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My New Savings Account – It Ain't at the BankBy
Thursday, June 28, 2012
I just bought some land – cheap.
I bought it from a struggling bank for over 90% less than it was under contract for in 2008.
Some people might call this buy a "speculation." And I can't fault them for thinking that.
Me? I actually think of this land as a new form of savings account that doesn't lose me money.
At the price I paid, I can hardly imagine a circumstance where this land will be worth less than I paid for it. (I'm listing the land with a real estate broker... who suggested listing it at more than five times what I just paid.)
Meanwhile, this portion of my savings is not at risk in the stock market. It's not at risk in paper U.S. dollars that the government can devalue and print at will. And it's not at risk in a financial institution that could be shaky and we don't even know it.
This portion of my savings is safe in the dirt.
People think their money is safe in the bank... But what they don't understand is, even in the best possible outcome, they will still lose money on their savings. You see, right now, bank savings accounts pay you next-to-nothing in interest. And when you factor in inflation, you are actually losing money with your money in the bank today...
For example, Bank of America's "Growth Money Market Savings Account" pays 0.1% interest on a balance of less than $25,000. (That is not 1% interest, that is 0.1% interest – nearly zero.) At the same time, inflation has been running in the 2% range.
So you're losing roughly 2% a year on your cash (or more correctly stated, your "purchasing power") in the bank.
For a portion of my savings, I would rather hold this land – and even pay the property taxes – than have it sitting in the bank.
I am not saying hold all of your savings in land. You still need actual cash savings.
I simply believe that quality land in or near metropolitan areas – land that will be in demand within the next five years – is a fantastic value right now. If you have all the savings you need at the bank, now is the time to start looking for property.
Some might argue gold is a better place for non-cash savings...
I think of gold differently – I think of gold as "catastrophe insurance." And don't forget that the price of gold has run from $500 an ounce at the beginning of 2006 to over $1,500 an ounce today. But housing prices in America are down by one-third from their peak. Property is the safer bet today.
Also, while gold is a smart long-term holding, its price moves will be volatile. I don't think of gold as an alternative savings account, like I've described above.
Still, most people are afraid to "speculate" in land. It's "too risky" today, they say.
I disagree. At these prices, I don't feel like I'm speculating. I see it as an alternative savings account – with much more upside than a typical bank savings account.
You may have never thought of land as an "alternative savings account." But with land prices down so much – and with risky financial institutions paying so little interest – it's time to change your thinking about what's really "safe" for your money.
I can sleep well at night with a certain portion of my savings in my possession, safe in the "dirt," in the form of raw land...
Land actually has some "built in" safety protections that you simply can't get with your money at your financial institution. It can't go out of business, for example, and the government can't print more of it.
You are free to disagree with this idea. But me? I'm actively looking for more deals like the one I just completed... I feel my money is extremely safe this way.
You should at least consider it, too.
Good investing,
Steve
Further Reading:
Steve has been pounding his fist on dirt-cheap real estate since the housing bubble popped. He's shown readers how to collect 18% dividends by being the bank and explained why the trend has finally turned in real estate.
In April, Brett Eversole told DailyWealth readers how to get a 50% tax-free gain through real estate. If you aren't in the market for a home... maybe you should be," he writes. "This is one of the best times in history to buy." Get the full argument here: Here's How to Get the Best Deal Possible on Housing.
Market NotesAN UPDATE ON THE EURO BEAR MARKET The euro looks like it's starting the next leg of its long, grinding downtrend...
Back in August 2011, we highlighted the euro's "compressed" state. This is a situation where an asset's day-to-day volatility gradually dries up and the highs and lows move closer together. These low-volatility periods are often the calm before a storm. We expected the euro's compression to be resolved to the downside in a big move.
Our warning was well-timed. The euro plummeted soon after our note... which kicked off a big bear market in the currency. This bear market has produced a series of "lower lows and lower highs" in the euro's price chart.
As you can see in the chart below, the euro struck a fresh, 52-week low about a month ago. This decline was followed by a "relief rally," which is now losing steam. As Europe deals with its debt bonfire, expect the region's currency to get burned... and this downtrend to continue.
– Brian Hunt
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