Great post. Thanks for your insights and for the kind words.
I too bailed on the market before it tanked but I haired out early, in December of 1999. I took a nice profit but didn’t have any huge positions. I told everyone I knew to get out, but alas no one really listened to me (the froth and mania was unbelievable but not near as bad as this real estate market), except my personal trainer at the time, who left the market with 10 times his annual income (I put him in QCOM options).
Many of my friends literally went bankrupt riding the market all the way back down. My brother-in-law, who was in Dell Computer at the time, rode a two year, $ 180,000 profit all the way down into a dark hole (buying on the dips), resulting in a $ 30,000 loss. I warned him three times to sell but he wouldn’t listen. (I was trading options, futures and currencies at the time, because my primary business, real estate, wasn’t doing all that well).
I am 100% in cash now (but looking at taking some small positions in index funds, ETFs and Bershire Hathway – B, but short term until I see a real trend) because even though the stock market is trying to move ahead, I think this housing bust is going to have far, far reaching consequences and impact everything but the absolute most conservative of investments, resulting in any short term gains in the stock market being compromised by a much larger force (maybe even a world wide depression). I think a lot of folks are going to get hurt badly, not just in the US, but worldwide. Quite frankly, the current world financial situation scares the crap out of me.
I sold my last large development project in early 2004 to one of the largest public builders in the US, just after I started to see what I perceived to be small cracks in the market. Flush with cash, they made me an offer I just couldn’t refuse. At first I thought I had sold out too soon as the market continued to climb after I sold, but now I see the timing was perfect (pure luck). If I was to sell that same project today, I would probably receive $ 20 Million less (about half of what I sold it for) due to huge cost and fee increases over the last two years and the general slowdown in the market. As you know, it’s always good to sell on the way up, not on the way down.
I structured the sale so that I pay no taxes until I am a very, very old man and maybe not at all if I die before the contract is due (this was done through a series of trusts and a private annuity agreement, which will ultimately benefit my children). So now I am sitting on a huge amount of cash, am completely debt free and am patiently waiting for a good investment idea to surface and when it does, I’m backing up the truck (but not before I share it with members of this website). I am totally willing to wait as long as it takes and it may take several years (as you know, patience is a huge virtue in the world of investing).
I am clear that it wasn’t intelligence that blessed me but sheer luck of being in the right place at the right time. (I have been in the wrong place at the wrong time twice before in my life and lost everything I built up as a young man not once, but twice). But the wisdom gained via my mistakes has made me realize that it is much better to be conservative with your capital and focus your investments, as opposed to taking huge risks. The cardinal rule is capital preservation. The second rule is don’t get greedy, you’ll never go broke taking a profit.
The bottom line is this website is a great place to learn and share knowledge that comes from many perspectives. I am truly humbled by the members’ willingness to share their experience and insights in this real estate market (and other markets) and blown away by the level of intelligence and candor shared in the forums. (Sheesh, there are “experts” out there charging $ 500 – $ 1,500 an hour for information not half as useful as what I find here). Hopefully, we can all help one another to gain more knowledge during the uncertain times that lie ahead, helping to keep us and our families safe from financial ruin.
Finally, in response to one post that stated wealthy people wouldn’t waste their time on this website (paraphrased), I say wealthy people spend 99% of their time researching and planning and 1% of their time implementing. This website has broadened my perspective enormously and I sincerely thank all of you for sharing your insights, data and opinions.
Anyone with wealth who doesn’t continue to listen and learn and remain open to new ideas is a fool and is someone who is soon to be painfully parted from his/her cash. Believe me when I tell you this, those of you who visit this website are miles ahead of the general population in your knowledge of financial matters and some of you will be the captains of capital tomorrow, or at the very least, financially secure. This is a very exciting place to be!
