Monday, November 28, 2005

Pop Goes the Bubble


  1. and it goes pop with such sublime second story news on the business sites from CNN to Marketwatch. Little do they know, the bubble will end with a bang not a whimper.

  2. Why do you think a bang, not a whimper?

    The stock market bubble of the 90s was one of the worst speculative excesses in history. Yet almost our entire financial, government, and media establishment seems dedicated to making sure we have a soft landing from it, so we still haven't had a stock crash 6 years later.

    Won't they do the same thing for housing? Why won't they be successful?

    (I am not saying you are wrong, but rather asking from genuine interest. I certainly believe there is a housing bubble).

  3. Anonymous -- I agree with Skytrekker -- it will go out with a bang, for a number of reasons. The simplest, for this debate, is that stocks were not leveraged so easily or to so great an extent as has been speculatively-owned housing. Want more?

  4. To the anonymous writer who asked "Why do you think a bang, not a whimper?"

    Specifically, you wondered if the support institutions (financial, government, media) were able to manage so that "we still haven't had a stock crash 6 years later", it is important to remember, that in the past 6 years, the stock market really hasn't gone anywhere to fall - to crash, you'd have to being going at a good speed, but since the stock market had the big reversal in 2000-2001, it really hasn't regained much either, so that is why no fall. Even if 6 years later, it finally recovers its value, that's not bad, because the gain was over time.

    The housing market though, is another story - no one can prevent the market from realizing its true potential, whether up or down. So the only question is, whether the market fundamentals exist to prevent any housing reversal?

    I don't think so, but many equally intelligent and sincere people believe that fundamentals support today's housing prices.

  5. The general business media is not very sophisticated- they go with the 'consensus view' which is always 'everything will be ok' there will be 'no disaster.' When the market crashed in 1929- the media spoon fed the public with the same garbage......'the market will stabilize' ...bankers and big money are rushing in to stabilize the market' or in early 2000 with the nasdaq at record levels the consensus views said there was nothing but clear days ahead for tech and the markets. Those same people now who where late to admit there was a bubble in 2000, and a bubble in housing, now say there will be a 'soft landing'. I would take with a grain of salt the consensus view of the mainstream media- they generally say or know nothing.

  6. The NASDAQ got creamed and is still very low. The DOW, on the other hand, did not get hurt nearly so badly and is still grossly overpriced on a historical basis. Why is that? Some point to the PPT (Plunge Protection Team) abusing their mandate. If it is the PPT, then why? Is it because so many pensions are dependent on DOW stocks holding their price? Is it just a matter of protecting the rich (who hold a lot of DOW stock)? Or is it something more general like any-economic-weakness-is-matter-of-national-security sort of thing?