The biggest problem most investors have is timing. I think a price target of $3000 is conservative, but this does not mean I am backing up the truck yet. A retest of highs is likely as far as I’m concerned, but I am still not going all-in for a 12% gain. I believe there will be better entry levels.
This is not the all-in moment in gold. The all-in moment in gold was years ago. It was at $700 when everyone was scared out of their mind to buy. It was at $1000 when everyone was calling for a “triple top” in gold. It was at $1040 when gold retested its breakout level, only to rocket launch to new highs. The all-in moments occur when people think you’re nuts. Now everyone expects gold to go higher because of the European debt crisis. This may be good for a mini-launch to $2000, but it is not enough to get us to the insane levels that are coming probably around 2016.
It is not time.
I think differently from most people. When people are skeptical of an investment thesis of mine, I rationally understand that I am probably on the right track. By definition you need to be an early adopter of a thesis to attain the biggest gains. By definition. And if you are an early adopter, then you can be sure people will giving you all sorts of reasons why you are wrong. I listen to these arguments because I am always on the lookout for new insights, but 99 out of 100 arguments I hear are ludicrous.
The situation in real estate is similar to the situation in gold years ago. People make valid points, but they see only the fly on the elephant’s behind. They don’t see the big picture. Yes jewelry demand accounts for a portion of the demand in gold, but it by no means drives the price. Yes gold at $1000 was a 4 fold increase from $250, but stocks rose 14 fold during the same timeframe, and not many were calling stocks a bubble.
In terms of real estate, yes there is excess inventory, but this argument assumes that the supply of buyers is fixed. Yes there are tons of distressed homeowners, but this just means there are more renters, which keeps rents elevated relative to home prices. This will be an inflationary downturn, and I’ve said before that real estate, not gold, is the best inflation hedge. Period. It’s in the data, this is not my opinion.
The bottom line is you need to be able to think dynamically to understand what I’m saying. I talk about countertrend cycles and people give me blank stares. I say that real estate will probably trade flat for the next 15 years, and they ask why I’m buying now. I say that the debt crisis will be drastic, and they wonder why I think stocks are going to 30,000. This is what makes investing fun. Economic and investing orthodoxy are going to change, and I can assure you people will be open to a more multidisciplinary approach to investing when all is said and done.
