Be Greedy When Others Are Fearful

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Be Greedy When Others Are Fearful

Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes



Be Greedy When Others Are Fearful – A Lesson From The Financial Crisis

“Be fearful when others are greedy; be greedy when others are fearful.” – Warren Buffett

There is a lot of fear in the market place right now. There was a lot of fear in the market from 2007 to 2010. On August 9th 2007 BNP Paribas, the largest bank in France froze withdrawals from two of it’s money market funds. Imagine what that must have been like. At that time, the general public viewed money market funds as no different from any other bank account. Suddenly, and without notice, you as a banking consumer could not use, take out, or spend your own money. This is what most of us point back to as the very start of the financial crisis.

From 2007 to the bottom of 2009, the DOW went from a high of 14,164.53, interestingly enough 2 months after the PNB Paribas disaster, in October 2007 to a low of 6,594.44 on March 5th 2009. A loss of 53% over the course of a year and a half. If you think the roughly 30% drop you’ve experienced in the last few weeks is bad, then you probably were too young to be investing 13 years ago.

Time of fear though present opportunities for the disciplined investor. I don’t think we have hit a bottom yet, and I am not trying to. It took 19 months from the start of the financial crisis before the stock market hit it’s bottom. It took a full 24 months for housing to find a bottom from it’s peak. By the way, I think if you are waiting for some collapse in housing prices, you are likely dreaming. Now that doesn’t mean they can fall in certain markets, ones that are more prone to a boom/bust cycle; but a retreat in housing prices is simply not a very common occurrence on a national scale. But with the memory of the housing collapse still fresh, recency bias blinds us.

I made most of my wealth from 2008 to 2011 by purchasing distressed assets. Those assets were both stocks and real estate. I see opportunity again. I do not think we are near the bottom yet, but I have already started to buy again. I haven't made a stock purchase in the last year until this past week. Im going to continue to dollar cost average as things continue to go

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Mary L.
Rental Property Investor · Member since 2020 · 41 posts · 54 votes
6y

I agree be greedy when others are fearful.  Like @Russell Brazil said, the real estate didn’t bottom until a few years later from the peak of 2006 to 2010, and Real Estate would not crash overnight, it takes time to bottom out.   It is too early to be greedy in the real estate now.  I would Not be greedy yet until at least 18 months plus later, especially in my volatile Las Vegas market.  On the other hand, stock market have a shorter time to crash and recover compare to real estate, I agree with Russell Brazil, that it may be a good time to jump in to the stock market little by little (not all in), to dollar cost average the stock market by “CASH” only, not with any margin or other form borrowing.  Margin or any borrowing will kill you in case the bottom is still far away from today stock market. 

Back in 2008 stock market crash, I jumped in and was greedy when Dow Jones fell 30% from about 14000 to 98000.  After I used up all my Cash on the stock market, my biggest mistake was, I was too greedy that started using Margin in my stock account, then Dow Jones crashed another 30% from 9800 to 6600, I was forced to sell many stocks as a loss due to Margin Call.  I lost a lot money in 2008 stock crisis.  I told myself that I would never use Margin again.  

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  • Bill F.
    Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    6y

    @Michael Lenahan

    Got ya, so you really don't have any actually data or analysis to support your claim that "this thread is not going to age well" other than to parrot back vague and trope oversimplifications of things you've heard other people say. At least we got to the core of the issue: you think it is ok to share your opinion, when you haven't done the work needed to have an opinion. 

    You see, I have a degree in economics and none of the people you listed are economists doing serious work. With the exception of Ray Dailio, they are perma-bears or contrarians who are trying to sell something.  Their wild statements are meant get them on the CNBC or MSNBC talking head shows to get free advertising. 

    If you want to follow people doing real work in economics try Tyler Cowen, Alex Tarbrok, Timur Kuran, Eric Weinstein. 

    4Reply
  • Michael Lenahan
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 95 posts · 53 votes
    6y
    Originally posted by @Bill F.:

    @Michael Lenahan

    Got ya, so you really don't have any actually data or analysis to support your claim that "this thread is not going to age well" other than to parrot back vague and trope oversimplifications of things you've heard other people say. At least we got to the core of the issue: you think it is ok to share your opinion, when you haven't done the work needed to have an opinion. 

    You see, I have a degree in economics and none of the people you listed are economists doing serious work. With the exception of Ray Dailio, they are perma-bears or contrarians who are trying to sell something.  Their wild statements are meant get them on the CNBC or MSNBC talking head shows to get free advertising. 

    If you want to follow people doing real work in economics try Tyler Cowen, Alex Tarbrok, Timur Kuran, Eric Weinstein. 

    You should be a forum moderator.  Good job.

    1Reply
  • Tom V.
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    6y

    @Bill F. You seem to be down on Michael Lenahan for not illuminating his thoughts to your satisfaction in the forum.  What is your opinion given your economics degree and familiarity with people doing "serious work?"  I looked up some of your references.  

    Eric Weinstein says humanity needs to get off planet Earth.  Is that the guy we should be listening to in a crisis?  Is that realistic?

    Timur Kuran posted some pictures on Twitter he says suggest, "Massive misery even in the best case scenario."  

    It seems like those guys would agree with Lenahan's take that the relative optimism of this thread will not age well.  What do you think?

    3Reply
  • Bill F.
    Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Tom V.:

    @Bill F. You seem to be down on Michael Lenahan for not illuminating his thoughts to your satisfaction in the forum.  What is your opinion given your economics degree and familiarity with people doing "serious work?"  I looked up some of your references.  

    Eric Weinstein says humanity needs to get off planet Earth.  Is that the guy we should be listening to in a crisis?  Is that realistic?

    Timur Kuran posted some pictures on Twitter he says suggest, "Massive misery even in the best case scenario."  

    It seems like those guys would agree with Lenahan's take that the relative optimism of this thread will not age well.  What do you think?

    Well Tim, since I have not done the work needed to have an opinion on what the future will hold vis-a-vis COVID-19, never mind the mental bandwidth to engage in the second and third order thinking needed to make an estimation of how the a group of yet unknown people will view this thread at some undetermined date, I haven't and will not offer my opinion, since it would add nothing to the collective conversation.  Thanks for asking though.  

    Given I posted my comment 8 hours ago, and both those gentleman have hundreds of hours of interviews and thousands of pages of writings, good job skimming their works and finding a single fact that makes me look wrong. Super cool of you.   

    For what its worth, I also never said I agreed with, or even knew, either of their positions on the pandemic. I said they are going serious work in economics, which is true: Eric on Gauge Theory's application to economics and Timur on Preference Falsification.

    1Reply
  • Tom V.
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    6y

    @Bill F.  It would probably be helpful, if you're investing in real estate or anything else, to begin to form an opinion about how the world will be different in 1, 3, 6 and 12 months.  

    I think a lot of people here are just trying to share ideas, so if one's main goal is to honestly hear from other people, it's a good place to compare notes.  

    These are stressful times for many people.  Hang in there and good luck to you.  

    5Reply
  • Bill F.
    Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    6y

    @Tom V.  We will have to agree to disagree on your first point, I like to spend my time on problems that are knowable and important. How the world will be different in 6-12 months is important, but not knowable. 

    Best of luck Tom. 

    0Reply
  • Ryan Taylor
    Atlanta, GA · Member since 2020 · 24 posts · 5 votes
    6y

    There’s truth to this. My father in law is a contractor and house flipper part time. He bought some houses for 8k in 2008 and sold them for 350k last year

    1Reply
  • Robert Lipscomb
    Member since 2019 · 18 posts · 23 votes
    6y

    @Brian Ploszay 

    "Use softer words"

    This is an investment forum, my friend. Everyone knows the phrase "Be Greedy" is a reference to seizing newly presented opportunities in investing your money. Let's not make this a forum for melting snowflakes. 

    4Reply
  • Nadia JarrettPro Member
    Member since 2018 · 14 posts · 1 vote
    6y

    @Joe Cassandra. That's solid advice. I was just discussing buying stocks now with the family. I did not want FOMO to haunt me later but I will wait.  

    0Reply
  • Account Closed
    Real Estate Consultant · USA · Member since 2020 · 11 posts · 7 votes
    6y

    I agree 100%.  Fear is narrowing some people's ability to think outside the box. 

    0Reply
  • Joe Si
    Member since 2021 · 6 posts · 0 votes
    4y

    I think a lot of that sentiment also has to do more with the stock market than the real estate market. If you look at the current trends of the real estate market, there are still many people who are "fearful" but prices are still at heightened levels. In the market, however, the metrics are a bit more consistent. When people are fearful, the market tends to respond quicker than a "fearful" real estate market. Then again, when people are greedy, the market also responds a bit faster than the real estate market in my opinion. one thing you can do though is looking at some real estate stocks, for instance. Benefit from the best of both worlds. Even when real estate isn't doing what it's "supposed to be doing" as far a price is concerned, chances are the stock market side of things will "have your back" so to speak. It doesn't hurt to diversify.

    0Reply
  • Kar Sun
    Member since 2021 · 388 posts · 277 votes
    4y

    Greed will make you lose. 

    0Reply
  • Account Closed
    Member since 2020 · 983 posts · 1k+ votes
    4y
    Originally posted by @Kar Sun:

    Greed will make you lose. 

     I don't think the work 'greedy' should have been used in this thread since the use of the word makes no sense. Being smart enough to jump on opportunities is far from being greedy.

    This is a great thread with a lot of great wisdom and I invest exactly as explained in several posts. Between 2008 and 2010 I purchased 28 homes in Las Vegas for 30 cents on the dollar. I gave my children 6 of the homes and sold all but two that I have left.

    Now, since I can't find any multi-unit properties that fit in my business model I have all my cash in an online trading account and I have not purchased any stock or options. I will keep the money on the sideline and if I find a multi-unit property the cash is available and if we have a stock market plunge my online trading account is loaded and ready.

    I am not greedy. I enjoy working and it is fun to generate profits.

    1Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    Can you imagine if the people who have cash in the bank could see a 1/4 of a percent  disappearing as a “fee” every single month instead of silently being lost to inflation? They’d lose their mind and spend it. I mean it’s probably closer to 1/2 a percent but the idea of losing hundreds or thousands of dollars per month is not ideal. 

    0Reply
  • Jennifer Jo McCallonBusiness Member
    Member since 2020 · 62 posts · 59 votes
    4y

    Not to be all woo-woo, but how about be BOLD when others are fearful? (Zig when everyone else is zagging?)

    [email protected]510-545-6390
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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y

    This thread is a year old. Some of the comments and predictions didn't age well.

    What I find interesting is that COVID cases and deaths in the last week are basically the same as they were one year ago. The previous three month total as of November 2, 2021 is significantly higher than last year, yet the fear level is significantly lower. Part of this is complacently and acceptance. A bigger portion is media narrative and portrayal. They are not reporting that the "sky is falling", even though you could argue higher deaths, with vaccinations and advanced medical treatment, is not good.

    August 1, 2020 to November 2, 2020 there were 81K COVID deaths

    August 1, 2021 to November 2, 2021 there were 136K COVID deaths

    I am not trying to start a COVID debate. I am merely pointing out that fear is often not based in reality. It is perception and is highly manipulated by the media. I think it is likely the financial shock wave is still coming. It is just hard to predict when and where it will hit. Excessive government spending and inflation are a serious threat. Housing prices have run up high and they are starting to find price resistance levels. Keep a close eye on housing inventory and average days on market. A real estate crash doesn't happen over night. Markets soften over months and even years.

    2Reply
  • Kar Sun
    Member since 2021 · 388 posts · 277 votes
    4y
    Originally posted by @Joe Splitrock:

    This thread is a year old. Some of the comments and predictions didn't age well.

    What I find interesting is that COVID cases and deaths in the last week are basically the same as they were one year ago. The previous three month total as of November 2, 2021 is significantly higher than last year, yet the fear level is significantly lower. Part of this is complacently and acceptance. A bigger portion is media narrative and portrayal. They are not reporting that the "sky is falling", even though you could argue higher deaths, with vaccinations and advanced medical treatment, is not good.

    August 1, 2020 to November 2, 2020 there were 81K COVID deaths

    August 1, 2021 to November 2, 2021 there were 136K COVID deaths

    I am not trying to start a COVID debate. I am merely pointing out that fear is often not based in reality. It is perception and is highly manipulated by the media. I think it is likely the financial shock wave is still coming. It is just hard to predict when and where it will hit. Excessive government spending and inflation are a serious threat. Housing prices have run up high and they are starting to find price resistance levels. Keep a close eye on housing inventory and average days on market. A real estate crash doesn't happen over night. Markets soften over months and even years.

    People can believe whatever they want. As far I know based on various data and observation  covid either does not exist or is basically a cold/flu/pneumonia that has been classified as a covid. What I do know is that after these jabs people are dying. And that is called "covid new waive". Also read about the remdesivir "medication" protocols in hospitals that literally shuts down kidneys and floods lungs with fluid because the kidneys are no longer working. Then it is also classified as covid. Covidophrenia is not compatible with a free and democratic society anywhere. Fearmongering and mental illness are at peak. Some people complain they have runny stool and diagnose it as covid. Covid narrative is detrimental to any person who wants to invest or be an entrepreneur. It is a dangerous new cult. Read about problem, reaction, solution/Hegelian dialectic. Same got for "climate crisis". All related to make you destitute. And the "rules" only apply to the "commoners" while the elitist fly on huge jets. Watch the real estate and Blackrock. The pricing has been up due to inflation, created supplies shortages and companies like Blackrock buying over the market value. They are literally artificially driving prices up.

    0Reply
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