Bull, Bear or Pragmatist? How You Label Yourself Will Determine Your Level of Success

For 20 years, the Real Estate Investment Network, through our research arm, has been providing investors from across the globe with insights, tools and analysis on the North American real estate market.

In my position as researcher, analyst, consultant and investor, I have the opportunity to speak with many economists, sovereign and family wealth fund representatives, major financiers, REITs and international bankers. In fact, on my frequent journeys to Europe, these conversations play a major role in my fact-finding missions.

Through these conversations I continue to gain current perspective on the world’s perception of Canadian and US economies and real estate markets. I have found, without this international perspective, it is easy to get trapped in the local informational feedback loop. Hearing the same opinions spouted enough times that people begin to think it is the truth.

On my most recent trip, part of my job was to walk around and meet these people in London, in Denmark and in Scotland to find out what their perception of the economy is locally as well as in North America. My quest was to uncover storms that could be sitting on the horizon that may affect the Canadian economy (and therefore its housing market). My secondary quest was to find out where these large funds are focusing their capital investments so that they are parked solidly in a calm port when the storms come.

“In Calm Economic Waters, Every Ship Seems To Have A Great Captain”

Over the years we have witnessed many an advisor, in good and clear economic times, look like geniuses, almost economic prophets… only to see them disappear as soon as the economy starts to slow or send mixed or stormy signals. This run and hide (or change messaging) has always been an issue for investors who don’t really need ‘direction’ when the waters are calm. Right when an investor NEEDS direction and leadership is when many ‘leaders’ seem to disappear or start talking about tax shelters or other get rich quick schemes. At REIN, when the waters get stormy, we grab the helm so our Members can ride it out with minimized risk in ports where the storms are less violent.

The truth is, over these 20 years, we have seen the markets skyrocket, come crashing down and then recover back up. Our analysis remains the same, our indicators have proven true in all market conditions. Do they indicate the exact top of a market, or the exact bottom? Of course not – that is just not possible in the housing market due to its nature. However, what our analysis has proven to provide is certainty and direction right when you need it.

Bull Or Bear or Stuck In Heuristics?

With the advent of social media and the blogosphere we are witnessing more people loudly declaring themselves either ‘Bulls’ (positive inclination) or ‘Bears’ (negative inclination) on many subjects. Whether it be the stock market, world economies or real estate, it does seem like more than ever before people are labeling themselves.

This can be troubling if you wish to be a strategic investor. It is proven that once you label yourself or you have a fixed un-wavering belief in something, heuristics kick in. In very general terms, this means that your brain will begin to filter the information flow to pick out items that support your position. This is basic human instinct – wanting to be right. We have all been caught in this loop at one time or another in our lives; however, as stated earlier, it is a dangerous place in which to live.

Two simple examples are:

1. Those who believe they will never find a property that fits the Positive Cash Flow model (Hamilton, Edmonton, Surrey or any city) and they never do, while at the exact same time, strategic investors are finding them throughout these cities.

2. Those who have been calling for the giant real estate market crash in Canada since 2004 have been waiting many, many years for a big sustained correction (and those who followed them as well) and they have missed out on the large profit gains, mortgage pay downs and positive cash flow that strategic investors with more open minds have been able to take advantage of.

As a strategic investor you must force yourself to stay mentally fluid, mentally aware. It is not enough to support your argument regarding market direction. In fact, it is VERY easy to feel good about yourself when the market takes a turn towards your belief. However, that doesn’t make you wealthier or a better investor – it just feeds ego. It shocks me to see how many people say they’d rather be rich than right – while their actions prove the exact opposite.

By understanding and studying the difference between market drivers and market influencers, a strategic investor stays available for opportunities no matter which direction the market chooses to go. They don’t care to pick a side (pro or con) and cheer it on – what they care about is their ultimate long-term financial goal and how they are going to get there.

Anybody who has ever called themselves a bear about the market will look for everything that’s bad. The same is true if you label yourself a bull: you will miss some really important negative signals by focusing only on the positive.

From this moment on, I implore you to shift your thinking away from the polarization where many seem comfortable hanging out in (let them keep those blinders on). It is time to re-train your brain to watch for opportunities and signals.

The Giant Funds Didn’t Get There By Being Caught in Feedback Loops

In these discussions I have, whether here in North America or over in Europe, there is one thing that becomes very clear. The ‘big guns’ do their own research and their own analysis (yes, they take ours and others’ research and combine it to come to their own investment conclusions); however, they complete this analysis without a predetermined opinion they are trying to reinforce.

As we sat around discussing research, analysis and pre-chosen opinions (yes, a geek fest it was), we came up with a term that describes how we look at the world. A term that I think does a decent (although not perfect) job of describing our approach and why we have all done so well over so many market gyrations: Connective Pragmatists.

If you are a connective pragmatist, you start to see the world exactly how it is, not how you hope it to be or how you think it’s supposed to be. All you are doing is looking at the world exactly how it is. Rather than rail against the machine and protest, rather than argue your point to those who don’t believe you, rather than pontificate for no reason, rather than do our best to make others opinions wrong – we take the exact same data and analysis available to everyone and use it to uncover opportunities.

It takes the exact same amount of energy (and often times much less) to look at the world and say: “There’s the world as it is. How do I position myself to win?” That’s it, that’s your only game.

Being pragmatic becomes so freeing emotionally. You don’t have to push your opinion on anybody. If you have investment and mental flexibility, you waste a lot less energy “raging against the machine” because you begin to look at situations both locally and internationally with the question: “How will this affect my family, my investments, my business?” For instance, you’ll begin to see how high unemployment in Spain increases your cash-flow in certain cities in Canada.

The world starts to become your oyster. You begin to position yourself without arguing against anything. Sure, the world and local economies will continually throw you curveballs but as a Connective Pragmatist you just adjust to them rather than lean into them and get hit because you’re just too blind to see.

Connective Pragmatists know that the market will never be at statistical norm, it will never be perfect. Sometimes it will be considered a seller’s market and then it turns into a buyer’s market as the cycle continues its inevitable journey. We also understand that within larger markets (Canadian, US, TSX, S&P) there are always opportunities that arise that are performing opposite of the large market trend. And THOSE are what we look for and latch on to.

As you begin to retrain how you look at markets, no longer do you get emotionally buffeted around by the inevitable market storms, as the protagonist in the above cartoon is experiencing. You find hidden safe havens within economic storms, your find crystal clear waters when storms blow over and are often the first boat out to enjoy the calmness.

As I look back, my largest home-runs in life came from taking action in adverse conditions – including asking Connie to marry me on the evening following Black Monday in October 1987, buying property in energy regions while the headlines screamed fear around the coming “Kyoto Accord”, to finding ways to raise rents while others were having to give incentives due to vacancy. The list can go on.

One of Warren Buffet’s quotes entered a few of the conversations I had while over in Europe. We often discussed the dire NEED of some people to chase money, rather than waiting for the right opportunity to strike. It is a fitting and appropriate way to help wrap up this essay:

“You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”

? Warren Buffett

Try the Connective Pragmatic approach and enjoy the investing journey as you spend less energy creating better results without the emotional highs and lows that so many investors are addicted to. Let your new mindset uncover the opportunities rather than relentlessly chasing them.

is a Canadian-based real estate investor, researcher, author and educator. He is a Founding Partner of the Real Estate Investment Network™. He and his experienced team are leaders in providing Canada’s most current real estate investment education programs and economic research materials.