{"id":1194,"date":"2007-03-22T15:03:33","date_gmt":"2007-03-22T22:03:33","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1194"},"modified":"2007-03-22T15:03:33","modified_gmt":"2007-03-22T22:03:33","slug":"avoid-being-the-greatest-fool","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1194\/avoid-being-the-greatest-fool\/","title":{"rendered":"Avoid Being the Greatest Fool"},"content":{"rendered":"

The greater fool theory is simply this: Even if doing X doesn’t make sense, there is always someone dumber than me I can sell X to. Replace X with inflated real estate, sub-prime mortgages, stocks, garage sell junk, etc. This is the crux of bubble thinking. The major problem with this theory is that someone is always the greatest fool. It may not be you this time, but keep playing Russian roulette with deals that don’t make sense and it will be.<\/p>\n

I learned of the greater fool theory first hand as an undergraduate in college. In the bubble year of 2000, I started my first online stock trading account with a hard earned $2,000 from my summer internship. I had a run of success you would not believe with a very simple (and very stupid) strategy. The strategy: watch what Internet firms report positive earnings, and then buy. Obviously I didn’t have a good concept of a DCF model or really understand what a P\/E ratio was, but I did know that I was making a killing. In a matter of weeks I was almost up to $20,000.<\/p>\n

Little did I know that I was simply profiting off the greater fool theory. Every stock I was investing in was insanely overvalued. With no real fundamental values to hang their hat on, the stocks in my portfolio fell as quickly as they rose. When all was said and done I had less than $500. I went from hero to goat in a matter weeks, wondering where I went wrong.<\/p>\n

I am sure most seasoned investors have a similar war story. However, most new investors feel invincible. The problem with most new investors is that they have not gotten caught up in the frenzy of investing. It’s something akin to lemmings, when investors continuing buying even though they know there is no justification for their high valuations. Eventually, the first lemming falls off a cliff (sub-prime lending perhaps?) with the others soon to follow.<\/p>\n

The question is why so many investors lose their grasp on the fundamentals? The irony is that it is usually fear of Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The greater fool theory is simply this: Even if doing X doesn’t make sense, there is always someone dumber than me I can sell X to. Replace X with inflated real estate, sub-prime mortgages, stocks, garage sell junk, etc. This is the crux of bubble thinking. The major problem with this theory is that someone […]<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,2,8,5],"tags":[],"class_list":{"0":"post-1194","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-blogging","7":"category-general","8":"category-investment","9":"category-real-estate","11":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1127,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1127\/real-estate-investment-theories-that-can-actually-help-you-make-money\/","url_meta":{"origin":1194,"position":0},"title":"Real Estate Investment Theories that can Actually Help You Make Money","author":"Cooksquared","date":"March 9, 2007","format":false,"excerpt":"Some of you may have noticed a drop in my postings over the last two weeks. The driver behind this has been mid terms. For those of you who don't remember what that was like when you were in school, imagine doing all of the work you do in a\u2026","rel":"","context":"In "Blogging"","block_context":{"text":"Blogging","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blogging\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":18049,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/18049\/overnight-news-the-most-important-influence-on-real-estate-markets-right-now-the-riots\/","url_meta":{"origin":1194,"position":1},"title":"Overnight News: The most important influence on real estate markets right now? The\u00a0riots.","author":"Greg Swann","date":"April 14, 2021","format":false,"excerpt":"For the past couple of years, I've had my eye out for a top to this market. That was when there was one \u2013 a market. Now there are zillions of real estate markets, no two alike, and what is going on in Greater Phoenix is necessarily counter-balanced by bad\u2026","rel":"","context":"In "Group Therapy"","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"Ya think it's easy?","src":"https:\/\/i0.wp.com\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-content\/uploads\/2020\/08\/BHBNewTopImage-300x225.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":311,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/311\/fanmail-or-fanning-the-flames-mail-so-maybe-you-should-just-sit-back-and-keep-your-mouth-shut\/","url_meta":{"origin":1194,"position":2},"title":"Fanmail — or fanning the flames mail: “So maybe you should just sit back and keep your mouth shut . . . “","author":"Greg Swann","date":"September 9, 2006","format":false,"excerpt":"Here's an email I got regarding this week's Arizona Republic column, detailing how the buyer actually pays the \"seller paid closing costs\":Hello Greg, I was incensed at your first article about the buyer paying for everything but I didn't feel the need to waste my time writing to you. However,\u2026","rel":"","context":"In "Marketing"","block_context":{"text":"Marketing","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/marketing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3208,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3208\/real-estate-marketing-channel-dominance-theory-my-truth\/","url_meta":{"origin":1194,"position":3},"title":"Real Estate Marketing Channel Dominance Theory – my truth.","author":"Eric Blackwell","date":"June 5, 2008","format":false,"excerpt":"MIke Farmer got me to mention the thought of Navy Seal Teams as a basis for real estate marketing. He got me thinking on that...and my mind turned towards my Market Channel Dominance Theory(s). Or...let's just call it B-I-N-G-O. In the game of BINGO, you can win by being the\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3334,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3334\/let-me-introduce-to-you-the-one-and-only-dr-beatrice-rowles-real-estate-coach\/","url_meta":{"origin":1194,"position":4},"title":"Let me introduce to you the one and only Dr. Beatrice Rowles, Real Estate Coach","author":"John Rowles","date":"July 8, 2008","format":false,"excerpt":"Huff and Puff Your Way to a Fortune in Real Estate Part 1: Get Your Head in the Game BY DR. BEATRICE ROWLES, PHD, BSR, FUBAR Filling up a plastic bag with propellant and and then squeezing the bag to force it into your lungs is the new, cutting edge\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"Dr Beatrice Rowles","src":"https:\/\/i0.wp.com\/www.jrowles.com\/images\/Dr_beatrice.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":14492,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/14492\/the-stick-the-carrot-and-the-men-behind-the-curtain\/","url_meta":{"origin":1194,"position":5},"title":"The Stick, the Carrot, and The Men Behind the Curtain","author":"Brian Brady","date":"April 27, 2011","format":false,"excerpt":"Monday, I talked about how real estate is better described as a store of value rather than an investment, referencing the work Reason's Anthony Randazzo published.\u00a0 Randazzo really hit it out of the park because he showed, without a doubt, how the residential real estate bubble started right after 1992.\u00a0\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1194","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=1194"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1194\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=1194"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=1194"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=1194"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}