Monday, July 17, 2006

A Day at the Auction

It is days like today that prove my naiveté when it comes to matters of finance and big business is chronic, as I have never been a big star in either fields for much of my life, neither having much money to risk nor knowing where to risk has always been a big obstacle. One thing is true—fatally true—however, is that I have always pinned some dream or another to the high hopes of an improbable set of circumstances, some mostly perceived in my head at the way things should work and most by just not having any idea of how really things work at all.

A great example is the stock market. If you want your company’s profits to come to a screeching halt or if you’re interested in tearing down your entire business from the NYSE on down, convince me to invest in your stock. I have never won at the stock market, and I don’t suppose I ever will. WebVan, Kingdom Ventures, AOL, Primedia, they all tanked merely months after I bought in, and I lost money every time. If someone would tell me of a hot lead (like Kingdom Ventures which I bought for 0.35 cents a share and it dropped to 0.03 six months later), I would give it a try. I bought stock in the company I worked for at $7.00 a share, and it dropped to $1.50 soon after, and let’s not talk about WebVan… they went out of business with my grand carted off in someone’s pocket.

Many years ago, back before the Internet and the multitudes of scams perpetrated therein, I was a big fan of the get-rich-quick schemes. I subscribed to several of them over course of my youth… each one failed the moment it arrived. I bought in on a pyramid scheme once; when it was explained to me, it made perfect sense, until I found out that the only person to actually make any money was the guy at the top, so I pulled out with all of my money intact. I bought one of those “buy real estate” courses you see on late-night TV, as I always figured I was just a shade smarter than the dumbest guy they interview on one of those things, so how could I fail. “No money down,” was their hook, and the only person getting rich is the guy selling them.

There were others, and one thing I did learn from that period in my life is that I was then part of the lowest denominator in society: someone with a little bit of money who didn’t know what he was doing with it. I was, in short, a fool and his money. We parted ways on several occasions, but much like a dog that gets kicked when he’s called, you soon learn to not run to the back door when you hear your name.

Needless to say, all of these money pits and my shortcomings as an investor and calculated risk taker have taken their toll on my confidence, and more importantly, added to the cynicism I currently have toward “deals too good to be true.” Face it folks, they probably are. So, when something comes along these days, my investing skin is so thick that I rarely flinch at it, but I’ve always been a sucker for a piece of land. Maybe it is that because I come from a long line of farmers (before my grandparents opted for the city life) that this third-generation city boy’s genetic makeup is calling out to him, but I have always wanted to own property somewhere, anywhere, as long as I can go there, stand in the middle of the wastelands of nothingness for miles around and say that the dirt that I am standing on is mine and I can do what I want with it.

Several years ago, I started to get these announcements from a company promoting a land auction (Click here for a link to their site), and there would be one ever six months or so in our area. It was a live auction where they would release parcels of land around the state and surrounding states, and I had always wanted to go and get my hands on some cheap land. Here is an example of the land they had on the block:

HINKLEY/BARSTOW AREA (SAN BERNARDINO CO., CA) 10 acres. Big parcel located west of Black Canyon Road and just north of the community of Hinkley. There has been renewed interest in this area lately, so take some time to determine for yourself the potential of this parcel. This property may lack road access.

The opening bid on this particular property was $100. That’s it, and most were just like it, pieces between five and 40 acres all starting around $2000. I can afford that! I thought. Let’s go to the auction and buy a piece of the American Dream, and who better to co-conspire with me but my brother Jason, who is even more interested than I am in making it rich without doing any real work.

Bright and early this morning, I am at his house for the big trek into downtown LA at the convention center where it was being held, and once in the car, Jason develops a sudden hankering for a cup of coffee, Starbucks coffee, two miles in the opposite direction of where we’re going. Once we get there, guess who forgot his wallet at his house and who had to pay for the coffee (and doughnuts on top of that too)? That’s right, so we had to drive two miles back to Jason’s house and get his wallet, and then finally we were off. When there’s no traffic and it is the weekend, I’m always surprised how quickly we can get into the city, as it was only a 25-minute drive. We were nearly the first one’s there, but since I didn’t bring any money, this was merely an exploratory trip for the both of us, as we wanted to check out how much the properties were going for… and, as it turns out, an auction is quite an exciting place to hang out on a Sunday morning. If you squint your eyes just right, it’s a lot like church: There’s a guy in a black suit on the pulpit, rattling off a string of diatribes in another language almost, while a half-dozen bid assistants are in the congregation to rile up the crowd, put on the show and help sell a few souls.

We sat down in the front of the second section, and that proved to be the best seat in the house, thanks to a guy named Marty. He was one of the bid assistants who helped spot bidders and assist with information. There were others, Victor, Kevin and Rudy, but Marty was the best. He looked a lot like Taylor Hicks (the last winning American Idol if you’ve been under a rock these past few weeks), only older, and didn’t stop moving from the time the auctioneer started his rabble to the moment the gavel struck. He ran up and down the aisle, pumped his arms in reaction to a person’s bid, shouted what sounded like Marine cadences as the bids progresses and a cheerleader-like kick as if he was revving up a tractor that hadn’t run in years. Only one other guy got into it, Victor, who started to shout disparagements at the opposing bidders who outbid the guy he was taking care of. Kevin was just an idiot. He just stood there, a big rotund mass of a guy, mouth breather with a slack jaw, and he flashed the bid amount with his fingers while he muttered them, only they’d be backwards, right for him, but backwards for us. Twenty-five thousand (two with his left hand and five with his right) would be fifty-two thousand for us, so if you paid attention to him, you were lost. Usually about that time, Marty would do a galloping side-step down the aisle in front of him, waving his arms like he’s directing a plane to land.

The auctioneer was one of the traditional ones, who seemed to make up words in the middle of his call, and possessed the ability to only need a breath of air every twenty minutes or so but only say one word:

“Twentyfivesixtwentyfivesixwhowillgivemeseven? Twentyfivesixsevenanyeight? Newhorseintherunningyou’reout twentyeighttwentyeighttwentyeightwhowantstoplaytoday?Who’llgivemeninenineninewe’reattwentyeightfiveanynine?Who’sonthemoneywhereisthemoney?”

It was mesmerizing, like having someone read to you a Dr. Seuss book at a high rate of speed: “And that makes a story that's really not bad! But it still could be better. Suppose that I add. A Chinese man who eats with sticks. A big Magician doing tricks. A ten-foot beard that needs a comb. No time for more, I'm almost home. I swung 'round the corner and dashed through the gate, I ran up the steps and I felt simply great! And that is a story that no one can beat, when I say that I saw it on Mulberry Street!”

There were times where I would just check out, stop thinking and let his voice lull me into a quiet stupor, until I woke up and realized I was at an auction surrounded by thousands of people. Other times the excitement and fury of the bidding wars made my face itch. For some reason, I resisted movement that required me to reach any of my appendages above shoulder level for fear that I would inadvertently bid on something. I know, sounds stupid, but how many times have we seen the bumbling oaf buy some expensive vase at an auction because he had an itchy nose? Well, I didn’t want to be that guy.

On the contrary, Jason wanted to be that guy. Neither of us had any money, remember, and neither of us had the wherewithal to make such a purchase. After parking, I had three bucks, and three bucks wasn’t going to buy me a jar of dirt; however, Jason, on the other hand, wanted a piece of the action (as usual), so on the fourth lot, a five-acre parcel in the Wild Billy Lake area of Klamath, Oregon, he raises his number, instantly attracting the attention of two ringman who jump up ecstatically at the “new horse” in the race.

In hindsight, it wasn’t perhaps the wisest thing to do, only because the bidding was fierce, make no mistake, on every other property on the 150-parcel list… every other property with the exception this particular one. Wild Billy Lake, for some reason, must be a toxic waste dump because only four people dared to bid on it before it sold at $9000, the second lowest winning price of the day. Jason was the second bidder at $5000, and only two more people followed, as opposed to dozens of bids on most all of the other properties. It was a heart racing few moments where we stood a strong chance of being thrown out on our deadbeat ears with or without my three dollars and jar of dirt. What was worse, for me, at least, was the attention of the two goundsmen, hovering over us as if they get a cut of the take. Marty was crouched down like he was judging a Twister competition and Rudy had his arms wide open, anxiously awaiting our return into the fray….or he wanted a hug, I wasn’t too sure. Either way, my heart didn't start beating again until the gavel fell.

That was the excitement for the day, a brief shot at owning a piece of land, or having it forced down our throats by the angry financeers on the other side of the room when they realized that we were looky-loos out to win the hourly drawing (which we didn't). Oh, so why didn’t I do it, why didn't I take a chance on my dream of owning property? Well, before I heard the very first lot, I figured that if the starting bid is merely $500, how high could it go, $1000, $2500? Who knows, but it couldn't be that high, right? Naïve as you might think I am about auctions, I thought it would end well and that next time we’d go, we'd bring some money and actually buy something, but the one property I was interested in, a 10-acre tract of land about 50 miles from my house that started at $500 went for $43,000, a little out of my ballpark right now. Hell, we’re not even in the same game.

So we left, a little smarter, a little disenchanted and a little more wary of the ways of the real estate world. Jason bought me lunch at Red Robin (hey, I drove, and at these gas prices!). When I got home everyone was asleep so, when in Rome…

Now, of course, I’m wide awake. Maybe I’ll do some work… nah, maybe tomorrow.

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