Gold beats stocks as second-favorite investment in CNBC poll
Gold finished No. 2 in the financial news networks quarterly poll, garnering 21% of the votes for best investment, lagging only real estate (32%) but ahead of stocks (19%).
The poll also found that 32% of investors think that now is a good time to invest in financial markets, while 40% say its a bad time to do so. Twenty-eight percent arent sure.
Trump voters lean toward gold: The poll also delved into the investment preferences of voters in the upcoming U.S. presidential elections. Thirty-two percent of Republican contender Donald Trumps supporters prefer real estate, versus 33% of Democratic hopeful Hillary Clintons backers.
When it comes to gold, Trump voters tend to be gold bugs, CNBC reporter Steve Liesman noted. Thirty-one percent of Trump voters prefer gold, versus 12% of Clintons supporters.
CNBC anchor Simon Hobbs reacted strongly to the results. Is it normal for people to rank gold above stocks? he asked Liesman. Thats a major turn in psychology there.
The typical Trump voter is more pessimistic and more angry and that shows up in their preference for gold right there, Liesman speculated.
Forward P/E ratios are high, Fed admits: In the category of stocks, 13% of Trump backers say equities are the best investment, while 23% of Clinton voters prefer them.
But where are these three investment classes headed? And which is truly the best for these times? Gold has a lot going for it right now. With $10 trillion (and counting) in sovereign government bonds now yielding less than zero, gold arguably for the first time in recent memory has a positive carry. And with the Federal Reserve now cutting back the pace of its interest-rate increases for the foreseeable future, the U.S. environment for the yellow metal also is optimistic.
What about stocks? According to the Feds own Monetary Policy Report (June 21, 2016) to Congress, equities are leaning toward pricey.
Valuation pressures have generally stayed at a moderate level since January, though they rose for a few asset classes, it said. Forward price-to-earnings ratios for equities have increased to a level well above their median of the past three decades. Although equity valuations do not appear to be rich relative to Treasury yields, equity prices are vulnerable to rises in term premiums to more normal levels, especially if a reversion was not motivated by positive news about economic growth.
Is the housing bubble also back?: And high-profile investors like Carl Icahn also see the stock market as rich and propped up by the Fed. I look at this market and you just say look at some of these values and you just have to wonder, he recently told CNBC. The Federal Reserve is holding up this economy. I just dont think you can have [near] zero interest rates for much longer without having these bubbles explode on you, so you need fiscal stimulus.
When Americans start looking at housing as something to speculate on, thats actually the biggest indicator I think in this modern-day housing world of a bubble, said Shari Olefson of The Carnegie Group.
Ironically, though, even as housing prices are rising, the U.S. homeownership rate has dipped to about 63.5%, near a 48-year low. With high-quality jobs scarce and student-loan debt exploding as home values climb, the U.S. has become a nation of renters, with wealthy investors and corporations scooping up housing to become landlords.
If theres one thing we should have learned from the housing bust, its that rising home prices arent an unalloyed good, Bloomberg columnist Justin Fox noted. Rapid priceincreases in the early 2000sdirectlyled to the subsequent crash. Sale prices lost all connection with both rents and incomes; after a certain point they were going up mainly just because they were going up, and buyers feared missing out. That couldnt go on forever.
Hot air in commercial real estate: And its not just housing prices that are inflated. What is less known to investors is the massive amount of forced hot air that has been blown into the commercial real estate market, financial manager Michael Pento recently argued. For example, commercial real estate prices have increased by double digits for the past six years, according to The National Council of Real Estate Investment Fiduciaries. Also, according to the Real Estate research firm Green Street Advisors, commercial property prices now exceed the 2007 prior peak by 24% overall. And in cities such as Manhattan, preferred office buildings and apartment complexes are 60% higher than what existed during the previous housing bubble. Of course, such lofty values have driven National Retail cap rates down to the subbasement of history, at just 6.5%. But this Fed-induced famine has caused yield-starved investors to embrace low income streams in the hopes if they ignore this current bubble it wont pop in the same manner as it did eight years ago.
With real estate and stocks looking frothy amid slowing global growth and a dozen other economic land mines around the world, while gold has made a steady, measured climb back into bull-market territory, a strong case can be made that the yellow metal is the best investment for the uncertain times ahead.