A Reader asked if I had any ideas about money to be made else where if real estate went bust. He saw these 2 books on amazon and asked what I thought about them.
http://tinyurl.com/9f3bw
http://tinyurl.com/daovo
I firmly believe that there are really only 5 classes of financial investments.
Financial:
Cash or Currency equivalents - such as US Dollars, Euros, CD's
Debt-Backed Securities - such as Bonds and Notes - basically, you lend money to somebody
Own a Business - this includes stocks, funds, and equity interests in LLCs or something
Natual Resource - such as Gold, Precious Metals, Silver, Oil wells, saltpeter mine, diamond mine, etc
Real Estate - buy and hold, not flipping
Those are investments, not jobs. Landlording, running a businiess, those are jobs.
I firmly believe that you should be evenly distributed 20% to each and 1/3 of your holdings in each should be in another country. My own portfolio is horribly out of balance. This is hard to do. As time goes foward, Gold gets expensive, while stock gets cheap, etc, etc. You have to watch when you load up (as in the case of Gold right now, who knows which way it will go)
I think one must also understand what makes these things go up and go down. For instance, I think buying certain kinds of duplexes today is a good thing (you'd have to make an appointment with me to hear the whole tale), I don't think my method is flawed because the prices are supported by rents which are supported by the population density and median incomes of austin. As long as they hold, the Real Estate value will hold. "Over priced" real estate happens when people buy too far above that support line...just like in stock.
I guess I can sum it up by saying: Understand what causes the prices to change in your investment. Watch those indicators and act appropriately.
What frustrates me about stock is that no one values it the same. No one knows how to value it. It's all subjective. It's not obvious like real estate is.
Debt-Backed securities are also a little nebulous, but at least we have rating systems that everyone sticks to. Such as FICO scores for individuals, That AAA, AA, A Rating system that I think Lehman Brothers came up wtih for corporations, and the DnB system are all ways to determine credit risk.
If there is a bubble that will burst, it will not affect every last house in the US. It will affect market segments that have soared beyond their support lines. It will also probably affect houses in what I call the "whimsical band". That would be houses owned by people that love to keep up with the Joneses. They live in places where a 200k house can go up to $250k in 2 years and people think they are such amazing investors. No, the people that came later followed the herd instict. You have to think like the "popular people" in high school. Whatever they wore, was the "in" thing. It's very "in" to live in a golf course.
Lots of conjecture there and strictly anecdotal opinions.
I'm not sure what to invest in if not the 20% all around thing and watch them all. The only way that Real Estate would go really really bad for everyone involved is massive amounts of illegal activity like the fraud that took place in the 1980's or what happens today on a small scale with investors illegally buying HUD homes.
A reason the stock market burst, IMO, is buying way above whatever the real value of the stock was. It's hard to not do it though. Like paying too much in a hot area. The ones that come after you will buy your house! Kind of like a pyramid I guess. Very scary.