I’ve got some good news for you and some bad news… actually, it’s the SAME news but whether it’s good or bad depends on you.
The news is: the economy is doing amazingly well…
- Stocks are at an all-time high.
- New jobs are being created (and although they’re not as high as they were earlier this year, they’re still pretty high).
- Companies are handing out raises.
- Small business optimism is better than forecast.
So why did the subject line of this email come with a seemingly dire warning? And why did I say that this was either good news or bad news, depending on you?
Well, it’s because of something I learned during my time on Wall Street…
Exuberance always comes before a crash.
In the days, weeks, and months (and sometimes years) leading up to a market crash, people say things like, “it’s never been better”.
But, just like a balloon that is inflated more and more and more and more… it will eventually burst.
And that’s exactly what will happen.
It might happen tomorrow, or next week or next month or next year but one thing is certain: it will happen.
It’s bad news for a lot of investors because, well, a lot of investors are doing something foolish right now: they’re getting caught up in the emotion of the moment and the excitement of rising stocks and they’re buying.
The buyers who buy at the top of the market are ALWAYS “retail” investors who are sinking their hard earned money in because they keep seeing other people getting excited about stocks.
These people are the last to buy and they’re the first to panic… they buy too late (on emotion) and sell too early (on emotion) and ultimately lose a ton of money.
It’s good news for a lot of investors, too. And the reason is: savvy investors know this happens so they take money out of the stock market right now, while there are still eager retail buyers clamoring for these stocks.
And those savvy investors then put their money into hard assets that produce cash flow.
Will those savvy investors lose out on a bit of upside?
Yeah, they might… after all, we don’t know exactly when the crash will happen.
But they get out now, before it’s too late, and they put their money into a hard asset.
Why a hard asset?
Because hard assets, like real estate, are a hedge against the inevitably rapid declining stock market values. They preserve their value even when other assets are going all the way to zero. And they provide consistent and dependable cash flow – even while other investors are barely getting out stocks by the skin of their teeth.
Now, some of you might point to the previous crash and tell me that real estate values declined dramatically there… so why would I suggest that real estate is a great investment now?
There are a few differences between what happened to a lot of Americans in 2008 and what we do here at American Wealth Builders…
First, properties didn’t necessarily decline in value; rather, they returned to their true value from an inflated market-driven overvaluation. Sure, some properties declined more than others, especially those that had been bought at the peak of the market and had bloated mortgages.
Note: that even though people ended up underwater in their mortgages, the underlying properties themselves did not go to zero like a stock would.
Now it’s important to also realize that not all real estate declined in value…
The American Wealth Builders properties stayed pretty steady for one simple reason: we carefully choose the markets where we invest and we’re very careful not to buy in markets that are going crazy with over-inflated property values.
Part of the reason is we’re highly experienced investor-buyers who have studied the markets for years – we’re not retail buyers buying a home to live in.
That’s a massive difference in understanding how valuations can go crazy in one market but remain untouched in other markets.
I’ve gone into a lot of detail here to talk about what happens before a crash. And right now, the clues tell us that we’re seeing that excessive exuberance and optimism that tends to precede any market crash.
You might not be able to predict exactly when it will happen, so don’t bother… because if you try to time the market and get it right –when it starts to turn then – it will already be too late.
The market is hot right now, and that should be a good enough sign to get out and get into a cash flowing hard asset.
Even if the market goes up a bit more after you got out, you can rest assured knowing that you’re still earning a cash flowing ROI that will remain steady even while the market continues to climb… and then inevitably crashes.
If you hold stocks, sell them now and get into cash flowing hard assets like turnkey real estate.
The news coming out of the financial markets is too good… and that’s bad.
But it’s good news if you’re savvy enough to act now.
Your AWB Team
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