We recently held our first presentation of Life’s Financial Navigator at the Denver Athletic Club in an attempt to answer such a question. Our speaker, Jerry Paul, a former INVESCO fund manager, was able to impart his knowledge on the state of the US economy and the headwinds that we are still facing. The focus of the presentation was on two main topics, debt and savings.
From a debt perspective, the bank, consumer and government debt will take time to reduce. While consumer defaults may reduce leverage, bank balance sheet recovery will take longer as a result. The Federal Reserve is likely to maintain a low-rate policy into 2013 and maybe longer. As we have seen, this may not directly correlate into a lower interest rate for such instruments as credit cards and commercial real estate loans. However, such instruments as home mortgages have benefitted.
On the savings side, household net worth has fallen from $64.2 trillion in 2007 to $58.1 trillion at the end of Q1 2011. Jerry’s recommendation was that consumers need to build their balance sheets by 1) increase savings rate to 6% from 0% pre-recession levels, 2) reduce their debt service via lower debt balances or lower interest rates, and 3) extending their working careers.
So, how do you answer that ever elusive question, of “Where do I put my money?” Much depends on your risk tolerance and timeline of when you will need it, but here are a few ideas:
1) Go Global on Equities: Find sources of growth using a global view, such as Asia and emerging middle class markets. Focus on multi-national companies with a strong dividend strategy.
2) Go Pro on Fixed Income: Call Jerry Paul CFA directly at 303-956-7821. This is not an area to go it alone! There are considerations such as credit spread risk, duration risk, illiquidity, and closed end fund arbitrage. I would leave this up to an expert, however there is always a bull market somewhere.
3) Go Local on Real Estate: Utilize your retirement funds to invest in real estate through a self-directed IRA in part or entirely. There are some incredible buying opportunities in this market. Make sure you are partnered with an expert in their region and product type. These down markets are where fortunes are made.
As crystal balls go, there is no such thing. However listening to experts in their respective fields is a recipe for success. Don’t go it alone, as you can’t be an expert in everything.
Resort Realty Capital is currently evaluating several opportunities to profit from these market conditions. If you would like to learn more, please contact us.
Darren Nakos, CCIM
Resort Realty Capital
111 Main Street
Frisco, CO 80443-0630
(720)-663-1430
THIS IS NOT A SOLICITATION FOR INVESTMENT – THIS INQUIRY IS TO FIND OUT IF YOU ARE INTERESTED IN RECEIVING ADDITIONAL INFORMATION. NEITHER RESORT REALTY CAPITAL, LLC, IT’S AFFILIATES AND REPRESENTATIVES MAKE ANY REPRESENTATION REGARDING THE RISKS OF INVESTING IN COMMERCIAL REAL ESTATE. YOU SHOULD CONTACT YOUR OWN PROFESSIONALS TO MAKE THE DETERMINATION AND ASSESS THE RISK OF INVESTING. AS WITH ANY INVESTMENTS, THERE ARE INHERENT RISKS AND NO GUARANTIES OF RETURNS. PLEASE CONSULT WITH YOUR OWN PROFESSIONALS IN DETERMINING THE RISKS ASSOCIATED WITH INVESTING IN COMMERCIAL REAL ESTATE.