When we hit inflation in the 70's, there were lots of places to invest to preserve purchasing power: coal, re-insurance, gold, silver, natural resources (copper, zinc, lead, iron, gravel, etc), real estate, personal education. The remarkable trends of recent times have caused adjustments to this thinking.
1. Coal is bound by the political policies of cap and trade, though we use it a lot here in the US to keep warm and to keep the electricity running...so far it's not too popular.
2. Re-insurance was thought to be a means of investing in insurance on a safer scale, as the insurers all wanted to be "re-insured". The advent of unregulated credit swaps have made this avenue less popular.
3. Gold is an investment device which is hitting some ground these days as the price rises like a rocket. That is a thought.
4. Silver is actually more useful than gold so it is running into the cyclical argument that makes it less desirable because it's part of the industrial process, thus relegating it to a posture more like copper than gold.
5. Natural resources are a thought, and part of the allure of the railroads, since they have to be transported somehow and the rail transport for such heavy products is cheaper, greener and more cost efficient. The problem is that the economy has not recovered enough to warrant investing in this arena. Yet.
6. Real estate is reeling from the bubble of poor investing and overspending. I see it in the foreclosure houses I showed to some clients last month. The houses we saw were in terrible shape, but they all had new thermal windows, re-finished hardwood floors, some had extensive stonework...in short, the previous homeowners had done the conventional thing, upgrading their homes with energy savings, and home improvements. They just got caught by the declining market and perhaps by losing their jobs.
7. So we're down to personal education. More on this later. I am going to meet a banker friend to compare notes and see what his thinking is on this subject. More later.
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