BANKING IS THE MOST competitive and lucrative business in the world. It always has been. But here’s something you might not realize: Whether you’re a teacher, an executive, a construction worker or a salesman, the reality is that you are a banker, too — in charge of thousands of dollars of liquid assets every month.
Nowadays we think of banks simply as electronic accounts on which we can draw checks and earn interest. But historically, banks’ main purpose has been to protect assets. Years ago, one needed a local bank to store valuables in a safe deposit box, and depended on a bank to earn steady (if unspectacular) returns that would at least keep pace with inflation. Despite the once-per-generation stock market mania that sweeps over America, investors historically have been far more concerned with holding on to their wealth than with striking it rich with their investments. Rightfully so.
Before you can invest, you must save. And regardless of what the market does over the next few months, I predict the Depression-era savings mentality I first wrote about a couple of months ago will make a far bigger comeback than most people realize. The truth of the matter is that, right now, as much as it hurts to admit it, most people aren’t investors as much as they are aggressive savers — willing to take risk, but on a much more limited scale. And although stocks have historically been the highest-returning asset class over the long haul, for the first time in memory investors are unwilling to stick around to see if history repeats itself. (more…)