On Oct 20, 2010, at 3:57 PM, Dennis Claxton wrote:
> Then I was trying to think of a similarly simple explanation for what caused the dot.com crash and I couldn't do it, even after looking at After the New Economy. Maybe if I read Doug's book cover to cover again I could, but not after thumbing through.
Chuck is right - the Nasdaq started leaking hot air. As I recall, a major prick in the bubble was a story in Barron's that detailed how little cash many of the major dot.com's had, and how quickly they'd burn through it. That was one of those things that everyone "knew" at the time, but up until then it didn't matter. There was something about the Barron's story, though, that made the previously complacent start to worry.
> Also, a lot of the ripple effects of the housing crash are easy to see. People stop buying furniture and appliances for example. What are some obvious ripple effects of something like the dot.com story, besides Meg Whitman trying to buy a California governorship?
Many fewer. Every jackass with a business plan could no longer get funding, and they stopped laying fiber optic cable like crazy. But since much of the bubble was financed with stock, there was little enduring toxic financial residue. (Of course if you owned those stocks, poof. But otherwise, no.) The housing bubble was financed with lots of debt, much of which is still with us.
Doug