: I agree. That approach has worked for a long time. It has even held up pretty well during the numerous "corrections" we've had along the way.  But a rising tide raises all boats. We've had a 70 year overall economic expansion.  I'm wanting to leave the party before the hangover hits. But there isn't anywhere else to go.

Regarding Michael and Crypto profits. You rock. I missed that boat. Hope you paid your taxes because the IRS just forced Coinbase, and other exchanges, to give them all transaction data. Plus, they announced they have the ability to backtrack the bitcoin blockchain and trace the money. Hope you made your killing in Monero which is currently (temporarily) untraceable. I only sound bitter because I am so jealous. Bitcoin at $1, me: "that is so stupid". Bitcoin at $1,000, me: "the end is near. Bitcoin at $20,000, me: "I'm an idiot". Bitcoin at $7,800 today, me: "sure, that makes me feel better... not".

Regarding Paul and selling options: I do think that is a good strategy. The only way I see is to be pretty delta neutral. Buffet's quip about how the market can be irrational longer than you have money comes to mind. Its great to be short volatility until it isn't. It's also tough to sell premium at a profit when the vix is 14 (forever it seems). Then it's tough to go all in when it spikes to 38. I tell myself "put on your big boy pants and get in there".

This turned into a novel, sorry. To those I've commented on I am in no way saying you are wrong. I'm just slowly turning into my father and seeing the downside to everything. The problem is that the riskiest thing to do is to avoid risk and do nothing. That guarantees failure. I just look at what Argentina went thru, what Venezuela is now going thru, what post war Germany went thru etc etc etc and think "that could be us". I'd move my money to a safer haven but I'm already in the worldwide safe haven. It turns out that it is a prison but they just haven't locked us in yet.

I'm off to re read all the "Chicken Soup for the Soul" books, then some Jim Rohn and try to get my mojo back.

Thanks again and any other thoughts are appreciated.

I'm with @Steve Vaughan....taking naps.

@Gordan Forbes           

I like your style brother! Just because you're paranoid doesn't mean somebody's not following you! :)

Remember deflation risk too but likely central banks will print to oblivion before they let depreciation take hold again.

Also, there are opportunities in every market for those willing to kiss a lot of toads!

For us it's workforce, large apartment communities in stable markets with lots of "have nots" that need affordable housing. We leverage the assets with government financing that allows for 10 to 35 years of fixed rate; which virtually removes short to medium term correction risk.

I also re-invest heavily in my business and its people. The name of the game for me is income producing assets (apartments and businesses) on a large scale!

All the best!

@Gordon Forbes Find a niche area where you can track sales and just buy/sell tickets when an underpriced item comes up. I did this for some concerts and made $12k in a month span, I would literally buy tickets for $50 and within a week resell them for $100 (all on stubhub)....can't figure out how to scale this, but if I can get it done, I can leave my office job! Also had resale sites like stubhub eat away $3k in fees.

Besides that, I've been putting some money into notes instead of the stock market. There are RE Note Funds that pay a 12% dividend and also I've been getting into crowdfunded notes for local businesses. This is kind of a test phase to see how it goes, but I do believe a mix of notes could be a pretty solid investment. 

@Gordon Forbes you need to search other markets. I buy and sell weekly always,  ( Cleveland ) about 25- 40% below market. Also if your goal is cash flow does it really matter if you pay a little high?  As long as the net cap is what you want , well Rent comes in either way, so up or down a few % really is irrelevant, everything comes full circle , all the best to you   

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here