Thursday, June 21, 2012

Things Seem Clearer in Retrospect

NOTE: This is a posting from July 2011 that I am re-posting now.  I will have to revisit this in 2016 and see if the rest of it comes true.....

How will our economy look five years from now?  If you could go back in time to 2006, what would you tell people back then?  What would people in 2016 tell us today?

Thanks to a little-known feature in Apple's new iCloud service, I can now obtain blog entries from the future.  They appear in my blog edit box as drafts, and I can read how things look today, from the prospective of 2016.  And I found this entry, which I thought was interesting.

June 7, 2016

The Dot Com Meltdown - Why Didn't We All See It Coming?

In retrospect, we all could have said we saw this coming.  And the collapse of the "Dot Com" economy, as well as the price of gold, have caused undue economic hardship and have been a real challenge to the Palin administration.

But in the light of a new day, people are starting to ask themselves, "What were we thinking?  Investing in money-losing companies with no real business plans or unique product?  Buying Gold at 3-4 times its production cost?  Electing a former beauty queen and community college dropout as President?"

It seems that 2016 will be the year of the great American hangover.  And yet, in light of the Real Estate Meltdown of 2009 (and 1989) and the dot com bubble of 1995 (and 2015) we should have seen it all coming.  We talk up the price of basic commodities to the stratosphere and then elect a moron as President.  Houses, Gold, websites, Bush, Palin, it's all just the same mistake, being made over and over again.  Will we ever learn?

Zipcar really should have been the writing on the wall.  A company that was losing money, with limited possibilities for expansion, a business model that could be (and was) copied by the traditional car rental companies - why invest in it?  But we did - we all did, whether we wanted to or not, if we owned stock in one of those "high growth" mutual funds.  And now we are all crying in our soup as our mutual funds go belly up and Zipcar goes through the final throes of bankruptcy.  Turns out the car rental business was not really a "new" business model after all.

And then there was the social media frenzy.  Everyone was talking about Facebook and other social media sites - which of course equates with profitability.  Everyone was talking about Enron, too.  But as it turned out, it was a fad - and a rather boring one at that.  After a year to two of Facebooking, a lot of people turned away.  And those one billion "active accounts?" - most of them turned out to be dormant or visited less than once a month.  No visitors means no ad revenue, and you can only make so much from "one trick of the tiny belly" sidebar ads.  Those ads alone should have been a tip-off that there was no "there" there - but we all drank the Kool-Aid, nevertheless.

Then there were all those "Daily Deals!" like Groupon, Living Social, Woot! and whatnot, as well as oddball "penny auction" sites that were going to be "The Next Big Thing!!!" which should have been a tip-off right there - any investment with an Exclamation Point!!! after it (or two, or three) is bound to be suspect.  We were willing to believe anything it seems - including the idea that we could defy the law of economic gravity.

Everyone did an IPO, and everyone bid the prices up into the stratosphere.  Suddenly, companies like Groupon had a larger market capitalization than old "brick and mortar" businesses like Apple.  It all really made no sense.

Of course, the question is, where do we go from here?  Portfolios are shattered, millions of people are laid-off, and everyone is looking for the "next big thing" to invest in.

I saw that Real Estate prices are going up and up recently.  Maybe it is time to jump on that Bandwagon?  After all, it is a good idea to invest in anything that has already increased in value - the Gold Bubble taught us that!

* * * 

So, maybe in the future we will be just as stupid as we are today.


  1. Well, one part has come true, sort of. Zipcar was bought out by Avis, who paid a fraction of the IPO price to clean up the mess.

    It turns out that the business of renting cars was, well, already known by others.

    Zipcar is still around, of course, but the car sharing "fad" seems to have peaked. Outside of certain urban areas, the concept simply doesn't work, and membership has basically flattened out.

    Also, as the economy improves, people will end up buying cars instead of renting. For the membership and user fees involved, many people can buy a secondhand Corolla for less money than using a Zipcar.

    While it ain't going away, it ain't taking over the world, either. And if you paid $18 a share at the IPO (or over $25 later one) you were certainly bummed out by the $12-a-share buyout price....

    Gold has taken a beating lately, but has not plunged in price - just slowly deflated from nearly $1700 to $1200, and then bouncing back to $1400.

    The vaunted $5000 an ounce, or even $2000, seems out of the question now.

    As for the rest? Well, we'll see in 2016.

  2. Facebook is still around, but we are realizing that it can be toxic to your mental health - and manipulated by foreign governments.

    The IPO thing? Yea, Groupon and Snapchat - among others - turned out to be raw deals.

    Gold turned out to be a thing, just not a great thing, and after an exuberant bubble, sort of deflated and stayed there.

    The gold bugs are all psyched for Crypto now. Wonder how that will work out?

    Wonder what 2020 will be like?


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