patrick.net

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.