selling home to put everything into stocks
I meet someone recently talking about the stock market. I talk about how I do multi-market investment research (mostly FX at the moment). He says he opened an FX account but didn’t do anything yet. I immediately test him by asking him if he wants to receive my research. He looks up to the sky, hesitates, and says, “Well … uuhhhh …. nooooo, I have an investment ….. advisor (?)”
He says in a nonchalant way that the S&P last year was down and he is up 12% in his retirement accounts. Fine.
He talks about how China affects the current markets situation. OK.
He talks about how to buy stocks when the central banks come in and pump everything up. OK.
He adds to his credentials saying he works for a huge transport company for the last 30 years. Fine.
I then cut through all the BS and ask him, “What are you going to do if the S&P goes down to 1550?”
He says, “I AM GOING TO SELL MY HOUSE AND PUT EVERYTHING INTO STOCKS! It’s going to go up guaranteed.”
He continued to talk, and I neither heard nor remembered anything he said after that statement.
One of the guys in the research group mentioned that during the dot-com boom, he experienced something similar in Silicon Valley. In March 2000, he had a discussion with some tech guy about the state of affairs, and whether this was a technology bubble. The tech guy denied everything my friend said, and loudly proclaimed to him:
“PALO ALTO IS THE CENTER OF THE UNIVERSE!”
I asked him how he felt at that time. He said he was like, “Uh oh ……”, and then the Nasdaq index dropped about 75% in less than three years.
He doesn’t know what happened to that tech guy.
At the end of 2005, I tell open-minded coworker “A” that a real estate crash is coming. A tells always arrogant coworker “B” what I said. B is adamant that the real estate market is going to go up and never go down, especially near the highly-rated school district. B says I “don’t know what the f-*k I’m talking about”, and B thinks I’m a dumba**. That was about the peak in the market.
Now everyone is BTD. Looks like a bounce is underway. Maybe we make new highs. Maybe I am totally incorrect. I don’t know.
I want to know one thing: if the S&P 500 does go down to 1550, will he sell his house and put everything into stocks? Is he going to say that the area we live in is the center of the universe?
If he does any of the above, I’m getting short risk.
Follow trends, then fade.