The Madness of Crowds

Submitted by Rich Toscano on April 18, 2005 - 10:17pm
Yesterday the UT ran a story concerning the rampant condo speculation that continues to infest our fine city. I highly recommend reading it if you haven't done so already.

The various data (e.g. the fact that 37% of 2004 condo conversion buyers were speculators) is very interesting, if not terribly surprising. The interviews, on the other hand, are just jaw-dropping, as they really hammer home the enormous amount of money being spent on the basis of threadbare and entirely emotional analysis.

Everyone has their own preferred methods for analyzing financial markets. The Professor leans towards graphs, data assessment, and copious amounts of powerful narcotics. The "investors" interviewed for the article, on the other hand, seem to eschew such techniques (with the possible exception of the narcotics), opting instead to trot out empty and indefensible catchphrases in order to justify their highly leveraged multi-million dollar purchases.

Much focus is given on one Dan Hall, yet another admitted stock bust victim who apparently learned absolutely nothing from his stock market experience and is now invested in properties throughout San Diego. His careful market analysis follows:

"You're not going to lose money on property," Hall said. "My father always taught me you have to take chances in life – like when Qualcomm was $20 a share. You have to see the vision."
"See the vision." There it is. This guy has gone into millions of dollars worth of debt--he has literally mortgaged his future--on "see the vision." Thanks, but since "the vision" apparently consists of paying half a million dollars to live in a shoddily constructed one-bedroom hovel, I think I'll pick a different vision, preferably one with Natalie Portman in it.

Later on we are treated, perhaps for old time's sake, to a rehash of the grandaddy of them all--The Original Home Price Rationalization. This time poolboy-cum-real estate baron Steven Mayer imparts our old favorite, showing us that you can't keep a good catchphrase down:

"It kind of woke us up a little bit last year when things slowed down," Mayer said. "But in the long run, you can't lose. There's going to be some short-term hits, but..."
Are you positively aquiver with anticipation? I know I am.
"...everybody wants to live in San Diego."
And the crowd goes wild!

This is who's running the show right now, folks. Don't let anyone tell you otherwise... it's the dot-com boom all over again. We've gone from clicks to bricks but the underlying psychology is identical. The biggest difference is that there is a lot more money involved this time around.

With apologies to Winston Churchill: Never have so many spent so much for that which they understood so little.

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