Investment or Speculation?

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CALIFORNIA HOUSING STARTS DOWN 45 PERCENT

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This headline was recently seen from the California Home Builders and it's is interesting to me because it reminds me of all the people that jump in. They see others doing something, emulate it too late, and "miss" the market. I know I am guilty of this in the stock market. Everyone was making money in tech stocks in the late 80s early 90s. Being a finance undergrad, I felt like I should be showing them how to do it. I watched the market for over a year and nothing made sense. The P/E rations were insane but, everyone else was doing it so, I jumped in. And lost 42% of my portfolio. Ouch!!

Now, when I look at investments, it needs to be an investment. Not just some rumor or wish that it'll continue to climb. I believe this last real estate wave was fueled by folks that wanted to be "investors" but had never analyzed an investment much less balanced their checkbooks. It's my assertion that they never entered their purchases into a spreadsheet and considered the true cost of the investment or the long term gain or loss.

I think they did just what I did in the 80s; they closed their eyes and jumped.