Finding The Best Investment Value During COVID Times

Investment Value

We all have asked ourselves the same question, why does the stock market keep going up?

The more obvious answer is that the Fed has expanded the supply of new money, and a chunk of this money is ending up in the stock market. 

Another reason is that the Fed has lowered rates to historical lows to stimulate the stalling economy due to COVID-19.  Borrowing is as cheap as it gets, so people are motivated to transact more, refinance, and consolidate assets.

The third reason is that most people believe inflation is coming.  If you are betting on higher inflation, then you may assume that the stock market has ways to go. 

Even though we face the most significant black swan event of our lifetime, we experience a bullish stock market. But, here’s where it gets dangerous, the herd is buying stocks because suddenly the stock market turned out to be virus-proof.  Beware!

An interesting fact worth highlighting is how company assets have switched from predominantly tangible through the 90s to now mostly intangible.   Intangible assets don’t exist in the physical form, such as data, patents, believe, and goodwill.  Tangible assets are physical with finite and specific monetary value.  But over the years have become a smaller part of a company’s worth.  Today’s five most prominent companies, Apple, Alphabet, Microsoft, Amazon, and Facebook, own mostly intangible assets. It’s practically impossible to value a share of any of these companies accurately, and so their worth is simply what the market is willing to pay.

The one thing we all can agree on is that you want to hold minimal amounts of cash.  So, what investment presents the best value proposition?

We’ve seen metals and cryptocurrencies going higher, which serve as a hedge against the stock market as well as inflation.  Bonds aren’t paying much due to the low-interest rates.   The low-interest rates and the inevitable demand for housing will prop up real estate for success.  There may be a few bumps on the road until we get through this pandemic. Still, sound real estate investments, specifically in Multifamily with strategic management, will prevail and deliver steady returns.