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"Not a bubble" is exactly what people think, when there's a bubble. Otherwise there would be no bubble. People find ways to rationalize why 'this time it's diff

"Not a bubble" is exactly what people think, when there's a bubble. Otherwise there would be no bubble. People find ways to rationalize why 'this time it's different'. Sometimes it is, sometimes it's not.

emodendroket 5y ago
This is a little like "they thought Gailileo was a crank." Yeah but they thought a lot of other people were cranks and you don't know them because they were.
encoderer 5y ago
In my experience, bubbles are made from greed not ignorance. In 2007-8 there was a lot of acknowledgment of the real estate bubble but there was always somebody to say well real estate isn’t really a national market so it won’t all pop at once. Ha. Similarly everybody knew it was a bubble in 1999. That’s why you had companies rushing to ipo like lemmings off a cliff. Personally I don’t think we are in a bubble right now and all the early bubble callers (since 2013 or so) have no credibility left.
- TheAdamAndChe 5y ago
  In my opinion, we are in a bubble now. In stocks, P/E ratios are extremely high, and many companies are IPOing, many more than two years ago. All asset pricing is going through the roof, and money is chasing money. Speculative assets have become trendy again with cryptocurrencies, ARK, and memes like dogecoin. We're all flush with cash and either terrified of inflation or riding a euphoria of asset inflation.
  - lotsofpulp 5y ago
    > either terrified of inflation or riding a euphoria of asset inflation. Why not both? At this point, the biggest risk I see is a materials shortage that the Fed can’t fix by adding zeros in a database. Such as gas prices spiking, or food shortages, or some other critical infrastructure failing.
    - Supermancho 5y ago
      The lumber shortage is forcing homes to be built largely with pressed wood. Ironically this makes home building even more expensive, as pressed wood prices have skyrocketed... passing traditional lumber because of availability issues.
  - fumar 5y ago
    What do you do to prepare for a crash? I follow the asset and commodity price increases. But, I can't see the next logical step. Save more money that is worth less over time? Are we on a train towards hyperinflation that can't be stopped?
    - deleted 5y ago
      [deleted]
    - nicbou 5y ago
      Traditional advice is to park your money in goods with intrinsic value. I believe that the common examples are housing and gold.
  - strgcmc 5y ago
    On the point about IPOs, this would seem to back up the idea that, a boom in IPOs has correlated with recessions and crashes soon after, in the past ~20 years: https://www.statista.com/statistics/270290/number-of-ipos-in-the-us-since-1999/ https://www.statista.com/statistics/270290/number-of-ipos-in... A drop in IPOs seems like a lagging indicator (they will drop off after the economy has cooled off), but it's not clear to me if a boom in IPOs is a leading indicator or not.
- JackPoach 5y ago
  Greed needs rationalization too.
- jdsully 5y ago
  Ignorance was a theme of many past bubbles. In the 20's it was the common man not understanding stocks. In the 80s it was "Savings and Loans are just banks, they're safe!". '08 it was "They wouldn't give me a mortgage if it wasn't a good decision". In all bubbles you see a few shrewd hawks and millions of lemmings - that's where all the money comes from. In this scenario its, "There's nowhere else to put my money", but not having a better alternative doesn't necessarily make it a good investment.
- vladimirralev 5y ago
  It's not greed. The chair of the Fed sat on national television and said they flooded the system with cash and will not stop until everybody gets it while ignoring any stretched valuations or inflation signals. All bubbles are policy decisions by the Fed to spark risk-taking and optimism, guided by the "less than honest" intermediaries on Wall St.
- robotron 5y ago
  There is a lot of greed driving home sales right now. Every homeowner I know has at least considered making bank in this market. The only thing stopping them is they'll then need to buy a home cheaper and further out or lose that profit.
- Cd00d 5y ago
  Completely off-topic, but I was just watching a YouTube video about lemmings with my 6 yo to answer some questions she was asking. Lemmings to not commit suicide from cliffs, en masse. This is a myth that came about from a staged incident in a Disney documentary about the arctic wilderness. It's completely made up. Was an interesting 5 or so minutes: https://www.youtube.com/watch?v=2fHYNMvcAhc https://www.youtube.com/watch?v=2fHYNMvcAhc
  - smithza 5y ago
    Myth notwithstanding, lemmings are the proverbial manifestation of "following your friend off a cliff". Disney did this brilliantly. Here is a fun podcast on it: https://99percentinvisible.org/episode/sounds-natural/ https://99percentinvisible.org/episode/sounds-natural/
JohnWhigham 5y ago
This isn't 2006 Las Vegas or some shitty 50 year old Florida suburb propped up by tourism, we're talking about every major metropolitan area that has jobs. People are buying because rates are rock-bottom, yes, but also because that's where the jobs are. This is different from last time, and aside from the Fed raising interest rates (and boy do they need to), there's no end in sight to the insanity.
AnimalMuppet 5y ago
My definition of a bubble is not just prices going up. It's not even people investing based solely on prices going up, rather than on the merits of the investment. To me, it's only a bubble when people are investing solely because the price is going up, using borrowed money. And that's why bubbles are dangerous. When they pop, they don't just destroy the investors. They can destroy the lenders, which can damage the overall economy.

emodendroket 5y ago

This is a little like "they thought Gailileo was a crank." Yeah but they thought a lot of other people were cranks and you don't know them because they were.

encoderer 5y ago

In my experience, bubbles are made from greed not ignorance. In 2007-8 there was a lot of acknowledgment of the real estate bubble but there was always somebody to say well real estate isn’t really a national market so it won’t all pop at once. Ha. Similarly everybody knew it was a bubble in 1999. That’s why you had companies rushing to ipo like lemmings off a cliff. Personally I don’t think we are in a bubble right now and all the early bubble callers (since 2013 or so) have no credibility left.

TheAdamAndChe 5y ago
In my opinion, we are in a bubble now. In stocks, P/E ratios are extremely high, and many companies are IPOing, many more than two years ago. All asset pricing is going through the roof, and money is chasing money. Speculative assets have become trendy again with cryptocurrencies, ARK, and memes like dogecoin. We're all flush with cash and either terrified of inflation or riding a euphoria of asset inflation.
- lotsofpulp 5y ago
  > either terrified of inflation or riding a euphoria of asset inflation. Why not both? At this point, the biggest risk I see is a materials shortage that the Fed can’t fix by adding zeros in a database. Such as gas prices spiking, or food shortages, or some other critical infrastructure failing.
  - Supermancho 5y ago
    The lumber shortage is forcing homes to be built largely with pressed wood. Ironically this makes home building even more expensive, as pressed wood prices have skyrocketed... passing traditional lumber because of availability issues.
- fumar 5y ago
  What do you do to prepare for a crash? I follow the asset and commodity price increases. But, I can't see the next logical step. Save more money that is worth less over time? Are we on a train towards hyperinflation that can't be stopped?
  - deleted 5y ago
    [deleted]
  - nicbou 5y ago
    Traditional advice is to park your money in goods with intrinsic value. I believe that the common examples are housing and gold.
- strgcmc 5y ago
  On the point about IPOs, this would seem to back up the idea that, a boom in IPOs has correlated with recessions and crashes soon after, in the past ~20 years: https://www.statista.com/statistics/270290/number-of-ipos-in-the-us-since-1999/ https://www.statista.com/statistics/270290/number-of-ipos-in... A drop in IPOs seems like a lagging indicator (they will drop off after the economy has cooled off), but it's not clear to me if a boom in IPOs is a leading indicator or not.
JackPoach 5y ago
Greed needs rationalization too.
jdsully 5y ago
Ignorance was a theme of many past bubbles. In the 20's it was the common man not understanding stocks. In the 80s it was "Savings and Loans are just banks, they're safe!". '08 it was "They wouldn't give me a mortgage if it wasn't a good decision". In all bubbles you see a few shrewd hawks and millions of lemmings - that's where all the money comes from. In this scenario its, "There's nowhere else to put my money", but not having a better alternative doesn't necessarily make it a good investment.
vladimirralev 5y ago
It's not greed. The chair of the Fed sat on national television and said they flooded the system with cash and will not stop until everybody gets it while ignoring any stretched valuations or inflation signals. All bubbles are policy decisions by the Fed to spark risk-taking and optimism, guided by the "less than honest" intermediaries on Wall St.
robotron 5y ago
There is a lot of greed driving home sales right now. Every homeowner I know has at least considered making bank in this market. The only thing stopping them is they'll then need to buy a home cheaper and further out or lose that profit.
Cd00d 5y ago
Completely off-topic, but I was just watching a YouTube video about lemmings with my 6 yo to answer some questions she was asking. Lemmings to not commit suicide from cliffs, en masse. This is a myth that came about from a staged incident in a Disney documentary about the arctic wilderness. It's completely made up. Was an interesting 5 or so minutes: https://www.youtube.com/watch?v=2fHYNMvcAhc https://www.youtube.com/watch?v=2fHYNMvcAhc
- smithza 5y ago
  Myth notwithstanding, lemmings are the proverbial manifestation of "following your friend off a cliff". Disney did this brilliantly. Here is a fun podcast on it: https://99percentinvisible.org/episode/sounds-natural/ https://99percentinvisible.org/episode/sounds-natural/

JohnWhigham 5y ago

This isn't 2006 Las Vegas or some shitty 50 year old Florida suburb propped up by tourism, we're talking about every major metropolitan area that has jobs. People are buying because rates are rock-bottom, yes, but also because that's where the jobs are. This is different from last time, and aside from the Fed raising interest rates (and boy do they need to), there's no end in sight to the insanity.

AnimalMuppet 5y ago

My definition of a bubble is not just prices going up. It's not even people investing based solely on prices going up, rather than on the merits of the investment. To me, it's only a bubble when people are investing solely because the price is going up, using borrowed money. And that's why bubbles are dangerous. When they pop, they don't just destroy the investors. They can destroy the lenders, which can damage the overall economy.