I Still See No Alternative (to Owning Stocks)

Have you heard of T.I.N.A.? I'm talking about the acronym for there is no alternative. In this case, I see no good alternative to owning stocks over gold, real estate, bank certificates of deposits and more. Let me explain. Inflation is running rampant. Official consumer price index numbers tell us it's up about 7.5% to 8.0% year-over year. Our actual experience tells us it's already much, much worse. Here are the yields on Treasury paper running from 30-days out to 30-years as of Wednesday. Is there anyone foolish enough to believe that earning yields like those can preserve true buying power over time? If not, why lock in fixed rates which have almost a 100% chance of destroying your nest egg's true value? The same is true for bank CDs, annuities, and money market funds. Fixed income is a non-starter in my book. The more of it you hold the worse you will fare over time. Has gold been a good investment? In the nine and a half years since its price peaked at $1,858.60 on Sept. 11, 2011, through Wednesday, the cumulative gain was a modest 6.81%. That equates to about 0.69% annualized, even with the precious yellow near a new all-time. Owning physical gold paid no dividends along the way. Unless you simply held your bullion in a home safe, risking fire damage or theft, it also cost money to store and insure. It would certainly involve a commission when you eventually choose to sell it. On a net basis, then, gold, too, has been a long-term loser rather than a true inflation hedge. Did real estate provide good returns over time? You make the call. Many people overestimate how well their homes appreciated due to the very long holding periods they may be tracking. The compound interest calculator below can't be fooled, though. A $50,000 home or building purchased 30 years ago could very well be worth over $216,000 today on a nominal basis. More than quadrupling your initial purchase price sounds impressive. In non-inflation adjusted terms, however, that great gain only equated to 5% annualized. As with gold, there were plenty of expenses along that 30-year ownership period. Maintenance is expensive, that new roof probably cost quite a bit. So did major systems replacements, property taxes, and homeowner's insurance premiums. We all need to live somewhere. Home ownership almost always beat renting if you planned to stay put for a while. Typically, though, real estate has not been a stellar investment compared to owning equities. In what might be an astounding example of history repeating itself Wednesday might turn out to have seen the turning point of the nasty bear market we've been in since mid-November of 2021. That would be 13-years to the day after the March 9, 2009 nadir was left behind. Wednesday's extremely positive, almost across the board, market action certainly gave us a great start if that proves to be the case. It was amusing to hear all the previous naysayers, who urged investors to sell and move to cash, falling all over themselves trying to explain why now appears to be a good time to begin easing back in, at much higher prices than they could have paid just a day or two earlier. The Covid-panic bottom also came during the month of March 2020, but that final low was set on March 23, exactly 14-days from the turnaround moments in 2009, and perhaps 2022 as well? A glance at the chart above makes Warren Buffett's oft repeated claim that he couldn't find anything worth buying since March of 2020 into a cruel joke. Berkshire Hathaway's , shareholders were likely not happy that Mr. Buffett sat on his wallet of about $140 billion when so many stocks were doubling, tripling or more over the past two years. Despite Wednesday's big rally there are still some tremendous buys out there. I've been averaging down on many of my favorites over the past few weeks at prices I never thought I'd see again. The lowest risk time to buy is always when most people are scared to death to step in and put cash to work. Ironically, Mr. Buffett paid more than double last summer's price when he bumped up his Occidental Petroleum position by $3 billion during the very week when oil prices were near all-time highs. Whatever happens from here forward doesn't negate the fact that he should have put that $3 billion to work at least 50% cheaper. OXY was offered between $8.50 - $29.20 each year from 2020 through 2022 year-to-date. Ignore the media. Go with what's been proven to work over the long-term in both absolute and inflation-adjusted (real) returns. If you counted 2021 in the above data the results for equities would look even better. Like it or not, stocks are usually the best long-term choice. Where else can you have instant liquidity, dividend income and the ability to get even more current cash, along with a degree of extra safety from option writing? Will Wednesday prove to have been the ultimate turning point? Time will tell.

I Still See No Alternative (to Owning Stocks)

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