Only Your Haircutter Knows For Sure

Did you ever get a stock tip? If you ever got one, and it didn't come from a trader, directly on the floor of one of the exchanges on Wall Street (which would make it illegal anyway), then it wasn't really a tip. It was probably more of a joke that somebody thought was serious. By the time that information reaches somebody on Main Street, Wall Street has come and gone and taken the money off the table. This isn't new. This is not a problem in our generation, that's just how it is. That's how life works. It is important to learn something from this factual situation.

 

Whenever you get a tip about anything, be very careful about who that tip is coming from. More important than the tip itself is the source of the tip. In general, tips smell a lot like pyramid schemes, because the person giving out the tip is hoping to create a groundswell of support for his position so he can capitalize on it before the opportunity crashes and burns.

 

To be clear, this discussion is not about my haircutter. He's a wonderful guy and he's been cutting my hair for years. But the guy doesn't know anything about real estate. He's dependent on a commission-hungry broker who is pushing him into a market that he doesn't understand. So now, he's telling me to get involved in the same market, partly so he feels a little better — because misery loves company.

 

The problem is not that there's anything wrong with the short sale market. The problem is the tip came from someone I know is not an expert in the field on which he was providing advice. I know for certain that good tips come from sharp insiders who understand their marketplaces as well as I understand mine.

 

Similarly last year, my neighbor told me that his son, who is a fireman, was running to the court house to buy a foreclosure because houses are on sale. I knew at that very moment the foreclosure game in Los Angeles was over. When consumers get in the game, then the professionals must step aside because the bottom feeding is over and prices are about to rise.

 

Professionals price properties somewhat scientifically, while consumers will frequently base their estimates of current value on a discount from the price that existed multiple years ago. Professionals know that previous pricing is irrelevant, but consumers generally don't know it. And it is not necessarily the job of hungry brokers to educate them, so many will let consumers go on believing whatever they need to believe to make the sale.

 

The point is this; get your information from a credible source. If you're giving information, be a credible source. I'm not faulting brokers for selling houses, and I'm not faulting haircutters for talking about what it is that they do. I'm suggesting to my readers that if you're taking the advice, beware. Read the tea leaves. There is lots of information available if you just pay attention. And maybe your haircutter doesn’t know for sure.