(This column first appeared 6/18/05)

skyscrapersQuick. In your best eyes wide shut fashion, check out the marketplace and tell me which
direction is up. Which is down? It is harder than it sounds.

After ten years on a dizzy, vertigo-inducing rocket ship ride to incredible new heights, the G forces (gravity? greed? greenbacks? greenspan?) are finally getting to us. All we can sheepishly say into our headsets is: “Houston, we may have a problem.”

Here we are, standing on the precipice of a fantastic, dreamlike edifice of equity. We are on the roof of a skyscraper breathing rarefied air. Playing in the clouds. The planet of values we left behind a decade ago seems incredibly small and inconsequential. Things are going so well that maybe they are going too well.

We are worried that it will all go away overnight. We keep dreaming about falling. As a market, we have developed a bad case of acrophobia – fear of heights. It was ok climbing up the market ladder. We were so busy concentrating on the steps we didn’t have time to indulge our fears.  Now that we are up here it’s different.

Our brains are working overtime sending warning signals to the pits of our stomachs in the form of the dreaded “what-ifs”. What-ifs are like mind viruses preprogrammed into our genetic code or at least imbedded as negative engrams into our psyches from early childhood. We’re capable of spinning out a zillion of them whenever the going gets fearful.  What if interest rates go up? What if there is a bubble? What if I lose my job?

Imagine that you are minding your own business, riding a bicycle on the roof of the skyscraper. Your Mom pops her head out a window on the 97th floor and shouts: “Be careful, don’t fall.” The first thing you visualize is falling. The handlebars start to wobble and your balance goes. Suddenly riding a bike isn’t automatic. Instead you are watching a movie of yourself doing a long slow swan dive off the edge, straight into the abyss without a parachute.

When you are really high up, people always shout “Don’t look down!” Does anyone ever look down and only imagine themselves falling part way? Just one story? Nah. It is pretty much all or nothing. If you fall in your mind you usually hear the sound of a watermelon splattering on the sidewalk in your mind too.

When (not if) the market changes- if we are mindful, we will notice the market isn’t going up anymore. Our first overreaction will be that the market is going down and that the sky is falling. Even though not going up is not the same as going down, acrophobia is scary. And to quote one of my favorite malapropisms- “Been up so long, looks like down to me.”

I hate to break it to anybody but multiple offers, overbids, quick sales and sellers sitting
at the top of the heap in total control is not a normal market. It is an exceptional market that we have experienced for an exceptionally long time. Equity is not a God-given right. The market can giveth and taketh away.

But it’s ok if the market goes down a bit. If it tripled in the last ten is it so awful to give a
little bit of it back in the short term? If the market falls – it really doesn’t have to fall all the way, despite what Chicken Little or your Mother or your own Inner Phobic says.

Can our fear of heights really blow this whole thing up to the point where we actually believe the market can go from boom to bust in a day? The stock market went down 22% in one day in October of 1987 – can someone make a viable case that this is even possible in real estate?

When flying the space shuttle or standing on the edge of a tall building, quiet wisdom says don’t look up and don’t look down either. Instead pick a longer point on the horizon to focus on and keep your balance. Remember to breath and don’t forget to live. “The only thing we have to fear is the fear of fear itself.”



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