Jason Hartman has previously mentioned that gold bugs have the right idea but draw the wrong conclusions—and here are five reasons why.
First, gold has no financing. Real estate does, which makes it the superior asset. Second, gold offers no tax benefits, which is a problem because taxes are the largest expense any person has. Throughout our lives, we’ll give up one half of our income to taxes. And taxes are boring—we get that. But losing half of your money is pretty significant and real estate can help bridge that gap.
The third reason real estate is better than gold is that it is not speculative. Renters provide rent, which is income for you. Gold is speculative. Gold is an inferior investment (here’s your fourth reason) because it can be confiscated. In 1933, the government did just that—it was illegal to own gold that wasn’t jewelry or select coins. Folks got $20 per ounce, and then the government raised the price of gold to $35 per ounce. With gold, you’re unlikely to get the actual value of the metal if it is confiscated. The government is hungry these days, and you’ve probably noticed it. A hungry government is a government that goes into business against its own citizens. This can manifest itself in a variety of ways—crazy parking tickets, higher fees, confiscated gold.
Finally, precious metals are subject to manipulation. When we talk about gold, we’re likely talking about all precious metals. What is their competition? The very existence of these metals is predicated on their having value, so there’s a huge incentive to suppress the price of these metals. And while these metals can’t be manipulated forever, they can fluctuate for longer than we’re able to remain solvent. Gold sits behind too much smoke and too many mirrors.
You’ve probably heard the story about the two campers out in the forest. They’re hiking along and come upon a bear. The bear notices them and begins to run toward them. One stops to put on his tennis shoes, and his friend tells him not to worry about it—he’ll never outrun the bear. The first hiker, running shoes on says, “That’s okay. I don’t have to outrun a bear. I only have to outrun you.”
Sure, real estate isn’t perfect. But it is a better option than any other investment you’ll look at.
(photo credit: Fabian Bromann via photopin cc)
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And If Inflation Doesn’t Happen?
The Jason Hartman Team
