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)]

I've been buying market garden equipment but our absentee landlords changed their mind and won't let us use it here. Instead of selling the walking tractor and screen house parts I decided to push the limits and grow what we need for subsistence using caterpillar tunnels. Now the neighbors have started moving in and planting in the back of the lot that I had cleared out for the larger structure, basically trespassing. It's a tricky situation because if we rat out the neighbors they will return the favor since this is all zoned residential. So far I've decided to make our presence known by planting a few things and cutting sight lines through the brush. Honestly though we're waiting for an opportunity to move farther away from the city since the gangs in the dueling low income housing projects down the street are killing each other about once a week now. Unfortunately the market is still brutal at the moment and our current deal is amazing compared to what's out there.

So far it's been all about muddling through. No easy answers, just try and work with the shifting conditions and prepare to jump on the right opportunity. I'm grateful every time I go to my cushy day job, but it would feel a whole lot better if I was making money on my side gig without getting hassled by the frothy by-products of the real estate frenzy.

KVD

[methylethyl]

Similar here.

Giant side-yard on our rental. But reduced to gardening on the sly because landlords are not a fan of urban agriculture. And desperate to move somewhere I could have, say, goats or rabbits without having them stolen. Or where I could enjoy agricultural luxuries like an outdoor spigot (which, mysteriously, our rental house lacks-- can't even wash the car in the driveway!).

But land prices... Jiminy Cricket! Only the gods could afford a whole acre around here. And it's not like it's a nice town.