I have two theories: First, there are sophisiticated investors out there in the world. Years ago those investors were targeting stocks some got into short trading, others researched financial information and made calculated bets on long positions. These sophisticated investors also know when to sell. Enter the common investor, unfortunately this common investor usually gets the memo about what is working and what isn't working a few years too late. Once the common investor enters the sophisticated investor leaves. When you have a theory or methodology that works on a small scale in a large public market, chances are that once the larger public market figures it out and implements it as there own the returns become minimalized. The sophisticated investor moves on before any real damage is done. The next place the sophistacted investor looked was real estate. At the time cap rates were high, and investments were good. Again, the common investor catches on too late. Today everyone fancies themself a real estate expert. Cap rates are at all time lows, and returns are not as great as they once were. Appreciation will continue, but based on today's press about bankruptcy and excess inventory the short-term looks marginal at best. So where does the sophistated investor go next? Enter my second theory; Foreign Currency Trading. I'll Tell you why later.
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