Friday, October 5, 2007

I hate to harp on this, but it's almost like the bubble bloggers don't really get the bubble.

A bubble has nothing to do with reality. It's a bubble, an illusion, and when it bursts, it disappears.

There is an inner core to every bubble, an inner reality. The bigger the bubble, the further you are from that core, the harder it is to see, the more the bubble distorts.

The bigger the bubble, the more it is going to hurt.

I could make the case that Bend, Oregon has had the BIGGEST bubble in a huge national bubble.

So, NOW you want to talk about supply and demand? About land and material prices?

What part of bubble don't you get?
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1 comment:

Duncan McGeary said...

I think even I, the victim of many bubbles, began looking for logical and rational reasons.

A bubble, by it's very nature is irrational and illogical.

You can argue IF there is a bubble, or not. In fact, every time you try to posit a reasonable explanation for a phenomena, you are saying it isn't a bubble.

It's either a bubble, and irrational, or it isn't and the phenomena can be explained.

There is always hindsight. Someday it will probably be accepted wisdom that easy credit created the housing bubble, and that restricting credit caused it to pop.

Whereas, maybe I'm the only guy in the whole country who thinks that reasons are symptoms, not causes.

Because ultimately, a bubble is about human psychology. Unpredictable and unexplainable. And when a bubble pops, the explanation is the same.

You can't predict what will happen when a bubble pops, just like you can't explain the bubble itself.

But I have come up with three consequences that have happened with every bubble I've experienced. And when you apply it to the housing bubble, it scares the crap out of me.

1.) Bubbles pop faster than you can react. The lead time to get out is almost always just a little shorter than the time it takes for the bubble to pass you.

2.) The results of bubbles always last much, much longer than you think they will. People look back on bubble with dismay. They aren't eager to experience it again.

3.) The results of bubbles are always much, much worse than you think they will be.

October 5, 2007 at 11:38:00 AM PDT

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