> So, that leaves real estate.
That’s a huge leap to jump to real estate as somehow safer than public market investing. Real Estate can also be highly volatile and is also prone to significant drawdowns.
Real Estate also has very high carrying costs relative to other investments. Especially if you’re trying to rent it out, at which point it becomes a business with not insignificant labor requirements, either from you or someone you hire. It’s more of a side job than an investment.
If you’re serious about investing, you shouldn’t be choosing between a bank account or real estate. Those are on opposite ends of the risk spectrum and opposite ends of the work-required spectrum.
Instead, you’d want to do things like dollar cost averaging into equities over time (nobody really invests by keeping it all in cash and then flipping it all into specific stocks in the middle of a frothy market). Or you should be looking into ladder if CDs, or bonds, or something like I-bonds to invest an asset specifically indexed to inflation.
But choosing between a 0% bank account or real estate investing is a major false dichotomy.
Ok, so interest rates are near zero. A ton of money is leaving the bond market and going to stocks. Price of stocks is being pushed up due to the increase in money chasing yield there. These companies didn't get more valuable, your earnings per share just went down. Now you're anticipating inflation as printing money is a great way to get out of the next crisis when your interest rate can't get any lower. This personally leads me to real estate.
> Right now, investing in public companies and tech is very risky, as valuations are at record highs. Many experts estimate near-zero returns for decades from public markets.
...is a big red arrow pointing to the fact that we're living in a castle made of sand
if we continue to let pathological incentives drive economic decisions the tide will wipe it all away
purchasing power is a mutually constructed fiction and remains a useful social technology only while material productivity can plausibly support the web of lies we tell each other
now that people have noticed the foundation caving in, it would be nice if we could formulate and incentivize a positive sum response, otherwise we get zero or negative sum dogfights over scraps as you describe
This write up of 80s Japan (from 1990!) is worth a read
https://hbr.org/1990/05/power-from-the-ground-up-japans-land...
It’s also justified as the USA is by far the most dynamic economy in the world and has the most advanced military there to protect your investment in USD.
I wouldn't bet the farm on this one. The US ain't what it used to be and China is rising fast.
I’m happy for China and Chinese people having a better quality of life. But their economy is based on humans doing things inexpensive. It’s essentially a services business, not a SaaS business. It doesn’t scale well but they have so many poor people to exploit that they can make a thing of it.
When the seriously export culture, novel technology, or medicines then sure. When they aren’t a net importer of food then sure. But the yuan is not a serious threat to usd. It’s pegged to it.
The problem goes back for much longer though. Interest rates hav been near zero since the Great Recession, and for most of that period, inflation was also below 2% almost the entire time. Add to that a lot of the year over year inflation we are experiencing is due to base effects eg the collapse of oil prices last year. Current oil prices are hardly elevated from their historical norms.
I agree with OP, if you just leave hard earned money of us middle class sit in the bank, it will be eaten away by inflation and fees. Its what our parents did, and its properly dumb. Risk with markets which most don't understand, or invest into real estate which everybody does at least a bit. Most folks consider only these 2 options.
Also, if SHTF, in most cases you will have physical places or even land to live off, instead of few bank statements. People will still have to live somewhere, and there is constantly more of us.
This is important because age of labor and consumers directly influences macro economic conditions, which trickles down to investment returns.
https://ourworldindata.org/uploads/2014/02/World-population-...
> investing in public companies and tech is very risky, as valuations are at record highs
To real estate where valuations are also insanity and at record highs doesn't make any sense.
> To real estate where valuations are also insanity and at record highs doesn't make any sense.
The difference for me is that I saw what was happening in public markets and I bought real estate in a country where this wasn't yet the case. It is now though, so your point is valid.
Right now, investing in public companies and tech is very risky, as valuations are at record highs. Many experts estimate near-zero returns for decades from public markets. And, as a small-time investor, I don't have access to private deals or markets.
So, that leaves real estate. I don't put my money there because I want to drive up the cost of shelter for anyone, I do it because I don't have any other reasonable way to protect my savings.