We can’t guarantee that the next one or two decades will see negative stock returns but the growing consensus of economic experts is that it’s exactly what to expect. Mike Shedlock, a forecaster who goes by the name Mish online, thinks the shrill cheerleading tone set by Wall Street is more a cry of desperation than anything else. While there has been some good news in recent years related to earnings, the elephant in the room is that it has been powered by federal government stimulus programs which will end eventually (the sooner the better). The financial services industry has been a direct beneficiary of fed dollars.
So what makes Mish and others believe we’re in for a twenty-year long cycle to the negative when measured in stock returns? In short, because the stock market has always risen and fallen in roughly twenty-year cycles. This is not to say that individual years cannot offer anomalous data. A high year can be followed by an even higher year and a low one followed by an even lower one but, overall, it’s time for a period of negative Wall Street adjustment. Using the metric PE (price to earnings ratio), we can see that the year 2000 brought some of the highest readings in history. It should be no surprise that 2010 shows an annualized rate of return of -2%. Ouch
The silver lining in this cloud is that there is no law in place forcing you to invest in the stock market. You do have other options. Gold has been flying high for years and, due to ever-increasing fears about inflation in our currency, will probably continue to be a strong investment choice going forward. So is gold the best you can do? Not hardly. Income property investing beats it hands down and is, in fact, history’s best investment. Why? There are many reasons but the short answer is that it allows you to profit in many different ways. With most investments your profit potential is limited to the amount of increase in value of your holdings, otherwise known as appreciation.
With an income property strategy, appreciation is only the icing on top of the cake. Visit our affiliate website www.JasonHartman.com for a free education on how owning property can lead you to the land of independent wealth.
The Commercial Investing Center Team
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