Timing Markets

In the early 1900's a man named Bernard Baruch ruled the New york stock Exchange. He became an investing legend and ended up advising several US presidents. Well, during the 1920's there was a stock market craze going on and one morning on the way to work Baruch stopped for a shoe shine. As he sat there the guy working on his shoes started giving him stock tips. Baruch didn't say a word to the man but simply stood up, walked to his office and sold his entire portfolio. Of course the market crashed soon after.

So what does this story mean? It means that when someone in a "shoeshiner position" has been educated into an investment strategy enough to be giving advice it is probably a sign that the market has run it's course. I have recently experienced this phenomena in the wild world of Real Estate. We moved from California about a year ago when the market was beginning to soften and it was so fascinating because while there I watched people go crazy about real estate, everyone was either a loan officer, agent, investor, or remodel house flipper (including myself). Over the last year in Utah I have observed the same pattern. Everyone here is drunk on the 100k they "made" in house appreciation. So they are building spec houses, remodeling, buying building lots, and just plain going crazy!

I think I was fortunate to have just witnessed the California slow down so I was a bit less agressive here. Well about two months ago I was at a friends house and I had a "Baruch shoe shine" moment. My friend had 3 or 4 buddies over who were pretty young and uneducated and they started giving me real estate investing advice. They each had several spec homes being built and other projects going. I ended up not saying a word about my own experience but when the encounter ended I was consumed with the desire to sell anything and everything to get out of the market.

With the recent events of the lending industry being on it's ear and foreclosures at a higher rate today than during the great depression it's obvious that things have run their course on the recent boom. Everyone has to remember to ask themselves when they hear about some money making investment strategy, "Am I at the beginning, middle, or end of this trend?" Bottom line... to time an investing market you have to buy low and sell high. You know you have reached the "low" or beginning of a market trend when prices are down and there isn't some buzz going around. You are at the end or "high" of the trend when everyone and their dog is doing it.

By the way how many house flipping shows are on TV right now? I lost track after the flip this house and flip that house came on the air:)