The Stock Market Super Bubble — What Goes Up Must Come Down
Shifting your assets early in 2022 can secure your future
In a recent mentoring conversation the proven statement about things that go up will come down was cited as a reason to work with our team to take the money and invest it into passive income-generating residential real estate.
The stock market has been rising for 12 years now — the longest it has ever done that. The short break during the first month of the Covid pandemic was really just a blip on the radar. Overall, it’s only gone up and we all read and hear the new highs on the DOW, NASDAQ, or S&P500, month after month, year after year. That’s changing in 2022.
It’s a Trifecta
The issue is that many people have their retirement savings in 401K plans and other retirement accounts which all invest in the stock market.
In addition, a lot of people who work with financial advisors have been told to put their money in the stock market.
The third part is that the enormous amounts of money that have been printed by the government and the FED has been pushed into the marketplace and needed to find a home. Most of it went into the stock market. You can read how many companies used the money to buy back their own stock. They also did not invest much into their own businesses.
This bubble has been building and even in 2021 it was already obvious that fewer and fewer companies are driving the continued rise in exchange values. That means a lot of companies in the market are not really growing in value anymore.
Now, the FED has acknowledged that the current high inflation will stick around for a while. Most people think it’s going to take until the end of 2023 to see inflation really going down to levels the FED will be happy about. That would be about 2% instead of the current 7%.
The recent announcement that showed the FED will increase short-term interest rates up to 4 times in 2022 is showing first reactions.
A BofA survey conducted from Jan 7–13, 2022 among investors with combined assets under management of more than $1.2 trillion showed fund managers had cut their overweight positions to their lowest levels since December 2008.
A separate monthly survey conducted by Deutsche Bank showed an overwhelming majority of respondents believed U.S. technology shares are in bubble territory as investors remained more bearish on hawkish policy moves and higher yields.
“Higher-than-expected inflation continued to be the predominant driver of those bearish fears, but its counterpart, a more aggressive Fed, drew much more concern from respondents this month,” Deutsche Bank strategists said in a monthly note.
The change in positioning has been extreme compared to historical averages. Investors have ramped up bullish bets in banks, commodities, and materials, and cut positions in technology, emerging markets, and bonds.
“Tech is going to be bifurcated between the companies that are earning money today versus the companies that are promising to earn money tomorrow,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.
“The companies that are promising to earn money tomorrow but not earning today are going to take big haircuts.”
What does this all mean for you?
I recommend that you look at your portfolio of investments and shift at least 33%, probably even better would be 50% from the stock market into value assets.
As anybody reading our articles regularly knows, we recommend residential real estate. It maintains its value, benefits from inflation, and will generate passive income while using leverage.
Some people wonder if it is possibly too late to invest in real estate because prices have been rising a lot the last few years?
Just do a quick calculation:
You have $500K in the stock market (including your retirement account)
You sell 50%. Your stock asset value is now $250K and the rest is cash.
Now you come to me, and I help you invest your cash in real estate following the exact same strategy we and our clients have been applying for the last decade.
This will get you residential real estate valued at $1.25 Million. It is such a potentially surprisingly high number because your cash will be 20% of the real estate investment and the other 80% or $1 Million will come from the banks and lenders.
You will control a total of $1.5 Million in assets instead of $500K before, just because of this shift of assets.
Now just think of a strong stock market reaction, let’s say a 30% decrease.
If you leave your money where it is right now you will go down from $500K to $350K
If you shift half of your stock market assets to real estate your asset value will decline from $1.25 Million to 1.17 Million.
While you own real estate, you will also have tax benefits and rental income.
You will secure your future and be much better off when you act now and get out of the stock market.
I am not a financial advisor or CPA, but when the most highly accredited experts start speaking of a bubble, it’s high time to act and bring your assets to safety.
The pleasant benefit of generating passive income, potentially starting the Ideal Investor Journey, and reaching your Time Freedom Point, where you no longer have to exchange time for money and can live your passion for the rest of your life is just an added bonus.
My team and I are happy to help you. It’s high time.