Right now the stock market is booming. It’s climbed back up from its 2009 lows and is soaring once more. Except, just like last time, there’s a catch. Stock markets in the US and the UK are priced as if the performance of the underlying companies was perfect. We should see record profits across the board to support those prices. But we’re not. Yes, there are a few headline companies, like Facebook, raking it in. But the majority of businesses are not making huge amounts of money, despite what the indices suggest.
That has led some to argue that the stock market is overvalued right now. Relative to gold, it’s climbing back up to it’s highest values ever. And it looks as if we’re seeing a repeat of what happened back in 2001 when the dot-com bubble burst. This time, the mania isn’t over internet companies. It’s being driven by the fact that interest rates are so low. Now practically everybody has become a speculator on the stock exchange, just to eek out a return on their investments.
But some people have said that enough is enough. They refuse to play the game, and they’re looking for alternative ways to preserve their wealth. They’d rather not endure the rollercoaster ride of the stock market, especially if it’s in a bubble. They just want stability – something that the mainstream economy refuses to deliver. So what are they doing?
Buy Physical Capital
Warren Buffett recently bought a railroad. This surprised a lot of analysts who were expecting that he’d buy equities like everybody else. But Buffett is a clever man. And he knows that the purchase of a railroad is a great way to preserve his wealth. Why? Because even if the stock market tumbles to zero, the railroad will still be there. His wealth will remain unchanged, while the wealth of those who own paper claims to assets, like shares, will see their finances tumble.
Buy Physical Bullion
Right now the market for paper silver and gold derivatives is booming. But more paper has been sold than gold or silver to back it up. That’s why long-term investors are buying physical bullion and rare coins.
And why is there a market for silver and gold coins? Because it’s another way to get out of anything that is denominated in currency. Many people are buying silver right now as a hedge against inflation. But even if there isn’t inflation in the future, it is still undervalued by historical standards.
Like physical bullion, art is seen as another way to preserve your wealth. Original Rembrandt paintings are always going to have some value on the open market. That’s why the wealthy are looking to protect their wealth in great works of art that they can then sell if they need to in the future.
Lastly, the wealthy are buying up property to preserve their wealth. Even if the price of houses falls 50 percent, they will still have the property itself to show for it.