The WaPo ran an interesting column this past week, suggesting that as housing quickly falls out of favor with investors, many are running headlong back into equities. Which may or may not explain some of the irrational movement we've seen in major stock indexes to start this year. From the story:
Investors fall in and out of love with either real estate or stocks depending on the cycle, financial planners say. "The stock market was the place to be in '98, '99, especially technology stocks," said Peggy Cabaniss, former chairman of the National Association of Personal Financial Advisors. "Then you see this huge collapse and people say, 'I am never going to go into stocks again. I am going to go into real estate, where it's safe.' " Now, with home prices falling and property sometimes taking months to sell, some people are running away from real estate again. "It was the dot-com bust, now we have the subprime bust," said Ken Winans, president of investment and management research firm Winans International. A home bought in 1978 appreciated an average 5.3 percent a year through 2007, while the Standard and Poor's 500-stock index delivered a 9.9 percent return during the same period, according to figures from the National Association of Realtors.
The house versus stock argument is an interesting one, but we might suggest some intriguing alternatives for investors looking to make some real returns in the next few years: if you can afford to run with a hedge fund, getting into distressed assets is likely to yield some big returns, for one thing. (Not that any of us here at HW has that kind of money, but still, if we did, that's where we'd be right now). Some other options include currency trades (the dollar is pretty weak right now, and depending on who you think will win the upcoming election, it may or may not stay that way), nonferrous metals (gold and platinum are through the roof right now!), and of course, commodities (rice, anyone?). Just some food for thought for our more intellectual HW readers.