The tech bubble and housing market bubble were NOT the same thing.

[techs]

Are people just plain stupid or uneducated?
I heard some guy on tv complaining how the "government" was responsible for both and that they were both the same thing.

The tech bubble was the result of a smashing good economy and investors who acted on the belief that for internet companies it was a good decision to buy in early at any cost.

The housing bubble was the result of banks foolishly making sub prime loans and the governments failure to regulate the lenders as well as the Americans belief that the economy would grow them into being able to afford houses.

cliffs:
Tech bubble: Investors mistake.
Housing bubble: Banks and government and buyers mistake.

 

[RichardE]

Originally posted by: techs
Are people just plain stupid or uneducated?
I heard some guy on tv complaining how the "government" was responsible for both and that they were both the same thing.

The tech bubble was the result of a smashing good economy and investors who acted on the belief that for internet companies it was a good decision to buy in early at any cost.

The housing bubble was the result of banks foolishly making sub prime loans and the governments failure to regulate the lenders as well as the Americans belief that the economy would grow them into being able to afford houses.

cliffs:
Tech bubble: Investors mistake.
Housing bubble: Banks and government and buyers mistake.

The housing bubble was the result of greed, so was the tech bubble.

Take your cliffs for example

Tech bubble: Investors mistake
Housing bubble: Investors mistake (home buyers are investors in real restate).

The only thing the government was responsible for was not policing peoples stupidity....which I don't really want them doing anyway.

 

[LegendKiller]

Both were a result of poor regulation of the banks and the underlying companies.

David Lareah and Lawrence Yun were the Jack Grubmann and Henry Blodgett of the housing bubble. Chinese Walls, "pump and dump", and poor underwriting were the same in both cases.

There are key differences, but there are also key similarities.

Subprime was also an investor-driven problems. Look at it now, no investors, which is *exactly* why the 30-year fixed mortgages haven't dropped a significant amount since this time last year, or even two years ago.

The same liquidity pool that drove the .bombs (PE, HF, Pensions, Mutuals, Index funds, banks) drove the housing market and is now driving the commodities market.

 

[babylon5]

Yeah all the bubbles we got share similarities, and also differences...but greed is always somewhere there.

Funny how after housing crash, investors switched to betting on oil. Wonder what's next on their target to mess up with next.

 

[StageLeft]

The point is that both represented people wildly over-buying on things that lacked the underlying value. That is the definition of a bubble and though different forces were in effect, both had that key criteria.

 

[PokerGuy]

The housing and tech bubbles share some interesting similarities, but in other ways they are quite different.

The real question to me is whether the energy (oil,gas) and commodities / metals are similar bubbles waiting to pop. My gut says yes, but I just don't feel sure enough to bet on it.

 

[Carmen813]

You haven't tried selling a hobbit hole in Lord of the Rings Online lately have you!?

Sorry, couldn't resist.

 

[WHAMPOM]

Originally posted by: babylon5
Yeah all the bubbles we got share similarities, and also differences...but greed is always somewhere there.

Funny how after housing crash, investors switched to betting on oil. Wonder what's next on their target to mess up with next.

You mean the oil bubble? The same four banks that took the mortgage hit are now using the Fed bail-out money(your tax dollars) to back the oil speculations.

 

[Starbuck1975]

Greed and speculation fueled both the tech bubble and the housing bubble. The same thing happened during the Gold Rush, the Great Depression, etc.

Tech Bubble: Investors dumped money into unproven business models with the blind hope of having a stake in the next Amazon or eBay...essentially a herd mentality of get rich quick on phantom business models.

Housing Bubble: Investors dumped money into real estate under the false assumption that real estate would appreciate indefinitely, due to loose lending standards and shady lending practices.

The government is responsible for neither, unless we want a nanny state where the government regulates every investment decision, and provides stimulus packages and bailots every time the herd gambles on bubble markets.

 

[BoberFett]

Originally posted by: Starbuck1975
Greed and speculation fueled both the tech bubble and the housing bubble. The same thing happened during the Gold Rush, the Great Depression, etc.

Tech Bubble: Investors dumped money into unproven business models with the blind hope of having a stake in the next Amazon or eBay...essentially a herd mentality of get rich quick on phantom business models.

Housing Bubble: Investors dumped money into real estate under the false assumption that real estate would appreciate indefinitely, due to loose lending standards and shady lending practices.

The government is responsible for neither, unless we want a nanny state where the government regulates every investment decision, and provides stimulus packages and bailots every time the herd gambles on bubble markets.

Actually, you could consider the Fed partly responsible. In a booming economy, why keep interest rates so low? There can be such a thing as too much capital. Too much money invested in too small an area is exactly what causes a bubble. The price inflates because capital is cheap. The Fed should have raised rates back in the 90s so that they could be lowered once things cooled down. That's the whole point of the Federal Reserve I thought? To smooth out the hills and valleys of the economy? Instead they've made it worse. Yay government!

 

[Special K]

Originally posted by: LegendKiller
Both were a result of poor regulation of the banks and the underlying companies.

David Lareah and Lawrence Yun were the Jack Grubmann and Henry Blodgett of the housing bubble. Chinese Walls, "pump and dump", and poor underwriting were the same in both cases.

There are key differences, but there are also key similarities.

Subprime was also an investor-driven problems. Look at it now, no investors, which is *exactly* why the 30-year fixed mortgages haven't dropped a significant amount since this time last year, or even two years ago.

The same liquidity pool that drove the .bombs (PE, HF, Pensions, Mutuals, Index funds, banks) drove the housing market and is now driving the commodities market.

If it weren't for this so-called "global pool of money" running from one investment to the next, driving it up, and then letting it crash, would our economy even go through recessions?

I guess what I am asking is if investors were perfectly rational, would our economy ever go through recessions in the first place? I suppose events like 9/11 can't be blamed on investors' irrational exuberance, but the 90's tech bubble and the recent housing bubble have both preceded recessions.

Expecting investors to be perfectly rational is impossible, but I am just asking a theoretical question.

 

[piasabird]

In some cases the federal government was forcing banks to make loans to poorer segments of society. The Feds also lowered the Interest rate so low, they were practically giving away houses. This in turns makes the dollar worthless.

The Prime lending rate should never have been allowed to fall that low. It was insanity and a major factor in all of this.

 

[yllus]

Originally posted by: BoberFett

Originally posted by: Starbuck1975
Greed and speculation fueled both the tech bubble and the housing bubble. The same thing happened during the Gold Rush, the Great Depression, etc.

Tech Bubble: Investors dumped money into unproven business models with the blind hope of having a stake in the next Amazon or eBay...essentially a herd mentality of get rich quick on phantom business models.

Housing Bubble: Investors dumped money into real estate under the false assumption that real estate would appreciate indefinitely, due to loose lending standards and shady lending practices.

The government is responsible for neither, unless we want a nanny state where the government regulates every investment decision, and provides stimulus packages and bailots every time the herd gambles on bubble markets.

Actually, you could consider the Fed partly responsible. In a booming economy, why keep interest rates so low? There can be such a thing as too much capital. Too much money invested in too small an area is exactly what causes a bubble. The price inflates because capital is cheap. The Fed should have raised rates back in the 90s so that they could be lowered once things cooled down. That's the whole point of the Federal Reserve I thought? To smooth out the hills and valleys of the economy? Instead they've made it worse. Yay government!

I don't know about that. The Federal Reserve under Greenspan attempted to heighten people's awareness of a bubble effect taking place in '96/'97 with the tech boom in full swing. Remember "irrational exuberance"? A rate hike followed that speech, and while stocks dipped momentarily they quickly regained momentum and headed to even higher heights.

Hell, the stock market isn't even really the Fed's area of responsibility.

 

[BansheeX]

All I know is that the analyst I listen to, Peter Schiff, who saw and identified the tech and housing bubbles well before they collapsed and avoided them completely in favor of foreign stocks and commodities, is saying with conviction that commodities are fundamentally not a bubble, but that the bond market is. I also listen to Jim Puplava's weekly broadcast and they've gone into great detail this year talking about oil fundamentals. For some reason I tend to give these guys more credibility than others because of their track records.

Chronological order:
http://youtube.com/watch?v=rhJaVEWAG24

http://youtube.com/watch?v=JGZQ2jevfGc

http://youtube.com/watch?v=LfascZSTU4o

Peter writes weekly articles on europac.net and has a book as well. God I love youtube, it let's us go back and see actual 1on1 debates to see who was right and who wrong in retrospect.

 

[halik]

Originally posted by: LegendKiller
Both were a result of poor regulation of the banks and the underlying companies.

David Lareah and Lawrence Yun were the Jack Grubmann and Henry Blodgett of the housing bubble. Chinese Walls, "pump and dump", and poor underwriting were the same in both cases.

There are key differences, but there are also key similarities.

Subprime was also an investor-driven problems. Look at it now, no investors, which is *exactly* why the 30-year fixed mortgages haven't dropped a significant amount since this time last year, or even two years ago.

The same liquidity pool that drove the .bombs (PE, HF, Pensions, Mutuals, Index funds, banks) drove the housing market and is now driving the commodities market.

Not to mention lack of Chinese walls between commodity desks and research. Virtually all of the regulation post-.bomb ties to equity, so you can have your oil ANALysts (i read too much dealbreaker...) playing buddy-buddy with your commodity desks.

 

[halik]

Originally posted by: WHAMPOM

Originally posted by: babylon5
Yeah all the bubbles we got share similarities, and also differences...but greed is always somewhere there.

Funny how after housing crash, investors switched to betting on oil. Wonder what's next on their target to mess up with next.

You mean the oil bubble? The same four banks that took the mortgage hit are now using the Fed bail-out money(your tax dollars) to back the oil speculations.

Actually no, it's your oil money coming back from middle east that they're playing with now.

 

[nergee]

"Actually, you could consider the Fed partly responsible......"

All central bankers, especially the FED do is tend to guess and they tend to guess wrong....
Greenspan guessed wrong to bail out banks in the after of LTCM, guessed wrong about the wacked out Y2K scare when he opened the liquidity floodgates which gassed up the dotcom bubble, and guessed wrong early in 2000 when he said the risk of inflation was to the upside. A few months later Greenspan went oops, and guessed wrong again by slashing rates to 1% and holding them too low and way too long, blowing up a giant housing bubble. This should be reason enough to abolish the FED and let the free market set rates....(I know, I know it would never work...everything is so peachy now....)