Today I want to talk about why this decade is really the decade to hold real assets, meaning gold, silver, land, real estate as examples. Consider any hard asset. there’s plenty of options here, I generally like things that hold value and are somewhat liquid.
Now I believe in diversification so I don’t think it’s smart to overload on any one but let me talk about my reasons why real assets will see a renaissance.
(1) First, is inflation. IMO, it’s going to be here a while and remain sticky.
Geopolitical tension is going to make inflation worse- it has for some time now. Supply is going to be hurt for many industries and we can expect to see supply disruptions continue.
Another important point is the strengthening of the BRICS and the real possibility of global de-dollarization. This is really actually already happening. How many more countries will join BRICS? Will the West use the dollar, and will the East use a commodity backed system? This is all unfolding right now.
Hyperinflation is a real possibility. And there’s a lot of reasons for this (some mentioned above).
Al the ingredients are here for this right now. Throughout history hyperinflation has consistently happened because of budget deficits from currency creation. So, typically hyperinflation happens when there is rapid money creation but no growth in output or services. And we have many examples, the Weimar republic in Germany in the early 30’s, Brazil mid 80s to early 90’s, Argentina right now (Read more about Argentina’s crisis here).
Now opponents will say the dollar won’t lose its reserve status as it’s simply the best of all the currencies and while I agree for now, it’s important to remember that the dollar needs to stay competitive and the trend is heading away from dollars being the global reserve currency.
(2) The second reason to hold real assets is that I believe we will see a decline in Index fund Investing. And really people are going to begin catching onto this. Stock Valuations are too high and are way too optimistic for the future. Conventional wisdom says when you’re young to invest a higher percentage in stocks and as you age rebalance more to safer investments like bonds.
But investors are going to begin catching onto what’s happening. GDP growth will eventually become stagnant due to a decline in productivity and innovation. More people don’t want to work than ever and we import way too much instead of producing ourselves and creating.
We have too much debt, both public and private. Credit cards, student debt (Who’s really responsible for the student debt crisis), and a huge potential for increased delinquencies and defaults. Wages are not keeping up with inflation as we are not pushing competition and small business lending.
Also, our healthcare and education system are horribly mismanaged. We spend more than any other country on healthcare and yet it doesn’t seem to pay off (We need more people in these type of jobs- read here).
(3) Real assets serve as a type of insurance (Do you need life insurance?) and are really the most conservative asset you own. Now, in the investment world, T-bills are considered the safest asset as the govt has never defaulted on a payment. But in the event of de-dollarization, a massive cyber-attack or another type of disaster, real assets are better to own. real assets have intrinsic value and provide safety and security.
