Harvey Baraban views the ups and downs of the stock market with the cool detachment of someone who has been a broker for more than 30 years. Yet ask him what he thinks about the U.S. economy and he replies, "I'm scared."
For one thing, the economy has never before been so heavily influenced by events in other parts of the world, such as the military coup in Thailand that roiled global markets. Technology allows stock prices to change in an instant.
But that's not what really worries Baraban, now a California-based educator who is speaking at 7 tonight before the Puget Sound chapter of the American Association of Individual Investors in Mercer Island.
It is the steady erosion of wealth in the middle class that is dampening the American dream, he said. Coming from a die-hard capitalist, what he said is sobering:
"We're in that process now in America where greed is more and more important. We see the total value of the upper class is huge compared to the upper class 10 years ago. Take the top 5 percent of all Americans in terms of net worth compared with the same percent 10 years ago. Nothing has grown as dramatically as the net worth of that 5 percent. The other classes have shown very little growth. A society can't exist forever with that happening. I'm a big capitalist, but I'm nervous because it's out of control."
So what's his solution for the other 95 percent? Learn as much as you can about smart investing, he said.
The era of mutual funds is over, and ETFs or exchange traded funds have become dominant, he said. ETFs are index funds that represent an entire industry. There are about 250 ETFs on the market now, so investors should get to know how they work, he said.
He also predicts that interest rates will remain flat, and the time to invest in money market accounts is over. Instead, he recommends treasury notes bought on auction.
Even with recent softening in the housing market, Baraban concludes, "real estate is your best investment going forward."