Posted:February 19, 2026
Categories: Economy, Stocks, Real Estate
In January, I ran the Naples Daily News Half Marathon for the sixth time. It’s by far one of my favorite races. It’s generally “cold” in Florida; the course is flat and fast, and it attracts a crowd of a thousand or so runners. My finishing times are getting progressively slower as “Father Time” catches up with me. Yet, for me, having a goal to train for on my calendar is highly motivating as a middle-aged amateur distance runner.
The race starts in the heart of downtown Naples on 5th Ave S. After a spirited start, where I tell myself to slow down, the race follows Gordon Dr. for miles 2 through 4, providing a glimpse of beachside homes lining the Gulf. It’s normally very beautiful and somewhat relaxing. At this point, I try to settle into a comfortable pace that I hope to maintain for the rest of the race. Mile 5 turns toward Port Royal, meandering through some ritzy neighborhoods. This year’s race offered an interesting glimpse into new architecture, as construction was underway on a few massive mansions. Occasionally, sitting in lawn chairs on their driveways, “1%-ers” would be cheering on the runners, sipping their lattes in peace.
The hardest part of the race is an out-and-back on Galleon Drive around miles 9 to 10, where the race leaders fly by on their way to the finish, which can’t come soon enough. Mile 11 funnels racers back onto Gordon Dr, where the finish is close at hand. The last stretch has a slight (very slight) uphill on 8th Ave just before a sprint (hopefully) to the end.
After spending so much time last year reading and writing about our monetary system, my run this year has made me think about what’s happened to our bifurcated economy. As the miles ticked by, my pace slowed a bit, and I wondered…how much is the total value of all the real estate I am running past? $500 million, $2 billion, or more? I had to find out. The answer: approximately $6 billion! You read that right: 6 billion dollars of real estate in a 13.1-mile stretch of residential neighborhood. It’s shocking enough to consider this conclusion in light of the fact that, in this same area of the country, many young families who live and work here, with 2 incomes, cannot afford to buy a home because of the dramatic wealth gap.
The Value of Real Assets
I don’t begrudge the owners of these homes. One should never judge another’s actions, especially when it comes to finances. We are all different, and we all are all entitled to make our own decisions, especially when it comes to how we spend/invest our money. Whether they know it or not, the owners of these homes are saving their money in a real asset- Naples Ultra-Luxury real estate. Since 1971, Naples Ultra-Luxury real estate has returned 12.3% annually. A beachside property that sold for $85,000 in 1971 now goes for a cool $50 million. What about the rest of our financial system since 1971? For the answer, I analyzed the returns of the following eight datasets from 1971 to 2026. The raw data1:
Average Annual Returns, 1971-2026
Visually, I’ve shown this data below, indexing the values to $100 starting in 1971.
Figure 1: Indexed Growth of $100 Invested in 1971 (8 Datasets)
Source: Various datasets (see footnote for all sources)1
Stores of Value vs. Wage Growth
Both tiers of Naples Luxury Real Estate (Beachfront and Non-Beachfront) delivered nearly identical returns (~12.3%), indicating that location within the neighborhood mattered less than the neighborhood itself. Clearly, this specific area of real estate has been an excellent store of value.
As I’ve written before, stocks and gold are also excellent stores of value and tend to closely mirror growth in the M2 money supply. We’re cherry-picking time frames here from 1971, but recall, this is the year President Nixon took the US, and consequently, the rest of the world, off the gold standard, entering a pure fiat global monetary system unanchored to anything real. Thus, scarce assets such as stocks (11.2%) and gold (9%) have outpaced the expansion of the money supply (6.7%) over the last 55 years, confirming their utility as a store of value.
The most striking data point is that wage growth has been trounced by asset growth, and has not kept up with money supply growth, barely outpacing price inflation (CPI). While a worker’s paycheck has grown 9x in nominal terms, the cost of living (CPI) has grown 8.4x. This means real wage growth has been almost zero (0.14% annually), while prime capital, such as Naples real estate and stocks (S&P 500), has compounded at ~12% annually. This illustrates a significant loss of purchasing power for labor relative to assets. Hence, my earlier example of the young family finding it difficult to afford purchasing a home in this area because of the zeroed-out wage growth. This data corroborates the system we now have in our country, the “K-Shaped Economy.”
The K-Shaped Economy
Some economists have coined the term “K-Shaped Economy” to describe the present US economic system. This system describes a bifurcated economic reality where specific segments of the population and sectors experience growth and prosperity (the upward arm of the K), while others face stagnation, decline, or severe affordability crises (the downward arm of the K).
The primary driver of our economy comes from those who own financial assets discussed above (stocks, real estate, etc.) versus those who do not. The top 20% of income earners hold roughly 71% of total wealth (see figure 2)2. While the top 10% of the economy, who own approximately 90% of all stocks, are the primary beneficiaries of monetary inflation and fiscal deficits. Because asset prices (stocks, housing, gold) have risen significantly, this group feels a strong wealth effect and continues to spend, driving headline GDP numbers higher. According to economist Jim Bianco, 50% of all retail sales are now driven by the top 10% of earners.3
Figure 2: Wealth By Income Percentile, 2010-2025
Source: BNY Mellon
Generational Divide
American economist and research analyst, Ed Yardeni, refines the K-shaped concept as a “Gen-shaped economy,” driven by generational wealth disparities, where:
A good visualization of this appears below. The blue line shows a measure of consumer sentiment in the United States. As this line drops, consumers overall are feeling less robust about their economic situation. Compare this to the level of stocks as measured in red by the S&P 500.
Figure 3: K-Shaped Economy
Source: RIA Advisors
Solutions
As we look at the path forward for this K-shaped economy, there are no easy shortcuts. Just as mile 10 of the half marathon tests your resolve, our economy faces a test of endurance. At the end of the day, our K-Shaped Economy and our debt issues are one and the same. Solutions include some combination of different roads:
Austerity/Default: This road leads to lower spending, higher taxes, tight money, deflation, and possibly even defaults.
Inflation/Financial Repression: This road leads to easy money, monetary inflation, and currency debasement. Government and central banks create more and more money, and increasingly work together to preserve the system through artificially low interest rates and forced purchases of government debt.
Growth/Productivity Miracle: This road leads to very high real GDP growth, supported by high profit margins. If this continues, the economy can grow its way out of the debt burden (or at least sustain it) through an earnings and technology boom, avoiding the hard choices of default or high inflation.
I tend to be an optimist, hoping for the third road (Growth Miracle) and planning for the second and first roads. To me, this is akin to hoping for my “C” goal time for my half marathon, but planning for a “B” goal (slower), and bracing for my “A” goal, which is always just to finish!
Conclusion
Regardless of which road our nation takes, we all have the power to choose: we can choose to influence our families and communities for the greater good. Choosing civic virtue will always affect where we live, with a ripple effect that extends across our nation as a whole. These can include improving financial literacy, charitable giving, raising families to respect the rule of law, and mentoring young people. Ultimately, these choices will shape the economic path we walk.
As I analyzed my race in Naples this year, I realized that running past 6 billion dollars in real estate hurt my finishing time. Not by much, but it did distract me from staying “in the zone.” I understand the game. I understand our economic system, which, in those moments, frustrated me a bit. On the flip side, as running often does, it creates mental curiosity. Writing this article has reinforced my belief that while we can’t control what our policymakers decide, we can control our sphere of influence. “Racing” through life does not and will not, historically, look the same from generation to generation. We can run our own race. True victory is not winning the race. It’s running it the right way. It’s embracing the courage to endure until the very end and passing on our wisdom to those running behind us.
References
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Asset Allocation Quilt Sources: Bloomberg, Kwanti, MSCI, Russell. Large Cap: S&P 500 Index TR, Small Cap: Russell 2000 Index TR, World Equity: MSCI All Country World Index TR, International Developed: MSCI EAFE Index TR, Emerging Markets: MSCI Emerging Markets Index TR, Bonds: Bloomberg US Aggregate Bond Index, Cash: US Treasury Bill 90 Days Rate, Gold: Gold Spot, Commodities: Bloomberg Commodity Index. All data represent returns for the stated period. Unlike the results in an actual performance record, these results do not represent actual trading. Additionally, since these trades have not been executed, these results may have under- or overcompensated for the impact, if any, of certain market factors, such as a lack of liquidity. In general, simulated or hypothetical trading programs are also subject to the fact that they are designed with the benefit of hindsight. No representation is made that any account will likely achieve profits or losses similar to those shown.
