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The Best Way to Profit from the Boom AND Survive the BustBy
Monday, September 30, 2013
I'm predicting a major boom and then a bust...
As I've explained before, the Federal Reserve is creating a major boom. The problem is, it's a false boom... And a bust is inevitable.
The question is, what investment could do well in both? What investment could soar in the boom and then survive in a bust?
Let's take a quick look at the boom and the bust, and then I'll share my idea with you...
The Fed's goal is to "juice up" the economy by keeping interest rates ultralow and by putting cash into the economy. But in my opinion, the actual results of these actions will be an incredible "juicing up" of financial assets.
As I've said many times over the last three years, I expect asset prices could go higher than anyone can imagine in this boom.
The bust will happen at some point AFTER the Fed stops juicing up the economy. At that point, the reality will sink in that the boom was manufactured by the Fed… and all we're stuck with is a bankrupt government.
In short, the boom could be incredible... and so could the bust.
So what investment could do well in both the boom and the bust?
Your home.
We're coming off the worst housing bust in generations. There's not enough supply of new homes coming on the market to meet demand from new families. Even better, housing is affordable, with mortgage rates near record lows.
And thanks to the Federal Reserve "juicing up" the economy, your upside potential is excellent.
But what happens when trouble comes? (It will, of course.)
What happens when interest rates finally start rising, for example?
When interest rates eventually rise, financial assets like stocks and bonds could seriously struggle...
In the 1970s – the last time we had a prolonged period of rising interest rates – HOUSING outperformed both stocks and bonds. Stocks and bonds couldn't keep up with inflation then... But house prices beat it.
This time around, if the government starts wildly printing more money to pay its debts, housing might be one of the best options...
You see, house prices stand a good chance of keeping up with money printing... At that point, it will simply take more dollars for someone to buy your house from you.
Also, if you have a rental house, you can raise your rent... If you own a bond or a bank CD, you can't get paid more dollars. But with a rental property, you can.
Finally, in the bust, families will realize that they DON'T need shares of Twitter or Facebook, but they DO need a roof over their heads.
Other assets besides your house could do well in the boom and also survive the bust…
But the case for real estate – your house – is simple.
Your house can rise dramatically in value in the next few years. And when the bad times arrive, I expect it will hold its value extremely well compared to many other assets.
So what's your best asset to safely increase your net worth in the boom and preserve your wealth in the eventual bust?
You're sleeping in it.
Good investing,
Steve
Further Reading:
Find more of Steve's essays on the big opportunity in housing here:
Exactly How High Housing Can Go
"I will answer that for you today... The truth may surprise you." The First Chinks in Housing's Armor
"House prices are up a lot. And mortgage rates are up a lot. Fortunately, I have some good news for you..." How to Make Hundreds-of-Percent Profits in Housing
"We've only seen an opportunity this good once in history..." Market NotesNEW HIGHS OF NOTE LAST WEEK
Visa (V)… credit cards
Blackstone Group (BX)… private equity Interactive Brokers (IBKR)… brokerage firm Celgene (CELG)… biotech Progressive (PGR)… insurance Yahoo (YHOO)… search engine Baidu (BIDU)… China's Google Facebook (FB)… social networking Southwest Airlines (LUV)… airlines Wynn Resorts (WYNN)… casinos Las Vegas Sands (LVS)… casinos MGM Resorts (MGM)… casinos Walgreens (WAG)… drugstores Rite Aid (RAD)… drugstores Netflix (NFLX)… movie rentals Papa John's (PZZA)… pizza Domino's Pizza (DPZ)… pizza Tesla Motors (TSLA)… electric cars General Motors (GM)… cars and trucks CarMax (KMX)… used cars Thor Industries (THO)… recreational vehicles Goodyear Tire (GT)… tires Sturm, Ruger (RGR)… guns Guggenheim Shipping Fund (SEA)… shipping stocks UPS (UPS)… freight delivery Chicago Bridge & Iron (CBI)… natural gas infrastructure Cheniere Energy (LNG)… natural gas exports Total (TOT)… Big Oil Occidental Petroleum (OXY)… oil and gas EOG Resources (EOG)… oil and gas Continental Resources (CLR)… oil and gas iShares Italy Fund (EWI)… Italian stocks iShares Spain Fund (EWP)… Spanish stocks Swiss franc NEW LOWS OF NOTE LAST WEEK
Books-A-Million (BAMM)… book retailer
J.C. Penney (JCP)… struggling retailer American Eagle (AEO)… clothing retailer |
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