Historian finds tech bubble that didn't pop (180 years ago)

Post by btilly » Mon, Mar 22, 2010, 5:59 PM UTC

jakarta wrote: post #8

mynameishere wrote: post #4

Most bubbles are good, just not for the people who buy in at the top. These tend to be "retail" buyers and so the least able to take the loss. But oh well. The recent housing bubble is actually distinguished by its particularly useless allocation of capital. The tech boom gave us a number of healthy companies as well as useful infrastructure. The housing bubble gave us a stock of deteriorating future crack houses.

To say most bubbles are good is incorrect. Bubbles depend on whether they are equity or credit-based. Typically, credit bubbles are terrible for economies because they usually start in one area and spread, infecting the entire economy. Equity bubbles on the other hand are usually well contained. When the dot com bubble popped, we didnt have banks collapsing and affecting other businesses.

Not so fast. When the equity bubble collapsed we were near deflation, which the Fed headed off with a generous credit policy that helped fuel the credit bubble.

If we had gone into deflation then, that would have been bad. (Not as bad as the cure may yet prove to be, but still bad and not well contained.)

Post by Retric » Mon, Mar 22, 2010, 8:51 PM UTC

Tuna-Fish wrote: post #10

Retric wrote: post #9

Earlier quoted context omitted.

Dell stock from 1990 to now had an average return of ~30% per year . You could have lost money if you bought at the peak but it would have still been an awesome return over 20 years. So yes it's only worth ~200x you initial investment now vs. ~800x I don't think anyone who bought in 1990 really cares all that much. And it’s not just Dell Microsoft did the same thing as did several others. PS: From 1990 to now the Nas…

Yes, dell has awesome returns from 1990 to today. We were not in a bubble in 1990. If you bought into dell between jan 1999 - august 2000, you are still in the hole by at least 50%, and possibly by up to about 70%. If you bought it at the peak, you were very badly screwed. If you bought it in 1990, the correct investment decision would have been to sell it in late 1999-mid 2000 when it seemed to plateau, and possibly…

There are two definitions of a bubble you can look at the current value and say the point where the market started to over value the winners at which point dell, Microsoft, and Cisco where not in a bubble prior to 1997 and it only lasted around 2-4 years.

Or you can look at the bubble from the point where explosive growth started around 1998-1990 and died in 2000.

PS: Looking only at winners distorts the picture, so while MSFT was still undervalued (relative to its current dividend adjusted price) in 1996 there were also plenty of overvalued stocks in 1996 that tanked.

Re: Historian finds tech bubble that didn't pop (180 years ago)

Re: Historian finds tech bubble that didn't pop (180 years ago)