Have you ever been to a really great party, and as you are walking out the door, everyone encourages you to stay?  The night is young, the music is great, the food is incredible, the people are all beautiful.   Well,  I have been to this party before, and it doesn’t end well.  It was called the Great Recession, which occurred technically from the end of 2007 to mid-2009, and has had lasting effects even today.  Eerily, this party of 2015-2016 has the same feeling and everyone wants you to stay.  Well, I’ll be leaving soon, and here’s why:

1) Back then, as now,  the feds loosened their fiscal policies which sparked a stock market boom. Looking back over the entire history of the US fed funds rate, we have never seen such loose monetary policy in the history of the United States.  This has translated into the the fourth longest bull market run in the history of the stock market.

2) Back then, as now,  low interest rates and loosening of credit requirements encouraged US households to borrow money for home purchases they can not afford.  Last fall, mortgage financing giants Fannie Mae and Freddie Mac, together with their federal regulator, have drawn up rules aimed at loosening constricted lending standards making mortgages easier to get for those with less than stellar credit.

3) Global threats the United States are on the rise, and according to James Clapper , Director of National Intelligence, “cyber” tops the list again this year.  Clapper attributes the 2014 attack on the Las Vegas Sands Corporation to Iran and announced that “the Russian cyber threat is more severe than we’ve previously assessed.”   Counterintelligence, terrorism and weapons of mass destruction (notably nuclear) round out the next 3 spots. For a rude awakening on the state of global affairs, take a look at this report. Worldwide Threat Assessment 

In summary,  if you have been to this party before and want to take advantage of future opportunities, consider keeping a larger portion of your overall portfolio in cold hard cash. Keep it apart from an emergency fund meant to cover expenses should you need it.  Here is a quote from Benjamin Roth, a lawyer from Youngstown, Ohio who lived during the Great Depression, and kept a diary of the rise up and the run down in markets and human mentality.  “In 1928 people were excited about big profits on the stock market: they read literature about investments, lived high and talked about the ‘new era,’” Mr. Roth wrote in February 1933. “Today their outlook is gloomy, they think the depression will never end, the stock market is an abomination, real estate is no good, everybody is cynical.…The slump is now looked upon as of indefinite duration.”

As an investor, you want to choose your options carefully.  There are many alternatives to the stock market for you to invest.  Resort Realty Capital is currently searching for value-add and opportunistic real estate acquisitions in 12 Rocky Mountain markets through our broker partners.  If you would like to learn more, please contact us.