Investment advice from Paris Hilton

Investment advice from Paris Hilton by Simon Black – Sovereign Man

Angelina Umansky, a 39-year-old spa owner from San Francisco, was visiting a friend in Miami two weeks ago when she heard about a new condo development downtown.

Hoping to find a vacation home, but worried that others were interested, too, Ms. Umansky arrived at the sales office at 8 a.m. the day after seeing some model units.

About 50 other buyers were already in line. Two hours later, a sales agent summoned her and said she had four minutes to decide which unit to buy. She acted fast, offering $350,000 for a two-bedroom, two-bathroom unit.

Ms. Umansky thinks she got a bargain; when she called on behalf of a friend less than eight hours later, she was told the asking price on a unit like hers had climbed to $380,000, a nearly 9 percent price increase.

Above is the opening story from a New York Times article published February 3, 2005, pretty much the very TOP of the biggest real estate bubble in history.

But very few people realized at the time that the market was such a bubble, even though it was exhibiting all the classic signs:

People were literally lining up to buy overpriced assets. Nobody thought you could lose money in real estate back then.

And prices kept rising. Quickly.

A central Florida homebuilder, Transeastern Homes, used to hold sales events at hotels and convention centers.

Prospective customers would spend five minutes looking at a subdivision map before buying. The company would announce price increases – up to 16 a day– over a loudspeaker, putting the crowd into a frenzy.

There are stories of dozens of condo buyers camping overnight in New York City for a chance to buy an incomprehensibly expensive unit.

Fights would break out between agents at showings. Some customers would bribe builders for a chance to buy a unit.

But one of the biggest signs of the top of the real estate market was “investors” flipping pre-construction condos…

Someone would put a hefty down payment on a condo before the building even started construction.

They had no intention of ever living there. They just wanted to flip to another buyer at a higher price, often just a few weeks later, when the building was slightly further along in construction.

According to the Times, a 1,000-unit Miami condo building sold out in 36 hours back in 2004. At least 50% of the buyers were flippers.

This is the type of behavior that happens in a mania– people stop buying assets because of the investment’s strong fundamentals. They have no intention to hold. They just want to flip quickly and make easy money.

The flippers have returned today.

Instead of pre-construction condos, however, today’s flippers are participating in the most frenzied sector in the market: initial coin offerings (ICOs).

If you’re not familiar, an ICO is a way for a business to raise capital from investors.

 

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