In the recent past, when I needed a break from following the financial markets and investment world, I frequented a nearby ice cream store with my kids.
When I walked by its empty storefront on winter nights, I often wondered why it didn’t offer something a little more inviting like, say, hot chocolate or Belgian waffles.
That ice cream shop recently shut down for lack of business, but the neighborhood coffee shop is always bustling. In fact, the small coffee shop now offers tasty and toasty Belgian waffles, and it’s rolled out ice cream for warm, sunny days.
I thought about these two different business models when contemplating today’s fear-filled securities markets. It’s still awfully cold out there.
Individual investors are wary of stocks. Seeing economic chaos all around them, they have sat out the more than 60% rise in equities since the March 2009 low.
And demographically dominant retirement investors are starved for income thanks to the Fed’s continued zero rate policy, pulling in a measly $540 a year for their $20,000 investment in benchmark 10-year Treasuries.
While eschewing equities, individual investors are piling into Eisenhower-era bond yields, and they are consigning much more of their wealth to money market funds, where the current 7-day yield is 0.03%.
Can individual investors do better than make 6 bucks a year with 20 grand stashed in a money market? A couple of savvy operators on both coasts think so.
Edward Mermelstein, a Ukrainian-born New York real estate attorney focusing on an international, mainly Eastern European, clientele, thinks Americans, still scarred by the real estate meltdown, are ignoring a historic buying opportunity.
“The rest of the world knows America is on sale and right now see a $75 million office building as a much smarter investment then a $50 million mansion.”
In fact, the same gloomy statistics that have paralyzed American investors — monthly construction starts at historic lows — are precisely what gives Mermelstein such confidence.