The Valor Blog.
Investment News and Views, Direct from Our Team.

Buyer Beware!!!

John Templeton has always espoused that the best time to buy is at the point of “maximum pessimism”. The opposite of this is that the best time to sell is at the point of “maximum optimism”.

Whenever you hear the words “you will never make money from ‘xxx investment’ ever again”, it is generally the point of maximum pessimism and is the time to buy. ‘The death of equities” in the early 80’s before the largest stock rally in history is the perfect example. I read an article (which I need to find again) which used similar phrasing about US single family homes in mid 2012. Having made well over 100% return in less than 2 years on the properties I bought in Atlanta, I can assure you that the “never make money ever again” phrase should be music to your ears.

Many of my friends and family think I am a permanent property bear. Far from the truth. I bought two properties in the US in 2012 for around $45,000 each. Would I pay $800,000 for the equivalent property in a similar suburb in Sydney? I can assure you no.

The opposite phrase to “never make money ever again”, is “if you don’t get in now, you will never get in”. When you hear these words, this is generally the point of maximum optimism. Run for the hills!!!

There is talk that the younger generations will never be able to get into the property market because of the high prices. This is eerily similar to “if you don’t get in now, you will never get in”. I believe that we are very close to the point of maximum optimism.

Knowing we are closer to the point of maximum optimism doesn’t mean that I have any idea of where prices are going. All I know is that it is time to avoid housing and banking like the plague.