If you were to ask me where someone could put their money to best retain its value in the near future, I think it'd be gold. I'm not talking about growth, there's still an outsized role for other financial implements in that regard, I'm just talking about wealth preservation.
Lots of people chose real estate, but I have a feeling that's a supercycle that's almost over.
Basic economics still exist, and with the upcoming population collapse, and the boomers all getting to that age where they start dying en masse, and many people suggesting we've already seen the lowest mortgage rates of our lifetimes in 2020, you're going to have a lot fewer people chasing a lot more supply with a lot less buying power and so eventually those prices are going to collapse on their own. By contrast, if you have a Spanish gold coin from 500 years ago, it is still highly valuable and is likely to continue to be.
Gold only needs to exist and will remain in its current form effectively forever. A house requires maintenance, annual tax payments, insurance, in many parts of the world you absolutely must pay for heating or your house will be destroyed. It takes a lot of money to own a home. Yes, you can rent them out, but if the same supercycle applies, it's possible rents will go sideways for a long while or even substantially down, meaning you have an asset you expected to profit from that could not just be losing value but actively costing you money every month.
Some people would then point out that net immigration will help recover the lost population, but to that I have 2 counter-points. First, the west is quickly fading as the "land of opportunity" so even at this moment many migrants make it to the west and realize it's expensive to live and taxes are insanely high so they return home and I don't see that getting better. Right now, there are houses in the Greater Toronto Area which have 25 migrants living in an unfinished basement. I've heard people say "Oh, that's just their culture" but the fact is it isn't -- India for example may have large families, but they don't have 25 strangers living in the same room and paying 1000 a month for the privilege. Second, many of the places we're net importing people from have their own issues. Many of the countries we presently net migrate people from are facing shrinking populations themselves, so it isn't like they have unlimited people to pick from. In a world that isn't like today, it's likely that other examples such as Africa which are facing some of the highest growth rates will actually have big problems maintaining those because a lot of that money is coming from western investment and so if the west has fewer people investing less money there won't be as much money to fund growth as there is right now.
Now some people might go "use stocks or bonds", but reality is that over history, 99.9% of stocks went bust. Huge names from the past such as E. F. Hutton, Eatons, AMC, and many more simply disappeared after being unable to keep up in a changing world market. For growth you need to go to the market, but for long term wealth preservation, you need something you can be sure will continue to exist. As for bonds, they have an expiration date as a matter of their function, and in addition many entities that issue bonds no longer exist. If you buy corporate bonds from the above companies you won't be getting your money back for example, and many countries have had big changes that mean you can't always rely on them -- 100 years ago many south american countries looked like they would be rivals to the US for example, but eventually defaulted on their debts. The US may therefore be considered a safe jurisdiction, but with a massively growing debt it's highly likely a sovereign debt crisis is just around the corner. That doesn't mean you shouldn't invest in these things, but rather that you need to be cognizant that for wealth preservation, both stock and bond markets mean taking on substantial risk.
Lots of people chose real estate, but I have a feeling that's a supercycle that's almost over.
Basic economics still exist, and with the upcoming population collapse, and the boomers all getting to that age where they start dying en masse, and many people suggesting we've already seen the lowest mortgage rates of our lifetimes in 2020, you're going to have a lot fewer people chasing a lot more supply with a lot less buying power and so eventually those prices are going to collapse on their own. By contrast, if you have a Spanish gold coin from 500 years ago, it is still highly valuable and is likely to continue to be.
Gold only needs to exist and will remain in its current form effectively forever. A house requires maintenance, annual tax payments, insurance, in many parts of the world you absolutely must pay for heating or your house will be destroyed. It takes a lot of money to own a home. Yes, you can rent them out, but if the same supercycle applies, it's possible rents will go sideways for a long while or even substantially down, meaning you have an asset you expected to profit from that could not just be losing value but actively costing you money every month.
Some people would then point out that net immigration will help recover the lost population, but to that I have 2 counter-points. First, the west is quickly fading as the "land of opportunity" so even at this moment many migrants make it to the west and realize it's expensive to live and taxes are insanely high so they return home and I don't see that getting better. Right now, there are houses in the Greater Toronto Area which have 25 migrants living in an unfinished basement. I've heard people say "Oh, that's just their culture" but the fact is it isn't -- India for example may have large families, but they don't have 25 strangers living in the same room and paying 1000 a month for the privilege. Second, many of the places we're net importing people from have their own issues. Many of the countries we presently net migrate people from are facing shrinking populations themselves, so it isn't like they have unlimited people to pick from. In a world that isn't like today, it's likely that other examples such as Africa which are facing some of the highest growth rates will actually have big problems maintaining those because a lot of that money is coming from western investment and so if the west has fewer people investing less money there won't be as much money to fund growth as there is right now.
Now some people might go "use stocks or bonds", but reality is that over history, 99.9% of stocks went bust. Huge names from the past such as E. F. Hutton, Eatons, AMC, and many more simply disappeared after being unable to keep up in a changing world market. For growth you need to go to the market, but for long term wealth preservation, you need something you can be sure will continue to exist. As for bonds, they have an expiration date as a matter of their function, and in addition many entities that issue bonds no longer exist. If you buy corporate bonds from the above companies you won't be getting your money back for example, and many countries have had big changes that mean you can't always rely on them -- 100 years ago many south american countries looked like they would be rivals to the US for example, but eventually defaulted on their debts. The US may therefore be considered a safe jurisdiction, but with a massively growing debt it's highly likely a sovereign debt crisis is just around the corner. That doesn't mean you shouldn't invest in these things, but rather that you need to be cognizant that for wealth preservation, both stock and bond markets mean taking on substantial risk.
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