Where would you put your money?

Ok, its late 1999. Uhu, everyone’s going crazy as the Dow is setting new highs just about every day. You happened to have made a very substantial investment just after seeing ripe opportunity after the Crash of 87. You’ve used dollar-cost averaging throughout the years from your middle-class simple-but-adequate income. You hear the throngs of service reps in your office discussing the next big move for their favorite companies, postmen asking you how much you made that week and just about every analyst of planet earth crying out how if you don’t have every penny you’ve ever owned invested in a company called Enron you’re a poor unfortunate idiot.

You decide its time to get out. But what would you do with your millions. So you figure that real estate, although not doing half as well as stocks, could nevertheless earn you a very substantial amount in rent and then appreciate some well into your later years. It would make a great inheritance for your kids as well. After all “Real Estate is the safest investment” and you’ve always heard things like “Lesser return, but lesser risk”.

What was faulty with this logic? Absolutely nothing. As a matter of fact you wouldn’t have been the only one. Looking at a chart of Real Estate prices, inflation-adjusted, over the past 116 years.

As a matter of fact prices were just about average then. To your luck many investors who wanted out were thinking along those exact lines. Thus created an unbelievable surge in prices the nation over. Many cities had their average home increasing more than two-fold the initial investment.

But like anything, even the greatest asset can be ruined by overpricing. As soon as all the neighbors from next door are doing the same, its probably run its course. After all if everyone has made so much buying in, who is left to buy from the buyers?

There’s valid reasons why all the wealthiest individuals in history have claimed that it is very easy to make money. Keeping it is rather difficult. But now, those who made their money in the steaming housing market and got out just as Mr. and rs. Smith were getting in, now need somewhere else to park their cash.

Commodities and hard assets. We’ve already seen a surge in various commodities such as corn, sugar and wheat, as well as in almost all metals, both base and precious. However, many are saying that the “Bubble” in commodities and gold is over.

Really? Do you see every Tom, Dick and Harry discussing their bullion purchases or parents setting up trust funds in sectors of agriculture and farming? Has Trillions been pumped into the commodities sectors that have been pushed so high by so many that they have so little up-room.

I would say quite the contrary, those claiming that this bull has run its course and is tired are the speculators who didn’t get in on time and are convincing themselves its over. Name me people who got into metals in the 90s and ask them if their selling. They’d say “No way”! Jim Rogers who is probably the most bullish on commodities says that this bull still has 10-12 years to go even if it wanted to come in last for the shortest in history. Of course a fair amount of speculators could change all that.

So keep an eye out, because in a couple of years Blue Chips and Tech stocks may look extremely undervalued.


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