Be a Wolf, Not a Sheep

The last Great California Recession  dragged on for an interminable 5 years [1991-1996], and, like today, was characterized by steadily dropping prices, massive foreclosures and multitudinous short sales.  Afterward, of course, as we all know, housing prices not only rebounded but exploded here in SoCal where space is limited and where everyone in the country apparently wants to live.

As prices were skyrocketing, many clients asked me: “Diane, why didn’t you make me buy something then?” Yeah, right.

Then, as now, the panic atmosphere prevented most people from snapping up the bargains. Uh, prices are still dipping, right? they would say. Or, uh, nobody’s buying, right? Maybe I’ll get a better deal next year…And so the sheep followed the rest of the flock…Like the rest of the sheep, they got interested in buying when they noticed everyone else buying…You know when prices were spiking again.

So, what happened to these poor sheep?  They were the ones complaining to me, “Hey my brother bought two on a lot for $200,000. Now, it’s worth $600,000,  and he gets $3500 a month in rent. Why didn’t you tell me to buy then?”

Well, I did, but you wouldn’t listen. Like the rest of the sheep, you ran with the flock. Your brother didn’t.

Is Warren Buffet’s way the right way? He recently sank $5 billion [yes, that’s billion] into Goldman Sachs. Since the company was hurting, he was able to negotiate a sweetheart deal. Then, last week, he put another $3 billion [yes, that’s billion] into  GE, negotiating another fabulous deal.

Warren Buffett, the Sage of Omaha,  lives and breathes the old adage, “Buy low and sell high”. Now, that our environment is super-charged with panic, mania and overwhelming fear, we can all understand why that seemingly obvious advice is so hard to follow.

If you’re a sheep, it’s hard to become a wolf. If you want to make money, you must be a wolf.

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