Originally posted by @Frank Wong:
Great posts everyone. Markets go in cycles, but past performance is not indicative of future returns. They do give us warning signs on when to tighten up and be conservative. We have been on a tremendous bull cycle which we could be on the tail end of things. A correction is surely in the cards given the scope of everything mentioned.
I try to keep it simple. Not every home in the area can be a million dollars. Million dollars in West Oakland, please good luck with that. Incomes don't justify these prices. I see the crises starting with tech, drops in stock prices in tech companies that are making money and not making money. Job layoffs in tech will have a ripple effect. How bad the ripple effect we don't know. We also have a major currency crisis that is going on. The big thing we have that no news outlet is talking about is QT. When you pull 30billion out of the markets each month you are draining liquidity. Its that simple less money in the system equals a contracting market add that with rising rates. Well, that's bad news bears.
Does this mean a crash does this mean stop investing? No, not really. Just know your risk. Don't be over leverage. I am conservative and hate debt. When you have no debt or very little it gives you one thing to survive any downturn. HOLDING POWER. I think Jay mentioned a guy cashing out his house to buy Hood homes in Memphis. That's crazy to me. I think a lot of people have only seen one cycle which is up. They don't remember the last real estate crash or dot come bubble of the early 2000s. Risk Management is key.
If you are not overleveraged and have cash. You can survive the downturn whenever it happens and you can also buy some deals. I look to buy when the markets are going up and down. Like Warren Buffet says "The market transfers money from the impatient to the patient"
I agree with you that there is a good chance that the bubble will take place in Tech. Just look at all of the inflated values centered around the industry in the Bay Area. A large part of the problem has been easy money and over inflation in the equity markets. As the markets heat up we tend to see exponential growth in value due to the historical trend nature of financial forecasting and companies feeling that they have to meet industry bench marks in performance in order to not under perform the market. It is one big self fulfilling prophecy and at the end of the day there needs to be a correction because the trend simply can not be sustained. If you increase volume forecasts and cant reach the volume goals then the only way to meet goals is through increasing prices, which leads to price inflation, which leads to...
Personally, while many people will disagree with me, I believe the monetary tightening and increased interest rates is over due. Yes it can potentially contribute to the beginning of a financial recession, but it can also mitigate the effect when managed properly.
