One other thing about the housing bubble… and it’s a point I made as a research analyst back in 2000 regarding the Nasdaq bubble…
The surest gut-level (as opposed to mathematical) indication that there’s a bubble afoot is that too many people with average amounts of human capital are making too much money. [I’m defining human capital as the sum of education, intelligence, experience, instincts, etc.]
During the Nasdaq Bubble – perhaps I should say “last” Nasdaq bubble (as opposed to the current mini-bubble) – every idiot with an internet connection that could spell “Microsoft” was making money in the stock market. Waiters and cab drivers gave out stock tips… day traders were, well, daytrading… It was ridiculous. Total boneheads appeared to be making money hand over fist (“appeared” being the operative word). And people that had merely half a clue – like young venture capital investment bankers three years out of Stanford Business School – were minting money like they were George Soros. Well, markets don’t work that way – they giveth and then they taketh away. I knew that these people weren’t “supposed” to be making that much money and that eventually the market would take most of those “lucky” gains away. And it did. Just like it always does. Sure, some lucky people get out in time and a few actually are brilliant. But the majority, without knowing it, are just waiting to take it in the arse.
This real estate bubble is exactly the same. Think about all these flipper TV shows, all the DVD courses and seminars, all the people who have made “easy” money in real estate over the last five years. Most of these people couldn’t spread a cashflow statement if it was done for them. It’s not meant to be, folks. Again, markets don’t work like that. That’s why, barring all of the statistical data, I know this real estate thing has to end badly. There are too many idiots sitting on too much wealth they shouldn’t have.
