But it really doesn’t matter what you think it’s worth.
Or even what it is “really” worth.
All that matters is what other potential buyers will think it’s worth. And I guess what you’re saying is that eventually, once we all sober up, we have to come around to good old common sense.
but others are crazy. from the top down, every aspect of government, finance and law is crazy. we never really fully sober up. So isn’t it still timing in the sense that you ahve to say prices are relatively sober right now, as opposed to stupid drunk pricing? How is that not a form of timing.
I might very well buy the 5 million condo if i thought others were going to think it’s worth 10 million in 5 years, regardless of the rent. but even if we assume people are goign to come to their senses, that happens ona timeline, a downward slope,a nd one has to pick a moment of relative soberliness to put money in.
even though you analyze for value, the investment has to be made at a specific time. which is…timing.?[/quote]
I don’t agree with your basic premise. This is a nihilistic view: valuation doesn’t matter, nothings matters, etc. But it does matter, or at least it always has. Historically, there has been a strong tendency, on average, for asset classes to revert to historically middle-of-the-road values. If you want to make the case that that won’t happen any more, fine — but then you’re doing the “this time is different” thing.
Maybe it is different, but I think that this is the less likely case. Every time valuations are wacky, in either directions, there are always lots of rationalizations for why it will always be thus. You just did it with “everyone’s crazy, and will always be crazy”. That’s no more compelling to me than what we heard during the housing bubble, they’re not making any more land, etc. (And btw, the rationale you described for buying the condo for $5 mil is exactly what people said in that bubble). It’s just a narrative, and those come and go, following the market around the whole way.
It’s human nature to think that there must be a good reason why the situation will endure. But if you look back, it hasn’t been like that. To use your metaphor, people have always sobered up in the past. (And in the case of too-cheap assets, I guess they’ve gotten over their hangovers). I have yet to hear a good reason why this should have changed. In the other thread, I linked to an article specifically talking about why it’s unlikely to have changed: https://www.pcasd.com/content/will-value-investing-rise-again
(And scaredy, you might appreciate this irony… the reason I think value investing will continue to work is that everyone is crazy and will always be crazy… or at least will overreact. With the requisite moments of clarity).
“So isn’t it still timing in the sense that you ahve to say prices are relatively sober right now, as opposed to stupid drunk pricing? How is that not a form of timing.”
This is not market timing because you’re making the decision based on valuations and long-term (say 7-10 year) prospective returns. Market timing involves much shorter timeframes, and also involves the prediction of a specific path (as opposed to just a distant, and approximate, endpoint). So no, I don’t see that as “market timing” based on the conventional understanding of what market timing is.
“even though you analyze for value, the investment has to be made at a specific time. which is…timing.?”
Every investment has to be made at a specific time! If that’s your definition, then everyone on earth is a market timer.
