This Issue: Making Money is All About Timing

A few strong instincts and a few plain rules suffice us.

--Ralph Waldo Emerson

Handling money well requires instincts. It can be learned, but it also requires a sixth sense in predicting the future. Gamblers know about timing. Some people have it, some people don't. Life isn't exactly a roll of the dice, but sometimes it seems that way. It can make you wonder: Are events in our lives arbitrary or are they predestined? How much control do we actually have to predict the future?

I don't have the answers to those questions, but I do know something about timing. Often, it's called patience. I've waited up to 30 years to see some things happen. Waiting to make a move can be more difficult than moving forward. That's when you have to go with a combination of your instincts, your brain, your gut, and your analytical powers. Whoever said making decisions is a snap hasn't made a lot of big decisions. There's no easy formula.

One thing I've learned in negotiations, especially when I really want something, is to lay back a bit, to act like I'm not really sure if I want it or not. This not only puts the competition off a bit, but it also gives me breathing space to assess exactly what it is I'm going for. Why do I want this deal? How much do I want it? What are my motivations? It’s hard to predict the future, so I do a lot of analyzing while I'm waiting for the right time to make my move or to make my move known. I know the importance of timing, and I wait until the ball is in my court before I swing.

Have you ever watched tennis players? I've played and watched a lot of tennis over the years, and the best players have incredible timing. They know how to handle themselves and it seems like they can predict the future to be in the right spot at the right time. The best players are indomitable because of it. Players falter when they lose their timing. It can be the difference between a big win and a big loss. Pay attention to that in all your business endeavors.

I also pay attention to comedians because of their ability with timing. The best ones have an impeccable sense of the power of a pause, a split second, or even a glance. It's amazing to see, and I've learned from both watching and listening to them. Everything can be a learning tool, whether you're in school or watching a great comedian.

I can remember when I was tempted to invest in a large piece of real estate, and something kept me from making the final move. This happened repeatedly, so I decided to wait. A couple of months later, a huge storm damaged the area so badly that I felt I had been spared a big mistake just by responding to my gut feelings. In predicting the future, it pays to pay attention to your instincts. The land may have been great, but the timing was wrong.

Whether you're in business or in music, tempo matters. You can destroy a beautiful piece of music by using the wrong tempo, and the same goes with business deals. I'm all for momentum, but there are times when you have to slow down a bit and mind the checks and the time signatures. Being methodical at times does not equal complacency. It's part of a technique, even if it may not appear to be a virtuoso approach. I watched 40 Wall Street for years before making a move on it. No one knew I was interested in it; there was no such indication from me. But I had a proprietary concern from the beginning because it was a beautiful and historic building. Only much later did my tempo increase enough to indicate I might be interested. I made a lot of money by waiting and watching, close to a $400 million profit, in fact.

Just because an opportunity surfaces doesn't automatically mean it is an opportune time to pursue the opportunity. Be circumspect about things. Be aware of the big picture, and give time a chance to work for you. This takes some practice, and you have to be alert to the nuances involved in the timing, but as Churchill said: 'Continuous effort, not strength or intelligence, is the key to unlocking our potential.' Keep working at it, predicting the future takes knowledge, instincts and trust. That's what timing is about.

Back in the sixties when I was a teenager, my Uncle George used to visit my family every Sunday night. He was a very smart guy, but very eccentric. And boy, could he talk. One night he told us an amazing story. It seems that while he was tinkering in his garage in the late 1940’s, he discovered a way to get his car’s heater to work better--a lot better. He went on to design an improved car heater. But because he didn’t want to spend any money to patent his design, he gave it to the Packard Motor Car Company in exchange for a lifetime discount on all his future cars. The last Packard he owned was a 1954 Caribbean convertible, salmon red. It was just a magnificent car, which could explain why he was not smiling when Packard went out of business a few years later. It’s hard to predict the future. No more Packards for Uncle George. Plus, he never got a single penny for his idea.

When it came to money, George’s brilliant-but-weird streak always got the best of him. But the Packard story isn’t the worst of it. The worst part is that Uncle George had organized his finances around his theory that because money depreciates, you have to spend it all as fast as you earn it.

That’s right. In his view, the more money he spent, the more he had. Like most loony theories, this one was based on a shred of truth. After all, it is true that in inflationary times, your money will buy more today than it will tomorrow. But George chose to overlook the fact that if you invest money wisely, you can outrun inflation and keep ahead of the game. You’ve got to understand trends when you’re trying to predict the future.

His story shows that identifying just one trend is not enough. If you want to get rich, you need to monitor a lot of trends and profit from them. You can see this principle very clearly in real estate investing. After all, it is called “real” estate because it deals with real assets you can touch and see, like houses, land, and apartment buildings.

As I was writing Catch the Wave: How Timing Can Make You a Fortune in Real Estate Today for Trump University, I interviewed a number of successful real estate investors and learned that they tend to monitor not just one trend, but lots of trends that take place in three principal areas. I think you would do well to keep your eye on these trends, too.

Regional Trends. Are people moving into the area where you are buying properties or are they moving out? Are local employers thriving or are they laying people off? Are schools improving or going downhill fast? Are real estate prices rising? If so, have prices gotten so high that they are likely to stall? It’s hard to predict the future, but best investors consider and reconsider such questions constantly because change happens every day.

Financing trends. Are there new kinds of mortgages available? If so, are they too risky to consider? Where is the prime lending rate headed? (Visit http://www.federalreserve.gov to find out.) Top investors monitor these factors closely and are rarely surprised by change.

Life trends. If you are about to retire to Florida, is it really a good time for you to buy an apartment building in Minnesota, where you now reside? If you are about to send two kids to college, is it a good idea to sink your savings into a risky real estate venture? The wisest real estate investors select investments that make sense within the context of major events that are taking place in their lives. They don’t only look at potential profits.

The bottom line is, you can never take your eye off the trends; they are the best way of predicting the future of their impact on your investments. And that holds true whether your wealth is in stocks, municipal bonds, or apartment buildings.

And let’s not overcomplicate things. Is the value of what you own going up or going down? If it is going down, what can you do about it? Considering simple questions like those every day will help you amass a fortune you can enjoy. Then one day, you can pass it on to your heirs.

Since the dawn of civilization, man has tried to predict the future because knowledge of the future could influence decisions that would greatly affect the welfare of individuals and society. If the farmer knew exactly what the weather was going to be like, he could adjust his planting schedule accordingly. If the merchant understood the social, economic, and political trends, he could tailor his inventory and sales cycle to accommodate the situation.

Throughout history, there have been people who, through luck or educated guesses, can accurately “predict the future.” Some of these same prognosticators have benefited from their predictions and come out ahead, leading others to wonder whether a secret body of knowledge exists that holds the key to riches.

One of the most popular contemporary versions of the prognosticator is the practitioner of “market timing.” Market timing is a strategy in which the investor tries to identify the best times to be in the market and when to get out. Relying heavily on forecasts and market analysis, market timing is often used by brokers, financial analysts, and mutual fund portfolio managers to realize the greatest rewards for their clients be trying to predict the future of their market value.

Investors who practice market timing embrace their craft with a certain missionary zeal. These modern day seers come armed with charts, facts, and figures, and are wont to denigrate the tendency of many investors to follow their emotions.

The advocates of market timing are the ultimate purveyors of the ideology that being in the right place at the right time is the key to riches. Their counterpart, the “buy and hold” crowd, contend that timing is an illusion; it cannot be done with any accuracy and evidence to the contrary either proves the rule or is plain dumb luck, no matter how much analysis and quantitative rigmarole is involved.

Far be it for me to say who’s right. Like most people, I leave my investments in the hands of someone who devotes his every working day to financial minutiae, the likes of which I neither understand nor have any interest in. However, the debate over market timing versus more long-term, passive investment strategies is interesting for the divergent sensibilities it illustrates.

Those who hitch their wagon exclusively to the market timing strategy are part of a long line of rigorous, quantitative thinkers. They believe the world is logical and operates by certain unassailable rules, and that discovering those rules is the secret to living right and living well. Then there are those who doubt that a set of rules and managed variables can be harnessed for any sort of predictable result.

Divination and the secrets of success converge to form a kind of mystical realm that is forbidding or dubious to some. Timing, as representative of these elements, has real traction in the marketplace and is a concrete investment strategy to which many subscribe. At any rate, it is a potent symbol of the elusiveness of consensus in even the most quantitative matters. It is also a symbol of the distinctly American fixation on hidden knowledge to predict the future as path to the big score.