You may not agree, but I don't think it can be avoided. Since real estate is leveraged or bundled into stock market speculation can only end in a crash. Two very large markets could crush most people in it's path. The bubble is too large. Does anyone here know what can or will be done to stop this thing from tumbling down crushing the real economy ? Please !!!!

-- I KNOW (i.know@more.than.you), May 01, 2000

Answers

I Know:

1. You don't know more than me.

2. I don't agree.

-- Jim Cooke (JJCooke@yahoo.com), May 01, 2000.

All bubbles seem to have a way of getting burst. The real questions are when and how. Those who have made great efforts to predict the current bubble's demise have been repeatedly wrong...but their day may yet come.

Was just reading an article about the height of the Japanese bubble -- the con artists there would use every trick in the book to get & especially KEEP the suckers in the market. Greed, nothing but pure unadulterated GREED is what keeps bubbles like this going...and the greater fool theory.

This will all no doubt end very badly as I-Know suggests, the tricky part is how & when. Be very careful when 'betting' for or against the current Bull Market...there are very powerful forces at play which have repeatedly and recently greatly influenced the "sea state" of the markets.

What exactly caused the Japanese market to tank from over 40,000 to under 15,000?

-- Greed (Isn'tAlwaysSo@Good.com), May 02, 2000.

I've been out of the market for some months based on fundamentals, the increasing deficit in the current account of the US and intervention by the Working Group on Financial Markets (PPT/CPT). I fully anticipate a crash at some point. HOWEVER, it is impossible to arrive at a scenario with any kind of time frame. People are going to keep dumping money into 401k's since they believe they will get a better return and our offshore deficit is being essentially repatriated. Further, foreign companies gain nothing by forcing a downturn in the US economy which would hurt them in the end.

Yes, a crash will happen. Yes, there is leverage everywhere. Yes, people will be wiped out financially. No, in the long term you can't stop it at this point.

The real question is what will cause a crash. I've followed the market for 40 years and the only commonality for a market plunge is an unexpected event.

Lots of luck.

Todd

-- Todd Detzel (detzel@jps.net), May 02, 2000.

A decade after the bubble burst, Japan is still struggling

Published Tuesday, October 26, 1999

Todd Zaun / Associated Press

TOKYO -- All summer the stock market set new records. A home purchased for $200,000 a few years ago is now worth almost twice that. Growth has been so robust for so long that experts say we are witnessing the birth of a new and better economy.

America in 1999? No, that was Japan in '89.

Newly rich brokers and bankers sipped green tea instead of cappuccino, but in many ways, the scene in Tokyo back then was eerily similar to New York City today.

In 1989, Japan was enjoying a prolonged bull market. The benchmark Nikkei 225 stock average soared toward 40,000, doubling in three years.

Japanese companies were leading the world in autos, electronics and banking, and investors seemed to believe the good times would never end. But then Japan showed that even great wealth can disappear in a flash.

The Japanese stock market lost one-third of its value in the first three months of 1990, and it would be two more years before it hit bottom. In some parts of Tokyo, real estate prices plunged 70 percent.

The collapse wiped out 840 trillion yen ($7.9 trillion) worth of business capital and household wealth between 1990 and 1996 -- the equivalent of subtracting an economy the size of Britain's from the world each of those years.

The magnitude of the collapse was astounding, but more troubling for many has been how long it has lingered.

[snip]

Differences from U.S.

With the rise in the U.S. stock market and soaring housing prices, many people worry that the United States may also have a Japanese-style "bubble economy." But there are some good reasons to believe Japan's experience won't be repeated here.

Japan's bubble expanded as investors used paper profits on stocks to make increasingly large bets in the market. Even big companies joined in, generating corporate revenues through market speculation instead of by selling products -- something that, for the most part, hasn't happened in the United States.

And while many U.S. firms have continued to focus on restructuring and cost-cutting during the good times, many Japanese companies did not. That failure made them vulnerable when the downturn came...

I beg to differ with the author on one point: many, many companies (Intel comes to mind) have been "making their earnings numbers" by including "investment income" (i.e., stock market activities) in their earnings. This gives a false sense of security during a bull market and will hurt them during a prolonged downturn. We're also seeing the beginning of the end for all those dot-coms with $30M-$100M (and more) in market cap and no income at all, and investors are now starting to tell the Amazons and their ilk, "Show me the money!"

Note the date on the article. Just prior to that end-of-1999 speculative blowoff in US markets and the subsequent market downturn since the first of the year. Stay tuned.

-- DeeEmBee (macbeth1@pacbell.net), May 02, 2000.