Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: MeDroogies who wrote (2656)	3/31/2001 2:05:33 PM
From: tradermike_1999	Read Replies (3) of 74559

Well, some people would argue...how do you know it's a bubble while it's occurring? Read "Manias, Panics and Crashes" to get the gist of what I'm saying. You may THINK you know....but maybe not. I felt it was a bubble, that's why I removed my initial capital. It allowed me to play along and not lose. There is a fundamental difference between the two bubbles you list and the tech bubble. There is substance behind tech. While some techs will go the way of all flesh, many will survive and be highly productive for years to come. How do you know if it is a bubble? You use common sense. There are some ideologues - Lawrence Kudlow and Milton Friedman - who claim that there is no such thing as a speculative bubble. Kudlow still claims that there was no internet bubble. He is the philosopher clown of CNBC. Use common sense. In 1999 I remember the day shares of the National Lampoon company went from 10 to 20 on news that a guy named friend in the mobile home business made an investment in the company. I'm not making this up. National Lampoon makes money from royalties when Animal House and their other movies are shown on TV. They announced that they were setting up a comedy website and the stock got hot. And then you had the Linux rage when worthless companies would announce they were going to put out software that would work with Linux and double in a day. When all the pigs are flying there is a bubble going on. You just use common sense and look at the charts for signs of the coming exit on the part of the herd. You used common sense and got out. The people who said how do you know if it is a bubble where using that phrase as an excuse to hold on while everything collapsed. They won't be around to buy at the beginning of the next bull market. They'll buy at the top again after they wait for their marching orders from Lawrence Kudlow, George Gilder - or whoever the next pied piper for Wall Street is going to be. There is NO difference between the tech bubble of the 1990s and the railroad bubble of the 1880s or the car and radio bubbles of the 1920s. In fact compared to the car or the railroad the internet the little chip and interent innovations pale in comparison. "Manias, Panics, and Crashes" is must reading. The author identified about 15 or 20 speculative bubbles in US history and countless others throughout the world. He attributes all of the to an extension of credit. Take for example the late 80s early 90s speculative real estate S&L bubble in which the Clinton frauded old people out of White Water property and Neil Bush ripped off investors and made millions Texas style. The S&L ripoff cost taxpayers billions of dollars and was triggered by deregulation which set the S&Ls free to float crazy bonds and promise interest that couldn't be paid. Our technology bubble was triggered by Alan Greenspan when he lowered interest rates in 1998 in order to bail out international bankers and hedge funds. There weren't enough real investments left in the economy so that extra money went to the most speculative investments out there - technology stocks. Garbage stocks from Yahoo, Priceline, and valuation bubbles like Cisco and Oracle. Most people still don't realize what a bubble it all was and are buying or holding now in desperate hope as their accounts sink into oblivion. Or worse they buy from CEO's like Larry Ellison while they sale. Some suckers were buying HIS stock when he was dumping nonstop trying to abandon ship. The greatest transfer of wealth in history - from the individual investor to the CEO's and Wall Street chieftains.

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