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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (2716)	3/23/2004 2:38:18 AM
From: Elroy Jetson	Respond to of 116555

Because bubbles are emotionally based, the reasons they collapse are usually factors which change sentiment, rather than anything substantial which actually alters the underlying economics. The commonly cited factor behind the collapse of the real estate bubble in 1990 were job cut-backs in the defense industry. The reduction in aggregate employment from these cut-backs however were only 2%. The collapse of the "boom of the 1880's in Southern California" was attributed to storms which washed out east-west transcontinental rail travel for three weeks. These factors in ordinary times would have a trivial impact on the real estate market, but during a real estate bubble they were enough to cause a sudden change in sentiment. Real estate is over-built and over-priced, but this alone is not enough to end a bubble of euphoria. It's difficult to predict which straw will break the camel's back.