Much has been written and spoken about this new “eek!” factor in our “Eekonomy.” You’ve seen the headlines—“Stocks Need A Hug,” “Banks’ New Message—Just Go Away!” and “Market Falls Down, Can’t Get Back Up.” Which lead to the question that only this column will dare to be spaced out enough to ask—is this all part of the grand set-up for Dec. 21, 2012? (The end of the world, according to the Mayan calendar.)
Assuming money will be around after that anticipated date, let’s talk about our most recent boom/bust cycles, also known these days as “bubbles.” We’ve been through not one, but two good ones in the last 10-12 years. You remember Bubble No. 1, starring that hot, sexy new upstart stock market called NASDAQ (which stands for, btw, National Association of Securities Dealers Automated Quotation System)? Nice little bubble, that, but most of those riding it stayed on an eentsy bit too long. One day, for example, shares of PypeDreem were going for something like 400 or 600 bucks a pop, and then, in what seemed like about 20 minutes, those same shares were going for about $9. Oops. It sure can be a bitch when everybody sobers up at the same time.
Bubble No. 2, of course, was the real estate joy ride that fueled the country’s eekonomy for about four years, and then, just as people couldn’t ever imagine it slowing down, much less popping—KERSPLAP!, like some multi-trillion dollar pumpkin being forcefed a couple of cherrybombs. Now, debt-addled joyriders from coast to coast are strewn about the eekonomic landscape like so many mangled shards of said pumpkin. The clean-up/fallout is expected to last well into next year. And most renters probably feel a lot less like schmucks right about now.
So, two big Bubbles, each of which had the power to make people (1) downright rich, (2) a nice little bundle, or (3) move into a van by the river. Will there be another? If so, when? You never know. These things are, by nature, unpredictable. But if one does pop up, make sure you remember the three simple rules for playing in “Bubble Ballpark.” (1) Recognize it.(2) Get in it. (3) Get the hell out.
Rule three is much easier said than done, especially as it pertains to this last real estate bubble. Sure, there was a lot of speculating going on, and some folks did damn good at buying and flipping houses for significant profit. But most players in this rocket ride just wanted to live in their cushy little bubble, giddily watching it expand in worth on practically a monthly basis. How euphoric was it, anyway, to buy a place for 250, and then have it Zillow out at 460 in less than two years? “Hey honey, I think we’re rich!” Under those conditions, it was very understandable to procrastinate on the proper adherence to rule 3.