Looking for Signs in Stocks and Real Estate

They say that stocks are poised to crash just after everyone is unanimous about the wisdom of getting into stocks, and that they’re set to rise just after everyone is sure stocks are dead. Presumably, it works the same for real estate. I heard something recently that sounds like either a good sign for stocks or a bad sign for real estate in Canada.

I hosted a get together where a friend who is a real estate agent told us about one of his clients. This client is frustrated with years of poor results from stock mutual funds and plans to pull all his money out and try to generate better returns buying real estate and collecting rent.

This sort of thinking is great for real estate agents, but I’m doubtful it will work out very well for this investor. I know people who are well-suited to be landlords, but most of us are not. This story feels like either a great sign for stocks now that the last person is getting out, or more likely a terrible sign for real estate in Canada now that the last holdout is jumping in.

Just to be clear, I have no confidence at all in my ability to read such signs. I have no intention of changing my investing strategy to use this information in any way. But, it sure feels like a sign that stocks will outperform real estate in Canada over the medium term.

Comments

  1. AnatoliNApril 8, 2013 at 9:07 AM

    My 2 cents:
    In my experience real estate agents, even friends, always (!) tell stories about clients smartly moving their funds into real estate. I consider such stories as a sign of an agent around :)

    ReplyDelete
    Replies
    1. Michael JamesApril 8, 2013 at 9:22 AM

      @AnatoliN: You may be right in most cases, but in this case, the agent's client is a person known to my group of friends. So, I'm satisfied that the account is accurate rather than just being a sales pitch.

      Delete
  2. My Own AdvisorApril 8, 2013 at 9:25 PM

    Life would be so much easier if we had a crystal ball to see into the future. Or, boring :)

    I often wonder, when you chat with friends, do they know their comments, perspectives or forecasts might be blogworthy?

    I had a chat with my brother-in-law recently about the Smith Manoeuvre. I told him I'm going to write about that. He seems surprised, not sure if it was in a good way :)

    Cheers,
    Mark

    ReplyDelete
    Replies
    1. Michael JamesApril 8, 2013 at 10:00 PM

      @Mark: I have some friends who bring me information specifically because they hope I'll write about it, but that's not the case here. If giving away any identities would be unavoidable, I ask for permission before writing about something a friend or family member has discussed with me.

      Delete
  3. UnknownApril 18, 2013 at 10:13 PM

    That's interesting that your friend thought this was a great time to jump in. I thought the sentiment on real estate was rather negative right now. Where does your friend's client live?

    ReplyDelete
    Replies
    1. Michael JamesApril 18, 2013 at 10:42 PM

      @Jin Won Choi: I don't know the client and didn't ask further questions. I think the important lesson is that people who make wholesale changes to their investment strategies run the risk of jumping from one asset class that has performed poorly recently to another asset class that is poised to perform poorly.

      Delete

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