This week's epic post on Bendbubble2 got me thinking about bubble psychology again.

First of all, there are going to be a huge percentage of the readers who simply won't or can't see the analog between something like pogs and beanie babies and houses. Nothing I can say or do will cure them of this inability. That's fine. Concrete thinkers have their place in the world, too.

And, indeed, I have to admit there are some BIG, BIG differences. But the principles are the same....just scaled to a much larger size. Of all the bubbles I've been through, comics would be the closest to houses in that they've been around a long time and are still a viable model and have an inherent value, but went through a short burst of 'irrational exuberance.' I could tell it was crazy, but was almost forced by the demand to extend further than I was comfortable with.

I'll never forget the conversation I had with the high up mucky-muck from Diamond Distributors. (The only time I've ever tried to work my way up the ladder.)

"I'm concerned. My orders are twice what my sales were last year. That doesn't seem right."

"What are you complaining about? Everyone else is happy!"

Nevertheless, I tried to be careful about my ordering, but the industry had other ideas and delivered product so late that all my caution was for naught. My comic sales dropped in half. then dropped some more. Sales probably bottomed out at about 75% from the peak.

Our little industry dropped from 12k shops (probably a third of them never should have been opened, and another third were viable but badly run shops that crashed when the going got tough) to 2.5k shops.

Good stores and bad stores both disappeared. The distributors shrank from one in every region when I started (ten or more) to a single survivor. Diamond Comics was forced to help out with payment plans for many of the standing shops (including me.)

The drop lasted 3 years, then hit a plateau for about 3 years, and then a slow climb. After being slammed by the sport card bubble, the magic bubble, the comic bubble, the non-sport card bubble, I was determined to diversify so much that no one product could kill me. I totally de-emphasized the collecting value of everything I sell. No more buying and trading off the street. The massive influx of customers never returned. The psychology turned so negative that only the 'true believers' stayed. (True believers in pogs, beanie babies.....0%; non-sport and pokemon, 2%; sports cards, 3%; magic, 20%; comics, 30%. guesstimates.) Comic shop numbers seem to be stuck at around 3k (though the level of professionalism is up 1000%.)

Most of the comic shops who survived did so by emphasizing the art and story, the entertainment value of comics. And the industry responded by creating some masterpieces. The format changed from monthly comics almost exclusively, to stores like mine where half the sales are graphic novels. We survived, and twelve years later are finally reaching the sales levels we saw back in 1995. (Of course, with inflation and without graphic novels, the actual number of comics is probably still down 75%.)

Pogs, Beanie Babies and Pokemon were all recognizable fads that I handled by not investing too much in infrastructure and by taking the profits and putting them into something else. I tried to keep my skepticism. I didn't follow it all the way to the top.

I tried to force myself to step OUTSIDE the bubble, which require thinking in ways none of us are used to. What if? I ask myself. I would pick the worst case scenario -- the earliest date that I thought it would crash, and then...and this required willpower when the money is rolling in....I would start to get out 1/3rd sooner. So, I figured Beanie Babies had roughly a year, so I started getting out four months early. I knew from researching how pogs had played out elsewhere that I had 6 months of big pog sales, so I started getting out at the fourth month (again, it took willpower, because pogs were reaching their peak.) Pokemon had about 2 years, and I started getting out about six months early. And so on.

I'd seen a computer model once of burst bubbles, and it basically showed that no one made money who went even a minute past the peak of the bubble. You have to get out before, and very very few people do that. They think they can detect it, and get out then. But usually there are people who are just a little smarter or a little quicker. Sales will fall faster than you can cut.

There is a weird period of grace, which probably depends on a certain number of stupid people with money who will buy just as thinks are going south. I don't wait for that, but I've seen it.
We are way past that with houses.

So again with an arbitrary estimate: I figure houses have way more intrinsic worth than comics, so the drop will be much less severe or long-lasting. So lets say, the drop is only say 25% as bad.

That's going to hurt. That would be able 20% drop in prices; or, if it takes place over a two or three year span, 30% in 'real terms.' A correction indeed.