Have you ever heard the expression, “Timing is Everything?”. If you work in the financial sector you have probably heard this saying more than once. The right decision at the exact right time can be the difference between a huge gain and a colossal loss. No one knows this fact better than Warren Buffett.
Part 2- Timing Is Everything
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when other are fearful”
- Warren Buffett
Try to really take in these words, they are very powerful, aren’t they? I find it to be one of the best possible advice in economics. If you know the markets, and know the nature of how it moves, you can definitely use this knowledge to your favor.
I can give you one good example of a person I know who has really good timing when it comes to investing. Is it a coincidence? I am sure it is not, because he tends to get it right almost all the time.
It was 2005 January 8th and Sweden was struck by the biggest storm in modern history. The storm hit hard in the south part of Sweden and turned much of the thick forest into fields of fallen timber. It was estimated that more than 250 million trees fell during this storm. It is estimated that if all timber was stacked in a row it would be able to reach the same distance as going to the moon and back 5 trips.
The devastation to the landowners was very grave. I remember my grandparents land where they lost around 30 percent of the forest. Still this was very little compared to many others. In Sweden many farmers completely live off their land and the money they get from selling the timber yearly. The sudden build up of the biggest timber stock pile on earth had led to the plummeting of prices for timber. The landowners had no choice but to sell as the timber would go bad if it was left the way it was. A Generation of wealth was lost for many, and there were even some farmers who went to their barns and hung themselves as they knew it would take forever before the forest would grow back.
This was a time when the last thing on peoples mind was to invest in forest, as it turned out that one could loose it over night to a freak storm. But my friend, thought the complete opposite. He said that this is a freak accident happens once in a century. Looking at the past, forest has always been stable long term. Said and done he bought quite a bit of land, that was now considered worthless without the forest growing on top of it. He planted new trees as soon as all timber was removed.
25 years ago seemed like a lifetime away when my friend bought this land and intended to plant pine trees on it to harvest later. Today there is already a small forest growing on his land, and the trees are more than half way to be fully grown and to be ready to harvest.
Markets go up and down, there are patterns, once we figure out the patterns we should not let emotions make our decisions. I think the key is to rationally analyze the situation. Because if you are acting on emotions you might not be acting according to logic, also most time if we act on emotion we usually are affected by others opinion.
The market place can be cruel, it does not care about our emotions. Ones man's misery can become another man's fortune, therefore the best time to invest may not be when your taxi driver gives you financial investment advice, but when no one want to touch a certain part of the market.