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Examining the New Bubble
abb_road writes "Whether or not we're in the midst of another boom-bust cycle in technology is a matter of fierce debate. BusinessWeek discusses what constituted that last bubble and looks at current trends to see if we're on the verge of a new one. From the article: 'The Great Bubble of the late '90s shaped a generation of Internet entrepreneurs and investors much as the Great Depression shaped a generation of economizers in the mid-20th century. 'The bubble generation is much more attuned to the fact that things can get really out of hand,' says Bill Burnham, a former partner at Mobius Venture Capital. 'There's a level of caution that has been ingrained.'"
Is today Black Friday ? I need to panic and sell all my stocks !
And then buy in a couple of days. (and still loss it all ? )
Boy, people sure were stupid in the 90's, huh?
What I'm listening to now on Pandora...
I gotta fire my broker. Should I still be holding on to my Pets.com stock?
If you wanna get rich, you know that payback is a bitch
Mobius Venture Capital, eh? Suddenly it all makes sense
Anyway, not that I'm an expert or particularly knowledgable about any of this stuff, but it seems to me that a big difference is that this time around, the companies receiving the funding tend to be much smaller and more focused. Sure, many don't have a valid business plan, but at least there are only 10-15 people running the entire show, as opposed to some of the companies last time around that felt they needed to employ a hundred to be taken seriously.
This guy's the limit!
It sure does feel like 1998. That's why, this morning, I just moved almost all of my 401k out of US-based stocks. I am now invested at 40% Bonds, 40% International (stocks & some bonds), 10% Money Market & 10% US Stock. Note that even through the dot-bomb, I was running at 90% US Stock (thankfully, my 401K was so small back then that I didn't get hurt too bad).
I'm waiting for the correction (I believe it will occur before the end of this year). After the correction, I'll re-allocate.
I've been following the stock market, and in my opinion we're not seeing a bubble. We're not even seeing a rise. In my opinion the value of the stock market has been reflecting inflation in the US dollar and in other currencies around the world. We aren't seeing all of it in the stores - yet - but it's coming. The prices of precious metals are a good indicator of what's going on.
Alan Greenspan is no longer the Federal Reserve Chairman...Ben Bernanke has held the office since Feb. 1 of this year.
____
~ |rip/\/\aster /\/\onkey
The Great Bubble of the late '90s shaped a generation of Internet entrepreneurs and investors much as the Great Depression shaped a generation of economizers in the mid-20th century.
Since my own existence only dates back some 40 years, I can't claim firsthand experience of the Great Depression, but comparisons between the Dot-Com Bust and the Great Depression are so overblown that it ain't even funny. From the usual suspects:
Almost all countries were affected; the worst hit were the most industrialized, including the United States, Germany, Britain, France, Canada, Australia, and Japan. Cities around the world were hit hard, especially those based on heavy industry. Construction virtually halted in many countries. Farmers and rural areas suffered as prices for crops fell by 40-60%. Mining and lumbering areas were perhaps the hardest hit because demand fell sharply and there was little alternative economic activity.
I guess it's to be expected, though. We're supposedly in this War on Terror, but so far, I haven't been asked to participate in a single Meatless Tuesday. Where do I go to get my ration cards, anyway?
Stressed? Me? Of course not. Stress is what a rubber band feels before it breaks, silly.
I read that as, "Examining the New Bible". Almost thought I had missed the second coming of Jesus in my drunken stupor last night...
I didn't RTFA yet, but I had to react to:
'The bubble generation is much more attuned to the fact that things can get really out of hand,'
If this is true, it'll last another 5-10 years before we forget all lessons learned (correct or not) and return to business as usual. Our species is really good at self-deception, group-think, extrapolation forecasting, and greed, with varying results. We deluded ourselves regarding tulips, electronics, radio, the internet, and who knows how many other bubbles; we will do so again.
For a couple very good talks on the self-deception issue (somewhat OT), listen to Robert Trivers and Nassim Taleb
Simple Unexpected Concrete Credible Emotional Stories
So it's just blind luck that we've been able to get a hold of and maintain control of inflation since the 70's and early 80's? I don't think so.
"'The bubble generation is much more attuned to the fact that things can get really out of hand,' says Bill Burnham, a former partner at Mobius Venture Capital. 'There's a level of caution that has been ingrained.'"
Let's see... Energy and home prices skyrocketing. Low unemployment, but virtually no improvement in salaries. The new bubble? It's healthcare, baby. Every market is targeting the baby boomers and milking them for as much money as possible, and when you combine that with a generation of people who have been saying "I deserve the best care no matter what the cost." forever while sitting on their lethargic hinds 24/7, we've got the current recipie for disaster.
Caution? Bah. It's top-heavy protectionism.
I don't necessarily agree with that statement either, but not for the same reasons many others probably don't. It might be a bad time to try to start a long term company online, but if you have a one-two year get rich quick idea that will most likely work what do you have to lose?
Arguing with an engineer is like wrestling a pig in mud. Soon, you realize the pig is dirty, and he likes it.
to a degree. I was involved in 14 IPOs during the last bubble and had a policy to sell out 90 days after buying no matter where the stock price was. I made out pretty good.
Regarding the stock market, historically, whenever a new technology/infatuation arrives on the scene, tons of money get thrown in, the market gets irrationally exuberant, stock prics go way up and then implosion. Stock prices get corrected and after the dust settles the new golden age begins from whoever is left standing. In this case that's eBay, Amazon, Yahoo.
No one "loses" money either. If you invested 10K in the market and your investment rises to 100K and then drops back down to 8K, you only lost 2K and only then if you decide to cash in and take the loss. For all those people who "lost" money, hedge funds made a ton so it's more of a redistrbution from the hands of the many to those of the few as opposed to a "loss"
What screws people is no exit strategy. The stock buying public is always right during the trend but never are they right at the top or bottom. Can't be satisfied with a 300% percent gain...
Like uncontrolled immigration and corporate controlled indentured labor via H1-B visas?
http://finance.yahoo.com/q/bc?s=USDCAD=X&t=1y
The dollar's just falling.
No, it's a major Real Estate Bubble.
Slashdot: Failed Car Analogies. Amateur Lawyering. Anecdote Battles.
Stocks are reasonably priced, salaries are reasonable, VCs aren't throwing money around in big fist fulls of $100 bills. I'd say that maybe things are maturing this time.
'There's a level of caution that has been ingrained.'
Its been 20 years since the last housing bubble. Looks like that cautiousness only lasts a generation.
Skip ------ See the latest from http://www.anArchyFortWorth.com
The IT industry will repeatedly bubble untill it's replaced. In the 80s people started to get really greedy and as we got into the 90s most industries became so refined that they can't really go any where. They'll just keep making the same stuff over and over again with slight improvements here and there.
Where as the IT industry just started to come of age. It started to mature in leaps and bounds, this won't stop untill we hit the peak where any more power is just pointless (photorealism all round). It's more or less like the old steam engines. A lot of people saw "improvements" all the time and went "Wow this has got to keep going! It'll never stop and I'll become super rich!" The same is happening now, and will continue to do so forever.
Greed will make a bubble in every industry that shows any majror improvements, right now IT is the favoured thing. Tomorrow it maybe nano technology, whatever it is the same pattern will repeat. Idiots won't listen, they'll do the same shit they always do and they'll get lucky once or twice and assume they will do it again.
I like muppets.
Once? The dot-com bust was not the first bubble by a long shot.
cite: wikipedia
There are also the current real estate bubbles around the globe.
The real problem is that all these players are chasing the same pot of ad revenue. Most of them are bottom-feeders off Google AdWords or something similar. They're not selling anything themselves. There's no new product.
Correlations between international and U.S. have been running 80-90%? And there has been a huge run up in non U.S. investments, especially emerging markets? Anyway...at least you remain diversified.
Sucks to be you ...
As long as your stock is diversified it really doesn't matter. Short of another black monday/black tuesday you will be fine. Will you lose some money in the short term? Of course. But the market rebounds, you don't lose shares. By moving that money from stocks to bonds/money market now you lose out on the potential interest in the meantime.
All a "correction" means is that you can afford more stock during the correction. Buy, buy buy!
In the '90s, venture captialists were handing out money to thousands of middle managers who wrote a 10 page summary of a an idea for a business and the stock market was insanely over-valued because folks figured sound business foundations were totally irrelevant in the internet age.
VCs were burned badly and they examine companies far more closely than before. The money is flowing again, but it's targeted much more towards real innovation and practical business models - not vague ideas and businesses built to flip in 12 months.
So, are we in a bubble? No way - we're still at the start of the age of information that will totally transform our society. Plenty of money to be made and huge innovation potential.
With VCs focusing much more on business fundamentals, the net effect will be to weed out all those loser middle-manager entrepreneurs and their get-rich-and-get-out quick schemes! So the money will still flow, but it will go to people with much strong and original ideas and more solid business models.
The next crash is going to come soon, The US economy is in massive debt, the war in IRAQ is not going so well, Afghanistan has kicked off with more fighting, the cost of shipping oil has increased letalone the fact that we have already passed PeakOIL(tm). As we have gone past peak oil much of the oil remaining is costing more and more to refine/dig up/pipe out, all of these increased costs have to beak companies bottom lines and investor confidence in the market. There is a limit to how much anyone can borrow before it completely screws themselves. The US economy is not isolated there are many countries that are borrowing significant amounts of money. As interest rates increase in many countries the cost of that borrowed money only increases which means people are going to have to cut back on spending in other areas if they can which hurts retail figures which has been seen recently in many markets. BUT you can all be happy that fox will still report the good news for the republican party and forget the rest.
Gold is now going up because gold is going up.
Yet people are piling on -- even tho it has little more intrinsic value than osterich eggs did in the 90's.
People are scared, then cautious, then risky, and finally greedy.
Then they get hammered- a whole lot of people lose a lot of money, and then they are back to being scared.
I'm up 32% over the last 24 months and I'm down to 50% exposure to this market.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Personally, it feels like something's got to give. I'm not as well versed in economics/macro-economic history as some others here likely are, so I pose this question: have there been times of such bubbles? Yes, I know there have been bubbles in the past - tulip mania, the stock market in the late 1920s/late 1990s, SoCal real estate in the late 80s, etc. - but has there before been this swell from one bubble to the next to the next without any real sort of crash or correction across the board? Yes, stocks got hammered in 2001, but real estate in my neck of the woods appreciated like 25% that year and for the next several years.
What is the cause of this? Is it the Fed flooding the marketplace with liquidity? Or is this nothing too abberational, and we're just headed for one helluva bust?
I could not justify my existence if I were a turkey farmer. Would I terminate myself? Undoubtably, yes.
Read a story yesterday that said Google employees sold more insider stock than the total sold by the next 199 largest companies in silicon valley, COMBINED.
Google selling also pushed up California's income tax receipts by 12 percent in 2005.
Things are getting a little out of hand, dont you think?
Google insiders are now selling twice as much pet year as Microsoft employees, even though Google has less than 1/10th the profit as MSFT.
Here is part of my reasoning. I have been investing 20% international (evenly split between Europe and Asia--mostly UK and Japanese companies) for 2 years. So, taking it to 30% international stock (again, mostly UK and Japanese companies) and 10% in an emerging market bond fund wasn't that big of a deal to me. Trust me, it's not like my 401K has millions of $ in it. And, I have at least 20 years before I can retire.
A long time ago, I read that US investors should put about 20% of their investments into overseas stock. For the rest of this year, I am increasing that overseas investment ratio because I believe China will continue to grow very quickly for the rest of this year before slowing down. The emerging market bond fund is strictly a diversification move on my part.
If, as I assume, we have a bear market before 2007 begins (meaning a 20% correction), I will then reduce my foreign investments and my US Bond holdings and put more back in the US Stock Market.
There are also the current real estate bubbles around the globe.
I have to agree, and when I saw the summary I reacted. IMHO we haven't learned a single thing. We went from one sure-fire, get-rich quick, get in now or you might not be able to afford to get in later, frenzy to another: real estate (variable interest, interest only loans! Reverse mortgages! Rent covers 1/2 of a mortgage payment on the same dwelling but it's still somehow a long-term investment!)
I often lament just how little we learned on the heels of the internet stock bubble.
Thing is, the last bubble was a lot more complex than pure stupidity. A lot of it was dishonesty, and a lot of the rest is that special kind of stupidity-from-pure-greed that makes people "invest" in pyramid schemes and the like. The knowledge that, yes, it can't possibly go on for ever, but hoping that it would last just long enough for _you_ to get your pay-off at the expense of others.
E.g., for the greed part, don't assume that all investors were unable to learn that those "internet companies" tend not to last. But that was ok. They didn't plan to hold onto that stock for ever. They planned to buy some "my_cat_photos.com" site at cents per share, hype it to insane values, then sell right before the company crashes and burns and let someone else take the loss.
(And those in the most profitable position were the stock analysts, some of which had no remorse in telling their clients "buy!" while they told their own agents "sell!" I.e., they were in a position to _create_ a bubble around a company, and profit from it.)
A lot of the hyping dot-com stock you may have read fell basically in this category, and partially in the dishonesty one. It's not that those people were too stupid to see that a company without income can't survive. They were hoping _you_ would be stupid enough to believe them and help them pump up the share price. When they proclaimed an income-less and busines-plan-less new economy, well, the money making part of that economy was actually very present in their mind: it was the stock market. Namely hoping that some other dolt would buy the pumped up shares before they crash and burn.
And a lot of the posing, posturing and seemigly illogical behaviour of the dot-coms actually fit that hype-and-dump pattern. Now _some_ of the company owners may have blown money on gazillions of employees, Ferraris and buying football teams just out of stupidity. ("Look, ma! I'm someone! I can throw money out the window just like the rich guys!") But for a lot of them and for some VCs this simply constituted a kind of behaviour they could pump before they dump. It could be hyped as a young, dynamic, fast-growing company that's poised to take over the world. At the rate they're growing, they'll soon be the next Microsoft, and you'll be sorry that you didn't buy their shares when they were cheap! The fact that the only "fast growing" part were the expenses, well, they hoped you wouldn't notice that.
E.g., for the dishonesty part, one of the things that started the bubble was... advertising money. See, in the early day of the Internet web sites had maybe one ad banner on the main page, and some of us even clicked on them. And ad rates were based on this in more than one way. I.e., not only did the advertiser only count on paying for 10,000 or 100,000 views of that ad, but they also counted on the relatively high return on that investment, since people hadn't been yet buried in obnoxious ads and desensitized to them.
But in true "tragedy of the commons" fashion, someone figured that they could rake in twice the money if they put two ads on their site. Or 10x the money if they put an ad banner on each page. Some went as far as to imagine a site which would have a tiny content frame in the middle, while the rest of the screen would be filled by wall-to-wall ads. I know I've actually worked for one.
Some were even less honest than that, and also generously inflated their page view statistics. If you believed them, some sites had millions of pages (and thus ad views) served per month, even though they were barely more than someone's blog site. And not even the blog site of someone famous.
So basically what started the bubble was the idea that "hey, looky, we can make a bunch of cash by defrauding the advertisers!" Except that in the resulting 3-way con-war between websites, ad providers, and the companies paying for the ads (with the ad providers trying hard to cheat _both_ the webmasters and the paying customers), the prices per ad dropped like a rock, making that gold mine a
A polar bear is a cartesian bear after a coordinate transform.
I don't really know much about the stock market, but I do know a bit about technology. And something that I have noticed which is similar to the late 90's bubble is an irrational belief in hype. This time around the hype is about anything that carries the label "Web 2.0." More specifically, anything that uses "AJAX." Far too many people seem to think that traditional software vendors are going to be put out of business by any schmuck who can manage to immitate a desktop application (or more laughably, an OS) in a browser. I've noticed a general unwillingness to stop and seriously consider whether or not anyone would actually WANT to run an office suite in a web browser, for example.
Fortunately, I don't see nearly the same kind of money changing hands as in the last bubble. Most of it seems to be "grass roots" kind of stuff. So perhaps the hype will just die down with fewer bankruptsies when the dust settles.
Just my $3.
-matthew
"THERE IS NO JUSTICE, THERE IS ONLY ME." -Death
Tech won't really be in a bubble unless there's a mindset of irrational exuberance in the general public. There would have to be large groups of insanely bullish people who flat out deny the mere possibility of a bubble. If you want to see a real bubble in action right now in 2006, look at the real estate market. We're just reaching the top of the sine curve there.
Um, no, the dollars are worth less - that's all that's happening.
= m&q=l&c=gld
http://finance.yahoo.com/q/bc?s=MSFT&t=1y&l=off&z
That's the price of gold compared to MSFT (just out of interest) for the last year. Gold is traditionally a very good (if not excellent) hedge against inflation and shows the devalueing dollar situation pretty well right now.
spoonerize "magic trackpad"
My personal experience contradicts your assertion. I have been in meeting with Greenspan, and one of my business school professors worked for him for several years. Alan Greenspan was famous for his incredible knowledge of details and how they impacted the macro view of the economy. For example, he studied weather patterns, road construction/maintenance schedules on highways and bridges, as well as numerous other details, to help him extrapolate on the shipping industry, which then helped him extrapolate on industries that rely on the shipping industry (i.e., all of them), and how to combine those extrapolations to arrive at a policy for the Fed. The guy is very smart. If he was really a political hack, he would not have survived five presidents, including a Democrat administration, which included Robert Rubin as Treasury Secretary, a very smart (and very political, but fortunately not driven by his politics) man in his own right.
The article notes "Web 2.0" is an ambiguous term, but uses it nonetheless. I'm curious - what exactly is Web 2.0? Is there an RFC for it? Do the W3C have anything to do with it? Can you get a job as a Web 2.0 developer? I suspect the answer to all of these questions is "no," and that we're looking at another media mountain born of a technology molehill.
a r2006/tc20060313_860688.htm?campaign_id=topStories _ssi_5) talks about Web 2.0 as a collection of technologies and techniques, which leaves me wondering what defines these techniques as "Web 2.0" besides their current popularity. The buzz around AJAX makes some sense as it is having a genuine impact on the usability of websites. However, does a website become part of the "Web 2.0" simply because it has a sprinkling of asynchronous JavaScript and XML? Or does it need a tagging system, or WYSIWYG editing (or whatever other technique is currently in vogue)?
One press article (http://www.businessweek.com/technology/content/m
We've had this issue before. Remember "DHTML," which was simply a buzzword referring to the combination of JavaScript, CSS and HTML? It was great for the IT publishing industry who could release a whole new raft of books on these technologies, but for the rest of us it was just another confusing ambiguity.
Rebranding combinations of old techniques merely creates a bubble of hype that confuses management, developers and users. If you've ever uttered the words "Web 2.0," then shame on you!
Should I still be holding on to my Pets.com stock?
Why I'm holding on to my Pets.com sock right now! Someday this puppet will be worth a fortune.
Oh, you said STOCK. My bad. If you've run out of TP you know where to go.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
So, based on your article, you are chasing returns? That can work for awhile I suppose.
I don't know about the rest of y'all, but in the last bubble, there was such a high labor demand, that if a person could switch on a computer, they could get a salary of $70k/yr. If you were more competent, you could get more. And the icing on the cake was that they were handing out stock options like candy, to everyone, even the janitors. And NASDAQ was doing so well - frankly, I bought a house I would never have had a chance at getting into otherwise (though I totally screwed up how I structured my stock sales, so I got fucked by the IRS, and wasn't able to really take advantage of what would have been about $1 million worth of options).
Many techies were seriously debating whether there was any point to higher education because of this tight labor situation.
Nowadays, it's very different. Most of us feel lucky just to have jobs. My salary has finally caught up with what it was in 1998. Only now, I'm not getting stock options.
We're most certainly not in the midst of another tech bubble. My take on this is that most likely, the reason for recent higher earnings has been due to the NSA buying lots of hard drives. When they've got enough, we'll be right back in the 2000-2003 toilet.
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
Of course this is slightly tangential as to whether there is a tech stock bubble.
"The bubble generation is much more attuned to the fact that things can get really out of hand," says Bill Burnham, a former partner at Mobius Venture Capital. "There's a level of caution that has been ingrained."
As I look out into the parking lot at the sea of import luxury cars and eat my free bagel on Free Bagel Friday, I say to myself,
I sure hope so dude. I sure hope so.
Lane Myer: I have great fear of tools. I once made a birdhouse in woodshop and the fair housing committee condemned it.
one to two years
I just don't see a bubble in tech. Yeah, there's some crazy money being thrown around, but it's not from investors as in the 90's, it's coming through aquisitions. By the late 90's everyone and their mother was a stock speculator. People saw these crazy returns and jumped in to get themselves a piece of the pie. Naturally, this phenomenon fed on itself and everything became overvalued incredibly quickly. When the big stock holders and VCs started selling off their stakes, all that money evaporated and so we have a crash. Right now I don't see anybody blindly investing in whatever tech stock they can to exploit returns that are way higher than they should be.
Where I DO see it is in commodities and certain housing markets. Metals - Particularly gold and silver - are going crazy right now. ETF stocks have opened up so you can buy "shares" in metals, and when you do, the ETF buys physical metal to store in a vault (it's just gold and silver now, AFAIK. Cheaper metals would cost too much to store) The rise of these ETFs allow any joe to buy gold and silver on a whim, thus creating a large potential of making them overvalued. Compounding the problem is that a lot of countries are getting scared by the inflating dollar and hedging their investments with gold, further driving up the price. The rise of the price due to this activity is a lot of the reason the gold & silver ETFs were created in the first place - The price activity has the attention of the public.
Don't get me started on housing in the US. I have seen this coming for three years. In the US, places in the midwest and south are going for what they should be, maybe even below - You can pick up a nice 3 bedroom 2 bath house with 1700 sq ft of living space and a good sized lot for the low $100's. These markets are safe from the bubble. But the same place out here in the SoCal city where I live will cost you at least $550,000, and that's with practically no lot. Even in the High Desert, which is on the other side of the mountains and 80 miles from LA, it will cost you $300,000 to get in the same house. Two years ago the same house was $160,000. It's ridiculous. The rise in prices is mostly due to the same mentality that caused the stock crash of the late 90's - People saw their homeowner friends building massive equity (and cashing it out to buy nice toys) and wanted to get in the game before it was too late. So they all started jumping out of the rental market and buying houses, which reduced inventory and thus drove prices up. The banks noticed the meteoric rise in equity, and they started loosening their credit criteria - They'll still make a ton of money even if the place forecloses. Pretty soon anyone who could breathe was qualifying for a home loan. Many of them could not afford a standard 30 year fixed rate loan, and so took out an ARM (adjustable rate mortgage, for those of you with no home buying experience) loan instead. So they were given a really low initial interest rate that would stay fixed for the first 5 years and then the banks would be allowed to increase it with the market.
Then came the "creative" loans. When people could no longer afford 30 year fixed or standard ARMs, banks started pushing "interest only" loans. This is basically an ARM loan except you don't have to pay principal on the loan during the fixed period (again, usually 5 years). What's in the fine print is that after the 5 year period is up, you must start paying the principal you weren't paying during the fixed period. Coupled with increasing interest rates, a homeowner could be looking at significatly higher payments.
But it gets better. Then came the "partial interest" loans. So now, not only are you in an ARM and not paying any principal, but you are also only paying a fraction of the interest every month. This is how a lot of people making $40,000 a year are buying houses that they would ordinarily need to be making $130,000 a year to afford. These are also called "negative am
-R
There's a level of caution that has been ingrained
Of course. When you're suddenly half a million dollars in debt because you leveraged options from a company whose only product was a website, you tend to learn the lesson.
A Government Is a Body of People, Usually Notably Ungoverned
It's fine to speculate on it in a volatile market, but I never get this veneration it gets. There are so many natural resources you can invest in which do have intrinsic value, and which historically have been less prone to devaluating compared to the dollar. Everybody needs oil, everybody needs land ... practically only investors "need" gold. Gold is a bubble unbacked by intrinsic value just as much as the internet bubble was.
And new boom officially began when the "dot com" search trend crossed the Web 2.0 search trend. (Brought to you by (who else?) Google.
Yep. I am. And, it will only be for a while. As I have stated before, after the US Market correction (which I expect to see before the end of August this year), I will return to the US Market.
Look at the "all data" plots... For each of the 3 "markets" listed earlier, one could pretty much cut out the bubble from the late 90s and it would appear that we're back on the growth trend that started back in the 70s (or where ever you want to draw the line)...
If you can see it coming, you can take steps to shelter your resume, no? Sure - I could've still made a pile of cash up until 2001 or so, but I felt a whole lot more secure during the bust than most admins I know of had. When a single opening in the private would attract 400-500+ candidates, and there were few and far between? The average decent admin (not counting paper tigers and folks who should've found another line of work anyway) spent well over a year to 18 months finding even a mediocre position. Meanwhile I was having a blast teaching the kids who are now out becoming admins and programmers themselves.
Overall, he's right - if you use your head --even career-wise-- you can do very well for yourself.
Quo usque tandem abutere, Nimbus, patientia nostra?
1. alan greenspan's "new economy" lie... when productivity wasn't growing when alan thought it should, he fudged the numbers (see hedonic pricing and chain weighted dollars). did you know that up to 50% of "productivity growth" came from fudging the numbers by adding money that didn't exist? for example, a computer that sold for the same price as a computer the year before, but was twice as fast, was counted as twice as valuable when figuring gdp. they didn't measure dollars, they measured "characteristics." the problem is that *if* the characteristics actually added value to the economy it would've shown up later on during its use... but it didn't. so they added nonexistent money to goose american productive growth numbers - and didn't mention the numbers were fake.
. htm
alan's faked the numbers and chanted "new economy" repeatedly. eventually people bought into the idea based on alan's "credibility" and mass ignorance of what actually transpired.
2. people are greedy. i disagree that most folks knew it could end. they thought everyone else was right and these business would take over the world and, every time the price went up, their view was reinforced. everyone can't be wrong - and i'm gonna get mine.
http://news.xinhuanet.com/english/20010414/397211
good lord! this guy had a windfall of $6+ million and was so intent on not paying taxes he lost it all and is $700k IN DEBT due to the amt.
this site was created by a guy who wateched his millions evaporate into debt - just so he could avoid paying regular tax rates...
http://www.reformamt.org/
he even knew his break even point for his exercised options... i think he owes $1 million in taxes. like every good american, he won't take personal responsibility for his greed - he wants the law changed. he doesn't care if that would allow billionaires to avoid billions in taxes...
i guess he thought cisco was really a $500 billion company. maybe he tought it was a trillion dollar company.
3. ignorance. anyone who cared to know would've found out about the faked productivity numbers based on fudged numbers. greed caused folks to not really want to know and, if they did know, to not tell anyone.
5. lack of critical thinking ability. the #1 component of corporate profit is consumer ignorance. perfect knowledge drives down margins (the vast majority of the time, especially for true commodities). the internet reduces consumer ignorance and would obviously reduce margins on many items as folks could easily shop for the lowest price. it has been almost a decade since this was obvious to me.
remember dow 30k? it was book. that was its title. the ignorati actually bought this thing.
i missed out on most of the bubble. some of my small caps did well with the rising tide - so i can't complain. then again, i didn't get torched when the buble crashed. my investments are up nicesly since 2000. i recieved a $35k severence package in 2000 that i used to pay off a condo while everyone else was making mass money in the market. until it stopped. one friend made $500k in a year... only to lose $500k the next. he was fully taxed on the $500k and only gets to deduct $3k above gains for the losses... OUCH!
th emarkets represent psychology more than rationality - and people with money are entirely screwed up in the mind.
there are other issues - like monetary inflation that pushes more and more money (which cheapens each dollar) into the hands of the wealthy and they have to put it somewhere, right? low interest rates weren't appealing, so they "invested" it, hence part of the rising tide.
the problem is that this money is basically debt financed... and that game will crumble.
some people think 2000 was a boom / bust cycle.
imho, that's naive.
the bust has yet to reveal its ugly head. when it does, it will stress the very fabric of the world.
Reorganize our entire suburban sprawl into small tightly integrated cities with housing next to workplace and markets.... Really pie in the sky would be:
Cheap space flight, space elevator, asteroid mining and orbital solar power plants
That is all nice and dandy but it won't happen anytime soon, because markets (and people) hate centralization.
Solar power is probably going to take off because anyone can lower their electric bills (and get money back) by installing Solar cells on the roof of their house. However, I wouldn't look to government for anything life shaking like the Manhattan or Apollo project any time soon.
Really want change in the world?
Donate to the Singularity Institute.
I do every now and then with spare change pay pal.
At least they are trying to build Friendly StrongAI.
And well... Strong AI would make all our other discussions a moot point and it doesn't matter if anyone in politics agrees or disagrees because it will be self-sustaining.
Advancement in decentralization is key.
"I am the king of the Romans, and am superior to rules of grammar!"
-Sigismund, Holy Roman Emperor (1368-1437)
"In order for dishonesty and greed to work, you need stupidity."
Oh yes, you are right there. Not gonna argue with that. But the interesting part is the perverse way stupidity enters that equation.
Bubbles don't happen because, suddenly, a lot of people just inexplicably become stupid. Well, ok, they do become stupid, but not inexplicably. There's in fact a very simple explanation for it: bubbles happen when people start thinking that everyone else is stupid.
Look at the apex of the last tech bubble, or for that matter at the renaissance Dutch tulip bulb craze, just to illustrate that nothing changed in centuries. It wasn't plain simple stupidity of the "ooh, tech shares or tulips are valuable, I must own some too" kind. It was belief that someone else would be more stupid and buy them at an even higher price. (And in the tulip craze, at one point the idea started being thrown around that the rest of the world would start buying those bulbs too. Basically giving those greedy people an even larger pool of people they could imagine to be that stupid.)
If you do manage to get a bubble started, the bubble _itself_ becomes proof that, indeed, everyone else is stupid and ripe to be scammed by you. You can take 1000 people who, each taken separately, would have never even considered investing in a tulip bulb or in shares of a company with no sales of any kind. But if you manage to get a bubble going, each of them can get their judgment clouded enough by greed to believe that the other 999 are stupid. And each of them thinking that he being the obviously smarter one will have no problem buying something for X dollars and selling it to one of those 999 dolts for at least twice that.
Where the dot-com bubble differed (in a minor way) from the tulip bubble is that the dot-com bubble was a two-stage design. The first stage that got it started was the belief that surely the advertisers are too stupid to notice that they're paying 10x the money for 1/10 the return. The fact that the advertisers were at first slow to react to people doubling or quadrupling the number of ads, and then could be for a while slowed down by smoke-and-mirrors metrics, was taken as proof of that. The belief was formed that basically you can scam them as hard as you want to, and anyone only needs a web site to rake in ridiculous quantities of cash multiplied by their number of users.
So, again, in both stages instrumental wasn't just blind stupidity, but the belief that everyone _else_ is a drooling idiot with money to throw down a rat hole.
You could say that this in itself is a form or manifestation of stupidity, and we could even aggree there very quickly. Yep, it is. Very much so.
But I find it an interesting form anyway, because it's a form where people are basically victims of their own greed and dishonesty. It's not someone else who smooth-talked them to buy a timber mill in Sahara, but their own greed who clouded their judgment enough to think "hmm, there aren't even any bloody trees there, but I bet there are plenty of idiots I could sell that mill to for twice the money." Very interesting phenomenon that, IMHO.
At any rate, I'll make the prediction that that's the way the next bubble will start too. And, sadly, it won't even be that much different from the last one. It might even end up a verbatim rehash.
A polar bear is a cartesian bear after a coordinate transform.
Bubble, what bubble?
Sure there were stocks traded on thin air but it's always been that way.
The market was stolen by corporate executives and the top 1%.
If you have a major "accounting scandal" every two or three weeks on average someones got to pay.
In this case it was the middle class as it faced decimation from offshoring and VISA abuse.
Funny how the punishment does not fit the crime.
The End of Selling Out was also a major cause of the bust. By the beginning of 2000, the public _was_ starting to get the idea that paying thousands of dollars a share for IPOs of Dogfood-On-Line.com might not be a good idea after all, but Greenspan kicked up the interest rates a couple of points at the beginning of the election year (which is really rough on a capital-spending-intensive bubble economy), and the AntiTrust Suit against Microsoft meant that Microsoft was unlikely to be buying anybody out any time soon, because there were serious threats to split MS into multiple companies, and any move towards becoming bigger or cornering the %s market by strategic acquisitions was obviously too risky for them. So VCs no longer had their two big cashout strategies for software and services companies and their cost of capital was going up, and they stopped pouring in the cash. You could go to Menlo Park, shake a tree, and if a VC fell out it was because he was dead.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
That's helicopter commander Ben Bernanke to you :--)
(He needs the helicopter to drop all the money from)
spoonerize "magic trackpad"
http://www.house.gov/paul/congrec/congrec2006/cr04 2506.htm
This backs up what I was saying. I believe there is a 'great inflation' coming and PMs are a safe way around it.
spoonerize "magic trackpad"
Sorry, got to call it like I see it.
You really need to look upstream where those local banks mortgages get sold, follow it just two steps upstream, then look sideways, then another step, then sideways. Then start looking at major shareholders of big "US" companies. Then start looking at who really owns the banks.
Just because you aren't seeing abdul or wong lee or pieter or gustav or sergey or shlomo moving in to that little mc mansion isn't any indicator of who actually OWNS the mc mansion.
It is not those yuppies you are staring at with the moving van.
I don't believe we're heading for a recession, per se. What I think we're going to have is what's been labeled "stagflation" - higher prices, salaries not adjusting, and people essentially getting poorer because their dollars won't buy as much. The good news is, it's slightly better than hyperinflation, because things will eventually readjust; the bad news is, it'll still be very painful.
We're running about average for this point in the 4 year "presidential" cycle, and the typical May tumble just happened. If things continue running to the average, we'll get a sharp low in October, followed by a year of dramatic growth. Alas, YMMV.
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