Investment-blog.net: Stocks, Emerging markets, Bonds, Currencies and Commodities

Wall Street represents and promotes soft assets (stocks, bonds, derivatives e.t.c) and as such is always in (silent) opposition to “hard” asset classes (real estate, commodities e.t.c.). The reason of course is competition for the same investment dollars.

Also keep in mind that in a “boom” cycle, hard assets get more of their share of capital allocations with ensuing inefficiencies and misspricing. During a bust cycle, capital miss-allocations get corrected. Therefore real estate at present is suffering the most.

However, do not make the mistake of thinking that this creates a “soft” Wall Street opportunity to buy a few shares on the cheap. Soft assets represent a promise of participation in some future earnings or income as measured by today’s or yesterday’s (probably faulty) assumptions.

The number 1 priority of investors at the moment ought to be “capital preservation”. Not the return of capital, rather the return on capital. You will know when the opportunity to buy arises.

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