QEs and Buying Real Estate (inflationary worry induced buys)

[Billy Zhao]

I was watching an investment show on youtube. The topic is whether the current stock market is in a bubble, and the impending crash will never come. One of the fund managers mentioned that most big investment funds/houses and Warran Buffet all miscalculated how the market will go: that they all predicted a deep decline to 30-40% in March and April. Instead, the market trending upward and just hit a record high last week. This prompts them all shifting strategies and starts buying more equities. 

While they disagree on whether there will be another major downtown in the short run, they all seem to agree, because of the large amount of liquidity (print money) from Feds, the dollar will be further weakened (inflation). So you are better off not holding cash but to buy something whether it's in stock funds or in real estate. And this is why real estate pricing also hit record levels.

I find this interesting since I do notice that for most markets housing is going up like crazy and people are worried that their cash will worthless so they buy up anything even above market price regardless of the cash flow situation. This puts pressure on the people holding the cash looking for deals to get nervous because they worried that they may miss out on deals, so they start to buying properties that may not be the most ideal cash flow wise. This looks a lot like a Dutch Tulip crazy at its hype but many people insist that this is not the same thing.

This is the moment that the famous Buffet quote "be afraid when people are greedy, greedy when people are afraid" doesn't seem to work. That is, people are afraid and greedy at the same time.

What's your take on this? Hold on to your cash waiting for the bubble to burst, or get something while you can still afford it?