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I was (sort of) there when the 2000 tech crash happened and was in the thick of it when the 2008 crash happened. This thread and a few offline conversations ma

I was (sort of) there when the 2000 tech crash happened and was in the thick of it when the 2008 crash happened. This thread and a few offline conversations made me reexamine what I believe about the stock market and the nature of the 2000 and 2008 collapses. Of course, I'm not an econ nor do I have data to back up anything I'm saying. All manias, from tulips to tech IPOs to housing bubbles are born when the common person joins the frenzy. On the flip side, the mania collapses when the common person walks away or never shows up the party. For the tech IPO frenzy of 2000, the common person never even showed up to use all those exotic new ideas which were getting funded and going public. During the housing bubble, the common person bought and sold houses which setup the flywheel. Eventually, the common person walked away from the asset in question bringing down the entire charade. Today, the market is soaring. People are starting to wonder when gravity will reassert itself but in my view, this time the difference is that the common person cannot walk away. Unless adblocking and disdain for social media become extremely mainstream, the common person is so busy amusing themselves to death online that they are not going to leave the tech mania. Companies like FB and Google have made the web sticky. Does this mean the stock market will rise indefinitely? I don't know. I do know that once there is a captive market comprising everyone online, no company is going to stop advertising or figuring out ways to reach buyers online. We are in a new age where you just can't get away from the web. We are the product but we also have no way of exiting the dragnet.

plaidfuji 9y ago
This is probably the most insightful comment here. When your grandma is buying some asset class, it's time to sell. I think the biggest complicating factor here is the US government debt and the massive amount of it that the federal reserve owns via its treasury bond buying program since 2008. Who's on the hook for this debt? The common person, via the value of the US dollar. The next crash will be precipitated by actions of the fed and creditors to the US government, not stock market investors. Incidentally, in this environment, cryptocurrencies could emerge as a safe haven.

plaidfuji 9y ago

This is probably the most insightful comment here. When your grandma is buying some asset class, it's time to sell. I think the biggest complicating factor here is the US government debt and the massive amount of it that the federal reserve owns via its treasury bond buying program since 2008. Who's on the hook for this debt? The common person, via the value of the US dollar. The next crash will be precipitated by actions of the fed and creditors to the US government, not stock market investors. Incidentally, in this environment, cryptocurrencies could emerge as a safe haven.