“Whenever you find yourself on the side of the majority, it’s time to pause and reflect.” – Mark Twain
Have we ever ….seen such negativity pointed in the direction of Real Estate? I think we need to remember that….when we evaluate what to do with our investment capital….or speaking with our clients and our partners…..I have the answer….Buy Real Estate now or lease that facility….you have been thinking about.. This market is a once in lifetime opportunity….when negativity is the King of the Mountain.. and the “Crowd” is against Real Estate…..that’s the signal to get in. Who will be kicking themselves down the road and saying….Do you know what I could have paid for that building in 2010…and now?
What is the “Crowd”? It is the group of institutions, individual investors, traders, speculators, and other players in any market that form a collective opinion that is expressed in the terms of a degree of optimism or pessimism. We will call them the non-professionals.
The professionals are the “smart money”. These are the very few that are aware of crowd behavior and are able to adjust their strategies (long and short) to profit from extreme sentiment. Note: professional does not mean institution by definition. Most institutions are part of the crowd.
The key point to make is that when non-professionals display an excessive amount of optimism or pessimism, the professionals enter into the market and drive prices in the opposite position. Any truly non-professional, one-sided opinion or expectation of a market will be unable to anticipate a movement created by the professionals in the opposite direction that is anticipated by the group of non-professionals. This is contrarian investing, going against the masses that believe in only one direction of a market and taking advantage of their unanimous opinion by going the other way.