What do you invest in when everything is over valued?
Investor · Roseburg, OR · Member since 2015 · 34 posts · 48 votes
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?
For every overpriced highly speculative Phase 2 selling stage area in America, there are areas of America that are moving from stage 1 to Stage 2 buying phase. This is the phase where you can make great cash flow and Appreciation is just starting to take off. I invest in Euclid Ohio and Lake County Ohio presently and property values have risen about 40-50% since 2014 in those areas.
I sold and 1031 exchanged all my pricey San Diego Rental properties that are clearly In the middle of a Phase 2 selling stage. In a few years the party will be over in San Diego. The party is just starting where I am investing now.
I went from 10 San Diego rental properties purchased in a clearly stage 1 Buying phase in 2011 and 2012. I was cash flowing $50,000 a year. Then, in late 2015-2016 all of those San Diego rental properties doubled in value. So, I 1031 exchanged them all and now am a principal in 8 apartment complexes in NE Ohio that have 122 front doors and they cash flow at $160,000 a year and rising at a rapid rate.
You gotta know when to hold em, know when to fold em, know when to walk away and no when to run!!
If I can do this on $80,000 family W2 earned income living in pricey San Diego, anyone can.
Go for it!!!!
Swanny
What do you invest in when everything is overvalued...
Put options
-Wayne
Great investors learn how to hedge their downside and move their money. If you're expecting a doomsday scenario, how to you cap your downside exposure in your world? If your invested in higher-end/luxury space, when the world comes crashing down expect those investments to take a huge hit. Try to rotate into mid-level, "working man" investments. If your already in that space, you might want to consider rotating into some lower level investments. When catastrophe hits, EVERYONE tightens up their belts (i.e. becomes more conservative) and switches into survival mode (yourself included!). Personally I've developed a blend of investments across all spectrums (low, mid, luxury) to stay diversified and cap my downside for just such a crash. And if the crash comes, make sure to bring your cash! Everything will be on sale! :)
Happy hunting!
the problem people dont realize is this idea of "value" changes... the inputs and fundamentals are not the same as the last go around.,, you have a lot of pent up demand and millennial buying into the market that will be trend for the next 15 years easily... a lot more money in the overall global economy due to monetary easing.... and guess what is another very strong fundamental indicator? wage rising!
confidence is at all time highs, incomes and wages are on the rise... the stock market has priced in this growth of course as it is very efficient, but regarding other asset classes... real estate in particular is very much a local economy supply demand driven asset ... so it doesnt need to correct necessarily but could soften
industrial metals could continue to grow, oil and other inputs to economies as welll
the globe actually looks pretty robust and in growth mode actually.
as for the quesiton "what do do" if you genuinely think everything is overvalued... get in cash... spend money on enjoying life experiences , and do things to help like donate to non profits that help a cause you like.... its not always about making money, but its about enjoying the journey
If you can find a property that has a good cash flow then just hold onto that property until the market restores after the correction. You will be able to collect profit all of those years and the value will return at some point.
Look for areas that will gentrify in next 10 years. Even if there is a market correction some areas wills till go up in value.
@Gordon Forbes you can always pool your cash and purchase investments at wholesale or greatly discounted rates if the often predicted correction does come and people panic and sell their positions (stock or Real Estate). Indexes or peer to peer lending may also be another option based on your investment goals. My advice is just that as I am not licensed to sell or advise people on financial services
These are the foundations of my wealth building and preservation. How you make more money or what you invest in is up to each individual investor. We are blessed to live in a time of abundance and infinite opportunites!
When you are getting started or >5 years from retirement:
High Cash Value Life Insurance: liquid in a crises/opportunities, modest growth guaranteed by legal contract, tax advantaged status
When you are approaching retirement:
Preferred Fixed Index Annuities: 20% (currently) rollover bonus, pays you an increasing income for the rest of your/spouses life, never loses value or runs out
There is always an undervalued asset class, even when most markets are inflated. Somebody above mentioned commodities. Most agriculture commodities are pretty depressed right now. Agriculture is also negatively correlated with the stock market.
the problem people dont realize is this idea of "value" changes... the inputs and fundamentals are not the same as the last go around.,, you have a lot of pent up demand and millennial buying into the market that will be trend for the next 15 years easily... a lot more money in the overall global economy due to monetary easing.... and guess what is another very strong fundamental indicator? wage rising!
confidence is at all time highs, incomes and wages are on the rise... the stock market has priced in this growth of course as it is very efficient, but regarding other asset classes... real estate in particular is very much a local economy supply demand driven asset ... so it doesnt need to correct necessarily but could soften
industrial metals could continue to grow, oil and other inputs to economies as welll
the globe actually looks pretty robust and in growth mode actually.
as for the quesiton "what do do" if you genuinely think everything is overvalued... get in cash... spend money on enjoying life experiences , and do things to help like donate to non profits that help a cause you like.... its not always about making money, but its about enjoying the journey
I think annuities are a high price scam, fact using insurance companies for a vehicle to invest in is a high fee rip off.
Let me guess your sale insurance?
The only life insurance to buy is term, then take your savings buy a broadly diversified index fund.
These are the foundations of my wealth building and preservation. How you make more money or what you invest in is up to each individual investor. We are blessed to live in a time of abundance and infinite opportunites!
When you are getting started or >5 years from retirement:
High Cash Value Life Insurance: liquid in a crises/opportunities, modest growth guaranteed by legal contract, tax advantaged status
When you are approaching retirement:
Preferred Fixed Index Annuities: 20% (currently) rollover bonus, pays you an increasing income for the rest of your/spouses life, never loses value or runs out
Hi Billy. I felt the same way too before I educated myself. I was a finance major in college in the 90's. It was until the last decade that I read Becoming Your Own Banker and multiple other books on the subject.
I started two policies and used them to pay off debt first and later invest in real estate. After fully understanding and realizing the power of a PROPERLY designed account, I knew I had to share this with others. Yes, I THEN got my license and help educate people to use it for Banking, not death benefit.
This isn't my primary source of income and don't care if you use my service or not, I just want to see people avoid my million dollar mistake. I was doing all the things Dave and Suzie recommended, and thus missed out on the opportunity costs of non-direct recognition. Most untrained agents are working for a larger commission based on death benefit. The banking policies are designed for Cash Value (low commission).
Rather than detract from Gordon's question, you or anyone else can join the forum I started just for this topic.
Best of success and happiness in all you pursue!
Eric
https://www.biggerpockets.com/blogs/10914-bank-on-yourself-infinite-banking
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.
HA! I tell people that the older I get, the more I feel like the old lady that yells at all the neighborhood kids - GET OFF MY YARD!!!!
I'm ultra conservative, and I still feel that there is a shortage in most areas of the country of Class B apartments for working class Americans. It's an overlooked market segment, and I look for markets where that demographic is growing. Then if you can invest for cash flow and underwrite conservatively, then weathering a downturn successfully is much more likely. Everyone has to have a place to live, and when the luxury market tanks, the Class B properties will be an option for them as well.
Investing in yourself is usually in the form of continuing education. New skills, certifications, languages, you name it. There are a million+ useful things online (Udemy, Udacity, Coursera).
Another option would be to take a service or business concept you have worked on and dedicate some time + money + energy to it. In a booming economy where assets are highly valued, it's also likely that people have more money to throw around. It's a great time to start selling a service. Also a great way to network.
Investing in yourself is usually in the form of continuing education. New skills, certifications, languages, you name it. There are a million+ useful things online (Udemy, Udacity, Coursera).
Another option would be to take a service or business concept you have worked on and dedicate some time + money + energy to it. In a booming economy where assets are highly valued, it's also likely that people have more money to throw around. It's a great time to start selling a service. Also a great way to network.
Not sure why you tagged me in your post?
@Gordon Forbes This is where diversification comes into play and your goal. Yes, you are absolutely correct that market is all time high, real estate is over heated, commodities are going down the hill.
You would actually have to determine what is your goal of investing, your investment horizons and liquidity needs. As for long term investors (over 15 years investment horizons), if you do equal contribution, stocks will beat bonds and commodity by at least 3-5%.
Real estate comes into play when you need diversification.
I am 26 years old and working in financial industry and I do not have liquidity issue. I have 6 months personal expense saved in my checking account. My investment horizon is more than 30 years. Personally, I go for 50/30/10/5 low cost ETFs/real estate/individual company/cash.
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?
Apparently honey and vintage wines hold their value over the centuries, even better than gold and land. Start buying up all the honey you can - it never spoils. And the bees are all dying out, so it's going to rise in value.
And, as for wine, you can always use it to get drunk and forget your misery when all the other markets tank.
@Jonathan Twombly
Addict: "I'm dieing here man, I need some of that good sh*t. I got dollars, euros, some bitcoin..."
Dealer: "That crap is worthless, give me something with value!"
Addict: "I got loads of Tesla stock, even a little Amazon. Come on show some pity man, I got the shakes and sweats and I'm in need! Ok ok, how about some gold, oil futures, or a duplex in Houston? Anything, anything you want, just sell me some dope."
Dealer: "You got any Honey?"
(Dear reader, please insert a politically correct appology here if I have offended anyone who takes drugs, makes drugs, packages drugs, transports drugs, sells drugs, launders the profits from drugs, or runs a drug treatment program.)
And Jonathan, sorry, I couldn't resist. That little scene just popped into my head...
The mention of wine reminds me of a story about the late Malcom Forbes. He purchased the world's most expensive bottle of wine. A multi million dollar bottle with provenance that it was estate bottled by Thomas Jefferson. To show off his acquisition he put it on a pedestal, cork up, under a glass dome, with lights to brightly illuminate his prize. So very quickly he was the owner of the world's most expensive bottle of vinegar!
We now return you back to the topic at hand. Hope you have enjoyed the side trip.
You ever get the sense that want, famine, war, plague, despair, ignorance, and all the miseries of the human condition are just abstract concepts to some people until the moment they find themselves staring one or more of them in the face and realize to their horror that life breaks people, and does it in a hideously impersonal and unfair way, and the lucky ones are those who die with scars and regrets to bear witness to their successful education?
@Jim K.
Jim, you are the only person who can make me look like Mary Poppins!
Somehow it is comforting to know that someone is even more of a crepehanger than I.
But I agree with your succinct assesment of the human condition so now I am more depressed than ever.
Mission accomplished Jim, your work here is complete, job well done. <sarcasm emogi>
Hey, come on, Gordon. We needed some cheese with the wine, right?
OK, the most hopeful, life-affirming thing I ever heard was a statement by the psychoanalyst Jacques Lacan: "Suicide is the only successful act."
We will all fail to see what's coming at some point. The unknown will beat us. And we will cope. Because only insane people are absolutely certain they've really figured it all out.
Storage units? If the market crashes, people will lose their homes and will store their stuff. If the market stays, people will rent storage spaces, because they still accumulate things.
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?
Is everything overvalued?
I don't think so. I think the stock market, and real estate is on the high side of fair valuation, but I wouldn't call them "overvalued". Outside of a black swan event, there isn't any reason to think that things
I do feel like debt prices are significantly overvalued, if anything we might well see significant increase in inflation and interest rates over the next 20 years or so. And if so hard assets like real estate should profit handsomely. At least for those who have long term amortizing fixed rate debt on their properties.