What’s the Worst Asset Class for the Next 5 Years?

Summary

• Nick Maggiulli leans towards private assets having worse returns than US residential real estate over the next 5 years, citing limited redemptions, markdowns (e.g., 40 cents on the dollar), and impatience among investors.
• Ben Carlson highlights data showing private equity assets held for over 7 years exceed $1 trillion with no IPO exits, suggesting valuations are likely inflated and due for correction.
• On housing, both speakers expect stagnation rather than a crash; Nick notes political factors and homeowner ego may prevent price drops, while Ben points to demographics (largest population group aged 33-37) potentially supporting demand.
• The "buy, borrow, die" strategy is discussed as a tax-deferral method for the wealthy (top 1-5%), involving borrowing against assets and using step-up basis; risks include margin calls and dependency on taxable accounts.
• A guaranteed 7.25% annual return for 30 years in a 401A plan is viewed skeptically due to solvency and counterparty risk; advice emphasizes verification of funded status and diversification.
• For retirement savings, a solo 401k offers higher contribution limits, but building a brokerage account provides flexibility for early retirement; gradual allocation to both is recommended.
• In the AI era, college education may shift towards valuing experiences like networking, social skills, and liberal arts, rather than just knowledge acquisition; 529 plans remain relevant despite AI democratizing learning.
• Disagreement exists on the severity of returns: Nick is more bearish on private assets, while Ben sees potential for okay returns if public equities perform well.
• Uncertainty surrounds the solvency of guaranteed return plans and the long-term impact of AI on traditional education models.
• Narrow observation: In expensive coastal cities, renting is significantly cheaper than buying, while in markets like Texas, Florida, and the Midwest, buying may be more justified.