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Not just a housing bubble but a bubble in the exact same industry sector as well! Of course, a bubble is fundamentally a gross mismatch between future expectations and actual returns. That's why there's no learning from the past, and why it's always "different this time." More importantly, bubbles don't occur in a vacuum. The 1990's tech bubble wasn't just because the internet was new, and everyone thought it was going to be great. The 1990's also featured low interest rates, the repeal of Glass-Steagall, and other loose policies conducive to asset bubbles. Sound familiar? Such policies force money to chase yield, which means risk. As it does so, the market sends false signals about the true value of its companies, which reinforce themselves until some "Black Swan" event reveals the imbalances. In 2008, that event was the fall of Lehman Brothers. As I noted below, if the national government continues to tighten its fiscal and monetary policy, then this bubble will be over before it really began. If, however, the government reloosens after the end of QE 2, it will most likely be full steam ahead. |