[Doofrat]

I said:

When the market sours, condos are going to get hit first and the hardest because of this, but I don’t think it’ll directly affect the SFR market, rather they’ll both be affected by the market on their own.

What I should have said was I don’t think the condo downturn will directly affect the SFR market.

I think they’ll both get hit, but I don’t think that condos going down in price will affect SFR prices directly.

[Doofrat]

carlislematthew,

Obviously both are affected by the market, but I don’t think one affects the other since the buyers of each have different reasons for buying.

I see a SFR as desireable to a couple that has kids. If they feel that they are going to be priced out, they will jump into the market thinking that they need space for their family and they don’t want to lose the chance at getting their “nest”. I think they will hold on longer for the kids than someone who has a condo.

A condo is different because in San Diego, they are the lower priced alternative. I think this has led to alot of speculators buying them, but it also has led to alot of people buying these because it’s the only thing they qualify for, and this has caused the “price/what you get” ratio in condos to soar.

When the market sours, condos are going to get hit first and the hardest because of this, but I don’t think it’ll directly affect the SFR market, rather they’ll both be affected by the market on their own.

[Doofrat]

Jim,
Thanks for the info on the bonds. What I probably meant to say was a CD. My focus is on stocks, and I kept a good percentage of cash from 2002 to 2004 since there seemed there was no good liquid alternative worth anything back then. I don’t really know about the various alternatives to the markets like bonds, but with rates rising, it’d probably be a good time to learn, I like Rankandfile’s suggestion to have a thread devoted to investing in cash.
So do you think it’d be better to put money in a CD as a safe storage place?

Powayseller,
I’d have agreed with you a couple of years back when everything did seem to be overpriced, but I think there are some good values out there now. In fact, my last purchase was COP as well. My only concern is for a deep recession that would affect the E part of the P/E ratio. I think that by going to 95% cash, you’re speculating on a market that can do some weird things, that’s why I only want to take half off the table. To be honest though, I don’t think you’ll be missing out on any major market rally IMHO, but I’m just as afraid of being completely out of the market and missing out on say four years of gains because I tried to predict that the market would tank.

Like you, I’m happy with the 5.5% a CD pays right now with what I take off the table.

So it seems that everybody believes there’ll be a recession soon (as Powayseller pointed out, they are a natural part of the market) Any bets on when the recession will start, and how bad it’ll be?

[Doofrat]

A couple of observations, and a question:

If you look at the S&P over the last 5 years you can see that prices have not moved at all. We’re at the same place we were five years ago. Why is this? Well, to me, it seems that P/E ratios have declined, while the prices have stayed the same. With interest rates being low, you’d think there’d be growth in the market, but this has not happened. Earnings have been increasing in this period, so the cause of this 5 year flatness would seem to be lack of confidence in the stock market which has been pushing down the P part of the P/E ratio.

There are two ways to look at this (positively and negatively):

1. It’s still a good time to invest in the stock market because this lack of confidence has pushed the prices of stock to levels where they are a good buy.

2. It’s not a good time to invest in the market when the market has not picked up steam with low rates and increasing earnings, as well as reasonable market prices. You have to wonder, if this is the best the market can do with all these factors that should be helping the market, and all it can do is stay flat, what will happen if rates are higher (both tightening all the free money floating around, and tempting people to pull money from the market and place it in bonds) and or earnings fall from many of the factors discussed on this site?

Personally, I have a very high percentage of my savings in stock. I weathered the dot.com bust with nary a scratch, but the possibility of a recession has me worried.

By following the advice of Benjamin Graham, I shouldn’t try to time the market at all, and just continue to invest on a regular basis (of course keeping enough cash on hand for emergencies). The only other option should I choose to muck with my investment allocation, is to place a percentage of my investments into bonds if I don’t like current market situation. With the relatively high rates out now, and the possibility of even higher rates, I’ve been toying with moving up to 50% into bonds (basically taking that off the table)

The question then is what to do with the other 50% that’s still in stock. Should it be put into commodity stock like oil stock, or gold funds, “recession proof” stocks like RCII, or should I just go along business as usual and pretend there won’t be a recession since placing 50% into bonds to hedge against a recession and or market collapse?

What do you guys think?

[Doofrat]

Yes, my wife and I will be there.

[Doofrat]

Anxvariety,

You said “imagine being in the stock market without having any stop losses set.. that’s how I feel about having my money in banks right now”

Isn’t buying gold bullion like investing in the commodities market (without the margin of course, but still) without any stop losses in place? If gold were to go limit down, do you think you’d find many ready buyers?

[Doofrat]

The Real Estate Investor Seeks Apprentice is actually just a scam that I believe realtes to selling Herbalife. I was curious when I saw all the signs here in Carmel Valley, and read up about it on the ol’ net. I tore down 6 of the signs today on my bike ride.

One thing I’ve noticed is when we go to lunch at restaurants is that the busier ones will have plenty of seats, but you still have to wait because they don’t have enough staff/servers to work there. It’s too expensive to live here for people who work those jobs (you know jobs where you’re not an executive, or a brain surgeon, or own your own country).

[Doofrat]

Powayseller,

What’d you get COP at? I’ve got a limit order at 60. Got close today.

Doofrat

[Doofrat]

saiine,

Quite a nice thread you got started here :). I’d say that the best advice was to talk to a financial planner, but as Rich pointed out, that can be fraught with problems, but like previous posters said, they will be able to look at your present situation and advise you accordingly, which nobody here did before giving advice (me included)

The most important thing I wished I’d asked was whether you had any debt (high interest car loans, credit cards, etc.)

There are three things you MUST do before investing:

1. Pay off your debt
2. Pay off your debt
3. Pay off your debt

If you don’t have any debt, then great, either read all you can about investing and prepare to spend alot of time researching (you really have to enjoy doing the research to do it well) and/or go to a financial planner.

One other bit of advice I can give with no knowledge of your present situation: If Vegas sounds like your type of vacation, don’t even think about doing it yourself, get a planner and listen to them.

Powayseller,

Although I also hold your negative view about the market, Like the housing market, I think it’s virtually impossible to time when it will fail (or if). I think there are a few good values out there now that have popped up since Buffet made that statement, and even he has been buying up stock lately. If you find a good value, it’s usually a good value no matter what the market does in general. Now maybe that thinking will end up with me holding a sign out on Nobel and Genesee, and if it does and the market tanks, please stop by and give me a dollar or two.

Check out: http://www.gurufocus.com/StockBuy.php?action=buy&GuruName=Warren+Buffett

and see what Warren Buffet has been buying lately.

[Doofrat]

[Doofrat]

saiine,

It’s great that your 26 and looking to save and or invest your money. Since you’re asking for advice, here’s my two cents worth: my advice for you is to be more aggressive at a young age and place your money in something other than a CD, or use a ratio to decide how much to place in conservative investments such as CDs, and how much to place in the market. For a young person, 75% aggressive and 25% conservative would probably be as conservative a ratio as I would go. The problem with CDs is that the money you place in one is barely outpacing inflation. Of course, the problem with stocks is that you could lose your money. If you diversify and choose wisely, you shouldn’t have to worry about losing alot in the stock market, and over your working life, you’ll probably get much better returns. Even if you begin investing just before a major market downturn, at 26, you’ll have years and years to make it up.

Pick up Benjamin Graham’s book, The Intelligent Investor and read chapters 8 and 20 first.

It’s only $12. Warren Buffet read it when he was just 19 and still thinks it’s the best book on investing ever written.

I wish I had first read that book at 26 instead of at 34.

Personally, my wife and I invest every dime we save by renting instead of owning.

[Doofrat]

I love the picture of the condo conversion too.

I know it’s a condo, but it sure looks like a cramped apartment with a new fridge, new countertops, and a two tone paint job to me?!?

[Doofrat]

Great idea, It’d be nice to see the Professor debate one of the real estate perma-bulls in a public forum. I think I’ll write in and volunteer the Professor as well (once he gets better, that is).

I love it when people point to a couple of positives in the present to justify the continued rise of an asset. Oh look, tech and biotech are surging presently, housing can’t go down. What do you mean housing could go down, look how much I’ve made on my house in the last two years!

[Doofrat]

What is the best venue to buy and hold gold? I’ve seen all sorts of different ways to do it on the Internet, but am at a total loss as to which ways are the best.

[Doofrat]

And of course, another difference is that you have to actually bring money to the table for a stock purchase, even on margin. Like you say, you have unlimited leverage with loans these days with nothing down. How do you calculate the leverage on a zero down loan?

[Author]

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