Tuesday, May 17, 2005

Abnormal Gains Eventually Disappear

When there are outsized or abnormal gains to be made in any investment, sufficient liquidity will flow to that investment, eventually driving the price higher so that those outsized yields return to normal yields. If the real estate investor in this article thinks that even 5% to 10% gains are conservative, when still leveraged 5 to 10 times, then he is deluding himself, like so many others.

[“So there certainly is some risk," says LeReah. "There are certainly some pockets where they may be more vulnerable to a price bubble bursting than other areas of the country because of the speculative element."

Darryl Wortham says he's not speculating.

"I’m not looking to get a 50 percent return out in Vegas." He says. "I'm looking at 5 percent, 10 percent."]


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