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Buy At The Time Of Maximum Pessimism

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Reading an old Motley Fool article ( www.fool.co.uk/qualiport/2001/qualiport010628.htm ) in which the author suggests the best time to buy is the 'time of maximum pessimism', got me pondering the current UK B2L crowd.

I would suggest this era is the total opposite of 'maximum pessimism' so why on Earth do many B2L investors continue adding stock and why do first time investors come in thier droves?

I suggest the following rationalle must be employed by UK B2L portfolio expanders:

# the party's been going so long, it must be here to stay

# past performance is THE key indicator such investors look for

# it doesnt take a lot of thought / effort

# property has always gone up (they think)

#people genuinely dont beleive a recession will happen again - they cant imagine it

Any thoughts?

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People must be insane. Or have won the lottery. I suspect the only properties in my area to have sold recently have been bought by landlords.

Are the more recnt B2Ls just like the tail - end Goldrushers?

Many gold prospectors heard there was easy wealth to be made in the US so they gambled everything and followed the herd. At the same time, others quietly set - up general stores to provide the herd (most people failed to spot this investment). A while later, most of the propectors had lost the lot whilst the shop owners became wealthy.

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If you do your sums BTL can still work, but only if you are looking at returns on capital and not capital appreciation.

The muppets who think they can buy something for £200k, spend £10k on it and sell it for £300k 3 months later are the ones who have lost all hope. Those that buy it, think they can get 8 - 10% return on it - perhaps not.

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Are the more recnt B2Ls just like the tail - end Goldrushers?

Many gold prospectors heard there was easy wealth to be made in the US so they gambled everything and followed the herd. At the same time, others quietly set - up general stores to provide the herd (most people failed to spot this investment). A while later, most of the propectors had lost the lot whilst the shop owners became wealthy.

Ah I get you...you're suggesting that we all set up shops and sell things to the BTL muppets? I reckon there could be quite some demand for Tacky designer gear, Porsche Boxters and wheat beer.

:blink:

Edited by devslim

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Are the more recnt B2Ls just like the tail - end Goldrushers?

Many gold prospectors heard there was easy wealth to be made in the US so they gambled everything and followed the herd. At the same time, others quietly set - up general stores to provide the herd (most people failed to spot this investment). A while later, most of the propectors had lost the lot whilst the shop owners became wealthy.

What an excellent way to put it... A very good alternative to "johnny come lately" landlord.

Take my hat off to you Sir...

And I never thought I would say that.. :lol:

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Ah I get you...you're suggesting that we all set up shops and sell things to the BTL muppets. I reckon there could be quite some demand for Tacky designer gear, Porsche Boxters and wheat beer.

:blink:

Im staggered by the lack of imagination new and expanding B2Lers show towards investing. 'Stick with the Devil you know' seems to be thier overriding impulse.

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Are the more recnt B2Ls just like the tail - end Goldrushers?

Many gold prospectors heard there was easy wealth to be made in the US so they gambled everything and followed the herd. At the same time, others quietly set - up general stores to provide the herd (most people failed to spot this investment). A while later, most of the propectors had lost the lot whilst the shop owners became wealthy.

go on your a mortgage adviser aren't you ;)

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What an excellent way to put it... A very good alternative to "johnny come lately" landlord.

Take my hat off to you Sir...

And I never thought I would say that.. :lol:

Its not just the B2Lers, have u noticed the increasing prescence of fund managers getting into property?

SWIPS (Scot Widows) for example has suddenly 'discovered' property and is making a real song and dance in the media ABOUT 10 YEARS TOO LATE"! Norwich Union has also just running a massive ad campaign re its property fund.

Same old, same old.

The financial services industry is pathetic. I spoke to many IFAs back in the early - mid nineties and they all sniggered at my suggesting I wanted to explore property as investment. They were as usuall 10 years behind the market, still plugging pathetic complex sounding bonds and with profits policies and so 'blinded' with minisucle Tax savings advice.

Same now, I call them asking for a German property fund and they completely dicount me as some kind of nut. Ive even called Fund managers at so called property investment funds (Fidelity Global for example) and what do I find? Japan, Germany........ ohno,........... they tell me theyve just gotten into the USA or UK commercial! ahhhhhh.

THEY ARE HERD FOLLOWERS. They dont seem to spot trends until its too late. Richt now I see they are plugging Japanese funds - they should have been telling thier clients this 5 years ago!

How these people help people 'invest' is beyond me.

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Reading an old Motley Fool article ( www.fool.co.uk/qualiport/2001/qualiport010628.htm ) in which the author suggests the best time to buy is the 'time of maximum pessimism', got me pondering the current UK B2L crowd.

I would suggest this era is the total opposite of 'maximum pessimism' so why on Earth do many B2L investors continue adding stock and why do first time investors come in thier droves?

In analyses that I've seen evaluating the quality of human reasoning in probabilistic domains, "anchoring" is used to describe where people adopt a belief (e. g. "house prices are going up") and hold onto that belief far longer than they should do given the external evidence. This belief has done people well in the past, and hence they keep believing it even if external evidence suggests the opposite.

I have been thinking about this when reading some posts by bears-turning-into-bulls, or at least those giving up. There is a lot of evidence around that boom is petering out and the bust cometh. "2005" being a good example. But it seems like people are putting more weight on bullish evidence than bearish evidence. Perhaps because of the past history of ten years of HPI.

I had a quick look for a web reference on anchoring. I didn't find one (work calls) but here's one that is a different, but still relevant, definition. Note the remark about "extrapolating recent trends" in the definition.

http://www.deanlebaron.com/book/ultimate/c...ers/invpsy.html

Billy Shears

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What an excellent way to put it... A very good alternative to "johnny come lately" landlord.

Take my hat off to you Sir...

And I never thought I would say that.. :lol:

You are not wearing a hat.

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Its not just the B2Lers, have u noticed the increasing prescence of fund managers getting into property?

SWIPS (Scot Widows) for example has suddenly 'discovered' property and is making a real song and dance in the media ABOUT 10 YEARS TOO LATE"! Norwich Union has also just running a massive ad campaign re its property fund.

Same old, same old.

The financial services industry is pathetic. I spoke to many IFAs back in the early - mid nineties and they all sniggered at my suggesting I wanted to explore property as investment. They were as usuall 10 years behind the market, still plugging pathetic complex sounding bonds and with profits policies and so 'blinded' with minisucle Tax savings advice.

Same now, I call them asking for a German property fund and they completely dicount me as some kind of nut. Ive even called Fund managers at so called property investment funds (Fidelity Global for example) and what do I find? Japan, Germany........ ohno,........... they tell me theyve just gotten into the USA or UK commercial! ahhhhhh.

THEY ARE HERD FOLLOWERS. They dont seem to spot trends until its too late. Richt now I see they are plugging Japanese funds - they should have been telling thier clients this 5 years ago!

How these people help people 'invest' is beyond me.

I have this theory that the financial industry is so conservative it does not exactly attract independent minded free thinkers. Maybe that would explain the herd following you mentioned.

frugalista

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Buying when market sentiment is at its most pessimistic is easier said than done.....

I was scared stiff of the stock market when it fell to 3000 3 or 4 years ago......

and since then it has doubled!...but it had gone up to 4500 before i dared get back in

Edited by Michael

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Its not just the B2Lers, have u noticed the increasing prescence of fund managers getting into property?

SWIPS (Scot Widows) for example has suddenly 'discovered' property and is making a real song and dance in the media ABOUT 10 YEARS TOO LATE"! Norwich Union has also just running a massive ad campaign re its property fund.

Same old, same old.

The financial services industry is pathetic. I spoke to many IFAs back in the early - mid nineties and they all sniggered at my suggesting I wanted to explore property as investment. They were as usuall 10 years behind the market, still plugging pathetic complex sounding bonds and with profits policies and so 'blinded' with minisucle Tax savings advice.

Same now, I call them asking for a German property fund and they completely dicount me as some kind of nut. Ive even called Fund managers at so called property investment funds (Fidelity Global for example) and what do I find? Japan, Germany........ ohno,........... they tell me theyve just gotten into the USA or UK commercial! ahhhhhh.

THEY ARE HERD FOLLOWERS. They dont seem to spot trends until its too late. Richt now I see they are plugging Japanese funds - they should have been telling thier clients this 5 years ago!

How these people help people 'invest' is beyond me.

You are such a financial genius........my hero.......SWOON! :rolleyes:

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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