Watch What Smart People Do

Non-Idiots Who Made Money

Whether you like them or not, wealthy people are, by and large, not idiots.  They usually did something right, got a little luck, and made a few dollars.

In times like this, it’s worth watching the behavior of people who have accrued wealth, and asking yourself: “What are they doing now?  Is it different than what everyone else is doing?  And why?”

If so many buyers are fearful of this market, of rising interest rates, of a looming recession, of certain people running for president….why are they still buying so much real estate at the very high end?  Week in and week out, I continue to see very strong numbers for the luxury end of the market.  You can read all about it here, too.

watch what the smart money is doing.

What can the reasons be?

• They made a lot of money over the last few years.   So they have a lot of money to invest in the first place.
• They are taking money off the table.  That is, they are moving money out of the stock market or other assets, and putting it elsewhere.
• They have to put that money to work, because with inflation, sitting in cash is a losing proposition, too.
• The US Dollar seems to be doing very well, and appreciating against other currencies.  So they want to invest in US assets.  The right US assets.
• That elsewhere that they are considering investing is real estate, because they think they can make more money in real estate.
• Real Estate is one strategy, of a bigger, diversified picture that includes private equity and other non-stock market strategies.  So we’re only seeing a tiny sliver of activity.  But, the activity that we pay attention to, of course.  And activity that is noteworthy.
• Hard Assets have been known to appreciate in an inflationary environment.

Or, they are idiots.

What do you think it is?  When a sale happens, there is always someone on the other side of every trade.  That person either is in distress, wants to move, or thinks it’s time to sell.  So it’s likely that whoever is selling to this luxury buyer could think that our “smart” buyer is an idiot.

I tend to follow Warren Buffett’s advice.  Be excited when everyone is fearful, and fearful when everyone’s excited.  I’m going to pay close attention to what the smart money is doing.  If the luxury real estate market continues to be strong compared to other segments, it’s noteworthy.  And so I’ll keep talking about it here.  -Scott