3 worst flaw when combined causes a lot of problems
- Greedy
- Stingy
- Stupid
Good Assets are hard to come by. If you find one hold on to it and don’t sell it. Real estates can be good assets. Shares are meant to be liquid to be bought and sold.
A bubble occurs when valuation is driven be people on the buy side who borrowed money heavily for the purchase. Drop of valuation would result in the wiping out of their assets leaving their creditors hanging on to these assets.
Creditors are only concerned with recovering their own debt. Creditors will sell at a 60% discount off the asset’s original valuation if it means they could do so.
Historically, when bubble pops, the valuation tends to depreciate drop by 40% to 60%. A position bought at 60% discount might be a good purchase when compared to its underlying fundamentals. When you see a bubble, its much better to sell off at a 10% lost and buy at the low. You will make back more than double your loses.
High network individual does not sell during a downturn because of the following reasons:
- he has too much capital to deploy if the asset was turned into cash.
- good assets are hard to come by. The next buyer might not be so willing to let go of his sold assets at the original valuation he sold at
- he might not get the same credit terms due to various reasons