patrick.net

@HeadSet,

I think you've nailed the source of Z's "26%/year" claim. Ignore the cost of servicing your "leveraged investments" (mortgages), ignore the cost of prop. tax, insurance, maintenance, prop. management, etc.), assume you bought near the last cycle bottom and sold near the top, and sure, you're a RE tycoon.

"his overall bias is familiar to anyone who has been posting here for any length of time: he’s pro-Fed, pro-bankster, pro-debt and pro-inflation."

In other words, in debt up to his eyeballs.....

Boston Transplant,

Your welcome, but in truth it was more of an "informal survey". Without question though, patterns emerged. It's further skewed by the dominance of PNW issues, Nike, Starbucks, Portland General Electric along with scores of local OTC companies. The reason I can say leverage isn't necessary to "blow up" an account is b/c many accounts existed for the sole purpose of custody for PGE shares. As you'll recall PGE was bought out by Enron and these (1) holding accounts were absolutely wiped out.

The branch I worked at held 225 mil. in client assets during the 4th qtr. of 1999. By Fall of 2002 it was barely above 100 mil. I HAD to know where so many investors had gone so wrong!

While in the past I have used the equity in my primary residence toward my personal balance sheet (for loans etc.) I've NEVER calculated it into my overall investment performance! That's not cricket!

I haven't heard anyone singing "O Canada" yet....it would be nice to hear it in French if you don't mind. The loonie passed the US dollar this morning.

It is given that loonie will pass the dollar.

I am expecting AUD to pass the dollar, give it another 12 months.

I do fit the description of being “pro-Fed, pro-bankster, pro-debt and pro-inflation.” Those elements are all favorable to making money.

However, I am not in debt up to my eyeballs. My total debt is less than 13% of my investment assets. In addition, I own my home debt-free.

It is true that some people fail to count some of their expenses when calculating their profits. This is not the case with me. I am very experienced in financial accounting matters. My investment returns are properly inclusive of all income and expenses in accordance with the proper GAAP and tax accounting rules. Nothing is left out.

Returns such as mine are very common among successful private investors. I am not the best investor in the world. In fact, in many investor circles my returns would not be considered unusual. For example, there are many hedgies who would be disappointed with my returns. And venture capitalists generally expect to do better than I have done.

As for timing, picking cycle turning points a few times per decade is nothing like being a day trader. I find it interesting that anyone who believes that they successfully predicted the housing bubble and crash would refuse to believe that I (as a lifelong and trained investor) could not make money from using similar market insight.

You may not understand it, but that does not make it only half true.

An interesting point:
http://www.thestreet.com/s/kass-bernanke-made-a-big-mistake/markets/activetraderupdate/10380295.html?puc=googlefi

The thing is: Lower Fed Rate ==> Falling $US ==> Falling Bond Prices ==> Higher real Long Interest rates ==> worse housing crush

Yes. We have changed direction. The previous higher fed funds rate was choking the economy, which in turn reduces inflation, which in turn lowers long-term interest rates, which makes housing payments lower. Reversing this effect is what we will now see.

Zephyr Says:
As for timing, picking cycle turning points a few times per decade is nothing like being a day trader. I find it interesting that anyone who believes that they successfully predicted the housing bubble and crash would refuse to believe that I (as a lifelong and trained investor) could not make money from using similar market insight.

That would involve anticipating 9/11, then watching interest rates get set low and knowing they would stay low for years, then picking up masses of property, all within a few weeks... did you also have any puts on the airlines at that time, by any chance?

Most of the bears and bubbleheads here did *not* 'predict' the bubble, as it was partly precipitated by 9/11. It has been a retrospective realisation about the various factors -- easy credit, subprime expansion, low interest rates, shaky stocks post dot bomb. Unless you factored in an early sub-prime surge prior to 9/11 (was there one?), and you just *knew* that would create a price boom. All a bit unlikely. A few people in the property/MB business *may* have got set when they saw some of the confluence of factors... The Zeph is starting to sound like the Kiyosaki, infinitely wise in arrears, knew it all along, of course, and got insanely rich at the time (by selling nylon wallets and get-rich-quick books to MLMers...)

I do fit the description of being “pro-Fed, pro-bankster, pro-debt and pro-inflation.”

Thanks. Always nice to see someone honestly own up to his/her personal bias.

Since turn-about's fair play, I should own up to mine too (which should be pretty obvious to all by now): I am horribly biased in favor of honest, productive, working-class Americans and against paper-shuffling crooks, fraudsters, and Wall Street greedbags who demand that the financial system be rigged for "heads, I win, tails, you lose".

Those elements are all favorable to making money.

If you happen to be a paper-shuffling crook, fraudster or Wall Street greedbag. Those elements are not-so-favorable for ~98% of the working American public.

Returns such as mine are very common among successful private investors. I am not the best investor in the world. In fact, in many investor circles my returns would not be considered unusual. For example, there are many hedgies who would be disappointed with my returns. And venture capitalists generally expect to do better than I have done.

As I don't have your Schedule D's for the last 20 years at my disposal, I guess I'll have to take your word for those returns. And, as I haven't the foggiest as to what represents "average" long-run returns for your typical hedge fund or Thurston Howell III-type investor, I must again defer to your expert opinion. Unless of course someone else who works in the 'biz would like to post some corroborating or contradictory stats. (On a related note, Randy was not banned from this site, he just chose to stop posting primarily thanks to you-know-who.)

Different Sean said:
infinitely wise in arrears

Heh, heh. Nice.

SP

You guys are really stretching it to trump up some kind of argument to make my performance sound unrealistic. Posting sophomoric innuendo must be a fun diversion for you. However, if you spent that energy trying to learn how to make money from these things you could be so much better off. Perhaps others who read this blog will be interested in learning something about making money.

All that I have posted is true. And no, I did not anticipate 9/11 in making my investments. Nor did I rush to invest because of it. In fact, I made no significant investments at all during 2001 (before or after 9/11).

I do study market cycles. And in the late 1990s I did anticipate a normal cyclical recovery in real estate after the long and severe downturn of the early 1990s. After seeing prices start to rise in 1997, I started carefully buying rental properties in 1998 for what I expected would be a typical and long recovery. I also thought stocks were overvalued, so I sold nearly all of my stock in mid 1998 (the Dow was at about 9300).

In 2000, after the tech stock bubble finally burst, the Fed started rapidly cutting interest rates. They had already cut the Fed Funds rate in half (to 3.0%) before 9/11. After 9/11 they cut the rate a lot more, and by 2003 it was only 1%. I knew that all this should eventually stimulate the markets.

In 2002 I also saw that the fear of the coming war with Iraq was weighing down on both the real estate market and the stock market. I was confident that the markets would regain strength after the war started. So I bought as much real estate as I could leverage myself into during 2002 and 2003. With lots of debt!

I also thought stocks were cheap (Dow about 7300), and I bought as much stock as I could (also with debt) in early March of 2003 just before the war started in Iraq. (It is an old cliché to buy on sound of cannons, because war is usually good for stocks).

Then I just waited for the prices to peak and start to decline a little. Real estate was clearly in the exuberance phase, so when the market started to look glutted and prices stopped rising, I sold some, and paid off some of my debt in early 2006.

When the Fed Funds rate rose rapidly past 4.0% in late 2005, I figured that the party would probably end in about two years (typical historic lag – not a prediction).

Stocks continued to look good to me until late 2006 when I worried that the peak was near. So, I started selling on rallies - until last month. I have now sold about 70% of the stock that I once held, using the funds to pay off nearly all of my debt and to establish cash pool for new investments.

Now I am watching and waiting to see what to do next in stocks. And I continue to just wait for the real estate market to hit bottom so I can aggressively buy real estate again.

Predicting the future is not required. I wait for the trends to emerge. It’s a cycle that repeats itself over and over again. It is not hard to play the cycle if you pay attention.

Whoops... Should be: ...(to 3.25%) before 9/11.

Make sure and tell us before you start to buy either stocks or real estate again Zephyr.