What Bubble?
By James Altucher
To make the perfect bubble
solution, take 2 parts regular Dawn or Joy, 4 parts
Glycerine, and 1 Part Karo
Syrup, 4 parts distilled water. Then blow.
Other than that... what
bubble? We all use the Internet every day. Internet
e-commerce is still
growing greater than 50% a year even in a sluggish economy.
EBAY and YHOO, the two
most famous bubble stocks, have outperformed Berkshire
Hathaway from 1998 to this
past Friday. Maybe Berkshire was in a bubble from
1977-1990?
In terms of testing stats
on bubbles, it’s impossible. There's no testable
definition and most of the
markets which are accused of being bubbles are
probably not. The best
definition I've seen of a bubble is when people are
buying an asset today
purely because it was up yesterday. But even the South Sea
Company at its peak had
reasonable expectation of some pretty serious cash flows
coming into it. The
company was basically trying to dominate the role done by the
Bank of England and people
were placing their bets (thanks to spec-lister Alex
Castaldo for recommending
a great book on this topic - Famous First Bubbles, by
Peter Garber).
In NYC and surrounding
area, housing prices haven’t risen in two years (I know
because I just sold my
place). Doesn't sound like a housing bubble.
My main concern is that
the media uses the word bubble because they want people
who participated to
basically feel like idiots, since most of the people in the
media did not participate.
A bubble is transparent and pops at the slightest
touch. The Internet is
still growing faster than ever despite Dairy Queen sales
slowing for a second year
in a row.
In terms of a gold bubble
or raw materials bubble - other than my five front
gold teeth I can't figure
out what other use people can have for gold to make it
a bubble. Adjusted for
inflation, the price of gold now is what was at in
1600. And silver, which
Gates and Buffett eagerly snapped at in the late /90s to
protect themselves against
world financial collapse and the 10,000-Year Reign of
Darkness, is now 30%
lower. Raw materials in general are an interesting case
study in a global economy.
When Canada starts charging too much for raw
materials we'll simply go
to Brazil, or Vietnam or make Iraq the 51st state and
steal all their oil (oh
yeah, we already did that).
Time to blow some bubbles
with my 4-year-old.