Investing Versus Flipping

Investing Versus Flipping Chris Brightman, Research Affiliates

[klarman]

Key Points

1. High stock prices, just like high house prices, are harbingers of low returns.
2. Investing in price-depressed residential rental property in Atlanta is like investing in EM equities today—the future expected long-term yield is much superior to their respective high-priced alternatives.
3. Many parallels exist between the political/economic environment and the relative valuation of U.S. and EM equities in the periods from 1994 to 2002 and 2008 to 2015.
4. Our forecast of the 10-year real return for U.S. equities is 1% compared to that of EM equities at 8%, now valued at less than half the U.S. CAPE.

I have the good fortune to live and work in Newport Beach, California. Among the global investment community,...