Last year, all the experienced people were telling me that it was a great time to buy real estate. And I took their word seriously because I generally trust real estate hearsay more than stock market hearsay. But the thing is, they've been telling me it's a great time to buy every year for the past fifteen years. So then, my process has been to judge how intense their "great time to buy" imperative is compared to previous exhortations. Was this the greatest "great time to buy"? That's what I sensed, and that's why I bought last year.
May 2010 Archives
When they say, "You can't outsmart Mr. Market" that refers to how well the stock market has "perfect information." This "perfect information" is what makes it so that when someone says, "You should buy such-and-such stock based on X piece of information," you can always retort, "How do I know X isn't already built into the price?"
So what about other markets? Does the real estate market contain perfect information? I'd say no. It's a "dumber" market than the stock market, and so you are more likely to beat the "House." Mainly because it often takes years for the real estate market to react to new information. Plus, real estate is easier to value than stocks.
If in the future, everything's free, I believe marketing will play a bigger role, and that the meaning of marketing will change.
For example, the GPL-published book Dive Into Python is available for free to download, and yet people still buy the book. And I'll contend that these consumers aren't stupid, but are rather paying for something else. They're paying the publishers to inform them of the book's existence. They're paying to have the book inserted into their shopping stream (whether at a brick-and-motar or online). And of course, they're still paying for the ink, pages, and binding, which many consumers still prefer over eBooks. Since the actual text of the book is free, nowhere in the shopping chain are they really paying for actual content.
If a banker get a bonus because they had a good year, but they screwed the company for the next 3-4 years, then what good is that? On the other hand, who would accept a pay package that compensated 4-8 years later? Maybe that's what stock options are for. But then again, it may be easier for you to cook the books or do some rapid value extraction to boost the stock price artificially, rather than invest for the long-term.
The incentive-structure for founders and IPO kids, on the other hand, seems more ideal. Their window is 4-12 years before the real payday. In a normal or recession economy, these kids try to build a compelling product that blows everybody away. There aren't enough accounting hacks that can fill that gap. Unless of course, we're in a bubble economy.
