Market Timing

Were you in the stock market on 9/11? Do you remember what happened to the stock market when it reopened after 9/11? I do. It tanked!

I had a bunch of stock in various good companies like Pfizer, Citicorp, and Microsoft. I had several shares of Berkshire Hathaway that I bought in 1995 that had more than tripled in value. I bought a bunch of stock on margin in a variety of good companies. But all of the stocks tumbled after 9/11. And I got several margin calls. I had the cash to avoid having to sell. But it hurt. A couple of years later the market dipped again and this time I had to sell one share of Berkshire Hathaway for $85,000 if I remember correctly. Then it went down again to $80,000 per share. I got really nervous and told my broker I wanted to sell all of it when the price returned to $85,000 and asked him to call me beforehand. It came right back up; he did not call, the stock got sold and my margin account went away. I had money in the bank.

I did not complain. I was tired of nervous nights wondering what would happen next. I had experienced 10 years of ups and downs in the stock market with "profit taking" by market insiders at the expense of everyday investors such as myself. I did not day trade. When I bought a stock I bought quality and looked for long term appreciation. I made a bunch of money during the 1995 to 2000 period. But 9/11 changed all of that. The four years after 9/11 were not fun at all. I just looked up the last quote on Berkshire Hathaway: $111,600 per share. CLICK HERE. The 52 week high was $114,500 or $29,500 more per share than the price I sold mine.

My shortsightedness got the best of me, I think. I knew that Berkshire Hathaway was a great company. That's why I bought it. I did not have to think. Warren Buffet would think and act for me. My problem was one of my own creation. I bought other stocks using the capital from Berkshire. The other stocks tumbled and did not recover. (Microsoft went from $120 a share to $25. I had 10,000 shares. I bought it at different prices but the loss was very damaging.)

So how does my tale of woe relate to what is going on in the Key West real estate market you ask. A lot of "investors" bought homes and condos here "on margin"-- if you will. They borrowed funds to buy properties that they could sell at a profit in the future. It worked like a charm for years. The town is a testament to the truth of it. Key West today does not look like it did 20 years ago.

The problem is that the real estate downturn across the country has frightened would-be buyers from buying in Key West. (That and fear of another Hurricane Wilma.) Many investors put their "investments" on the market and drove down the prices further. Many of these investments will be sold at a loss. On the other hand, investors who bought three or more years ago and who have no need to sell are doing fine. They are enjoying the use of the property or the income from it, or both. And when the market comes back their investments will have appreciated even more.

There are many would-be buyers out there looking. Hovering actually. Like vultures. Waiting to see what tasty piece of property goes on the chopping block, I mean auction block.

I remember another fact about what happened after 9/11. Town was dead as hell until Christmas. Then the "buyers" came back. Big time. Prices soared. And those market timers who procrastinated got hit. I think it will happen again.