1929 quotes/nationalism stuff

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Mon Apr 5 09:11:18 PDT 1999


From dhenwood at panix.com Mon Apr 5 07:20:43 1999

>do bubbles always burst?

Can't think of one that hasn't ...

Well that's a non-starter; since a bubble that hasn't burst always has the potential to burst, this seems a little too smug to me. But there is precedent for things that have appeared "overvalued" continuing to hold that value; California real estate for one. Everytime I say that, Doug claims I'm making a "weight of the money" claim and compares this market to Tokyo in the late 80's, except the Tokyo stock market has transparency problems and it didn't have the two key elements we have in this market: low supply of stock and active, agressive govt. encouragement to open brokerage accounts and stuff money into them.

Jordan assures us it's different this time.

No, I just think your notion of a bubble is wrong on this one :)

Can/will the market go down? Sure it can; but those two attributes have to change first. And I just don't see it anytime soon; in fact, I see just the opposite. Mergers are stepping up the pace of supply shrinkage faster than IPOs can get minted. And those defined contribution limits keep heading higher.

I think the only person who has stepped forward and given a credible answer to the question "What's an Internet stock like AMZN *worth*?" is that guy at CIBC who says, flatly: $16.50/share. And I wish him well, though I hope he's not *short* at $16.50 ...

In the mean time, it's just as likely that it's "undervalued" at $179 (up $9 today!) as it is "overvalued" ...

---

There are also parallels to other kinds of markets, where new markets simply appear and don't necessarily result in some kind of zero-sum adjustment somewhere else. Two simple examples are music CDs and coffee. Though hotly debated in copyright circles as the death-knell for the music business ("These things last *forever*; they'll buy the ones they want and never buy anything again!"), the availability of high quality music on CD *created* a new market demand; people who were too lazy to buy records because you had to take care of them and your record needle, etc. suddenly couldn't get enough of the stuff -- the music business is an order of magnitude bigger than it was when the CD was launched. Is that a bubble? Could it burst? The fact is that markets change. I'm 33, but there are three things I use on a daily basis that didn't even exist when I was in high school: cell phones, fax machines, and $10 overnight delivery.

/jordan



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