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It is called "irrational exuberance". http://en.wikipedia.org/wiki/Irrational_exuberance http://en.wikipedia.org/wiki/Irrational_exuberance Not really misinfo

It is called "irrational exuberance". http://en.wikipedia.org/wiki/Irrational_exuberance http://en.wikipedia.org/wiki/Irrational_exuberance Not really misinformation, just a suspension of judgement. Forget 2000, what about the real estate bubble? That didn't happen that long ago, yet nobody remembered 2000, and nobody remembers the last couple of years. The main difference now is that the average person is not really gung-ho into the stock market, or hasn't been for the last few years, particularly with regard to buying/selling individual stocks. Most of this stuff today seems to be 401k and IRA fund managers being fleeced by this and HFT. PS Keep in mind, most of the 'investors' who didn't get too badly burned off of the dot com stuff after 2000, moved their money into real estate since the NASDAQ was comparatively 'in the shitter'. Check out these great dotcom documentaries (both show meteoric rise and epic failure): http://www.imdb.com/title/tt0262021/ http://www.imdb.com/title/tt0262021/ http://www.imdb.com/title/tt0256408/ http://www.imdb.com/title/tt0256408/ and this AWESOME business sci-fi book about the same time period: http://www.amazon.com/gp/product/1887128905/ref=as_li_ss_tl?ie=UTF8&tag=littdidd-20&linkCode=as2&camp=217153&creative=399349&creativeASIN=1887128905 http://www.amazon.com/gp/product/1887128905/ref=as_li_ss_tl?...

jordanb 15y ago
I think the key with both was that there was a "plausible" explanation for why the bubble valuations made sense. In the 2000s, you had the "New Economy" bullshit: The internet was changing everything and the most important thing was to start a company that carved out your niche of the New Everything. Profits or even cashflow fundamentals could wait until after the land-grab. There was a kernel of truth of course, the Internet has changed a great deal. That's what made the argument sound plausible. With the housing bubble, the argument was "real-estate never goes down," "the population keeps getting larger so demand always goes up." "houses are real things with real value." Again there's a kernel of truth to the argument --- just enough to hide the reality of the bubble from people who don't take a hard look at the numbers with a critical eye. And moreover, during 2000 as well as the housing bubble, very many people who participated believed there was a bubble. Goldman Sachs were long on housing derivatives for years before they went short in the final few months. There's a lot of money to be made running with the herd in a bubble so long as you veer off before the herd goes off the cliff.

jordanb 15y ago

I think the key with both was that there was a "plausible" explanation for why the bubble valuations made sense. In the 2000s, you had the "New Economy" bullshit: The internet was changing everything and the most important thing was to start a company that carved out your niche of the New Everything. Profits or even cashflow fundamentals could wait until after the land-grab. There was a kernel of truth of course, the Internet has changed a great deal. That's what made the argument sound plausible. With the housing bubble, the argument was "real-estate never goes down," "the population keeps getting larger so demand always goes up." "houses are real things with real value." Again there's a kernel of truth to the argument --- just enough to hide the reality of the bubble from people who don't take a hard look at the numbers with a critical eye. And moreover, during 2000 as well as the housing bubble, very many people who participated believed there was a bubble. Goldman Sachs were long on housing derivatives for years before they went short in the final few months. There's a lot of money to be made running with the herd in a bubble so long as you veer off before the herd goes off the cliff.