An Utterly Serious Warning

[ecosophia]

There's an old Wall Street legend that came to mind today...

"In 1929, at the height of an economic boom in America, Joseph Kennedy Sr. (father of JFK) was working as a stockbroker on Wall Street. As the story goes, Joseph was walking around when he decided to sit down for a shoeshine. While polishing his shoes, the young worker gave Joseph some of his favorite stock picks. When Joseph heard the shoeshine boy giving out stock tips, he figured the party was about to end, and it was time to get out of the market. Joseph proceeded to exit his positions in the market and bought short positions that bet on the market going down. Shortly after that, the stock market entered a free fall." (Source)

The reason this came to mind is that I get therapeutic massage regularly these days, and my massage therapist mentioned today that she is getting into real estate investing. She's an extremely capable massage therapist -- but then I'm sure the shoeshine boy who did old Joe Kennedy's shoes was good at his trade, too. The rule remains the same: when people who have no previous background in investing start piling into some investment vehicle, a speculative bubble is in full swing, and will collapse catastrophically in the not too distant future.

I watched this same thing happen in real estate about a year before the 2008 real estate bust hit. When that arrived, everyone I knew who'd gone piling into real estate ended up in the bankruptcy courts. I also watched it in the stock market about a year and a half before the 2000-2001 internet bust hit, and a lot of people who'd put everything they had into interrnet stocks lost it all.

So, dear readers, if you find you're suddenly thinking about putting a lot of money into real estate investment, may I offer a piece of advice? You'd be better off shredding it all and flushing it down the toilet. Don't let yourself get suckered, because the market will sucker punch you.

Oh, and while you're at it, get ready for a whopping economic crisis, possibly as soon as this fall. The Dow Jones just hit an all time record, btw, and speculative investments are soaring while the productive economy lurches further and further into dysfunction. We're probably going to be in for a world of hurt within a year or so. Brace yourselves...

Comments

[(Anonymous)]

Your last paragraph pretty well describes my relationship with money. Our investing apathy may well prove to be a blessing. - Croatoan

[methylethyl]

Greed is always how the con artists latch onto you. Being satisfied with what you have is like armor :)

[ecosophia]

+6 mithril armor, in my experience!

[robertmathiesen]

I entirely agree about the importance of being satisfied with what you happen to have. We use a local bank, and we park some of our money in certificates of deposits, which are FDIC insured. Whenever we go to roll over a CD, the bank agent often recommends that we see one of its investment counselors. When we tell her we live frugally and we're entirely content with the modest funds we already have, you can almost see her brain struggling to grasp what we're saying: for her, it really "does not compute"!

And yes, greed is one of the several "hooks" con artists use to play the marks. (My step-grandfather worked as a carnival sharper in his youth, back in the very early 1900s. He had left home in Copenhagen to go to sea when he was 13., and once he got to North America, he jumped ship and made his way on land. So I heard some things growing up.)

[methylethyl]

We're not into the "investing" level of anything, but even in the small things it's like... when we say things like "oh, we don't need a smartphone" or "but why would we want a car we'd have to take out a loan for?" or "no thanks, we make those ourselves" some people kind of light up, like we gave them permission to say stuff they wouldn't otherwise, share tips and stuff. But most people sort of glitch out. It's so weird.

[(Anonymous)]

OP here. I say to myself, if I want something new for instance, I'd love to build a small boat, I force myself to build it entirely myself, with as many recycled or free parts as possible, and if a want incurs a whole host of maintenance costs, it's not a viable project.

I also can't recommend enough the whole approach of looking poor, or just as poor as your neighbours. It's probably the practical side of the rules of the mage - staying silent, appearing ordinary, simple acts of charity, and I do find that practising a certain gruff and grumpy exterior helps to banish off people you just don't want around. It's no joke, because in tough times, people will lash out at those appearing to be better than others.

[(Anonymous)]

maybe it's my decade of unbankedness speaking, but:

“I make myself rich by making my wants few.”