Paul Simon
2008-12-26 15:11:19 UTC
Why I'm Rooting for 3 Big Economic Bubbles
By Stephen Pizzo, News for Real. Posted December 26, 2008.
We need a healthcare bubble, an infrastructure bubble and a green
bubble right now -- or else the whole thing will pop.
Let's see, I've lived and worked through how many bubbles and bubble
pops?
My first bubble must have been the real estate bubble that developed
during the Carter Presidency. Housing prices in my Northern California
region were popping up 2% a month. Everyone and their uncle suddenly
wanted to buy a "fixer upper" and cash in.
That bubble burst sometime late in 1979, if I recall properly, which I
should since I owned a real estate company at the time. I knew the end
was near for that bubble when suddenly the investors showing up in my
office weren't grizzled old pros, but average Joes. "Hi, my neighbor
and I scrapped together five grand and we want to invest it in a fixer
upper," they'd tell me.
I took that as a sure sign that the jig was up. I sold my office and
went looking for another line of work. That turned out being the
newspaper business, which is a story for another day.
After that I avoided bubbles until 1996, when I suddenly found myself
in wallet deep in a San Francisco Internet startup, Quokka Sports.
Eeeeeeeeeeeeeeeeeha! What ride that was. We burnt through $164 million
in venture capital money in less than 40 months. And when the dust
settled in 2001 all that was left were 438 over-priced Herman Miller
desk chairs, a ping pong table and a couple of tons of empty Cheeto
bags.
Of course, we were just one of hundreds of dot com companies that
flared like new-born stars, burnt brightly for a short time, then went
super nova, leaving nothing behind but a big ass echo and lot of dust.
(The dust would be all that dot.com stock ordinary folks bought like
lemmings at the top of the curve . as they always do - just like those
two neighbors I mentioned above who were gonna get rich buying fixer
uppers..)
That's the way of bubbles. They are fueled by hope, greed and -- most
of all -- other people's money. And the money is easy to get. Hell the
bubblemisters don't even have go get the stuff. Other people bring it
to them by the truckload and beg them to take the stuff.
When the bubble bursts the bubblemisters shrug and mumble things like,
"Oh well, nothing ventured, nothing gained," and "Hey, don't blame me,
you're the one who begged us to let you in on the action." (My
favorite rationalization during the dot.com bubble came when a
reporter asked a venture capitalist why they continue funding CEOs who
ran failed dot.com companies. "Because you can't encourage risk-taking
by punishing failure," he replied. Easy for him to say, since he was
investing what? - Other people's money.)
But the real problem with most bubbles is not that people lose money.
The real problem with bubbles is that the amount of money lavished on
bubble-stuff rarely creates anything near the amount of useful
tangibles that could have invented/produced with the commensurate
amount of money.
Nobel Prize winning economist and columnist, Paul Krugman recently
wrote;
" once the economy has perked up a bit, there will be a lot of
pressure on the new administration to pull back, to throw away the
economy's crutches .The point is that it may take a lot longer than
many people think before the U.S. economy is ready to live without
bubbles.."
Now, while I agree with that in principle, I am rooting for three more
bubbles;
An infrastructure building boom bubble
A universal healthcare bubble
A green technologies bubble.
Because that's the only way we're going to deal with the challenges
that face us.
Thanks to Global Warming deniers in both government and industry, we
are at least 25-years behind the curve on addressing human
contributions to global climate change. And there's simply no way
normal market forces are going to spend what it will take to catch up.
In fact many industries, like coal and oil, have taken a page right
out of the old Big Tobacco playbook, pumping out junk science and
junkier scientists to counter such efforts.
The only way to catch up is to ignite the same animal passion that
fuels every bubble - greed. "Make some green by investing green,"
needs to become one of America's investment mantras. "A healthy
American is a consuming American" is another good one.
There are some early signs that just that kind of thing may be
beginning to happen. With Democrats back in power, and the billions of
fresh dollars rolling off the presses in DC, investors smell new
opportunities in new places - the kind of places Democrats and the
incoming Obama administration say they favor - healthcare,
infrastructure and all things green.
Need capital? Green start-ups may fare best in tough '09
December 17, 2008 -- Start-up companies in green industries stand the
best chance of getting venture capital funding in 2009 -- in what will
otherwise be a dismal year for entrepreneurs looking for money, a new
venture industry survey suggests.
"We will likely see a marked slowdown of new investments as venture
capitalists turn their attention to supporting existing companies,"
said Mark Heesen, NVCA president. Despite the overall slowdown
expected in venture funding, 48% of venture capitalists predicted
increased investment in clean technology businesses, ranking that
sector at the top of list of industries likely to get more funding.
The life sciences industry, including biotech, ranked second." (Full)
The pressure on the incoming Obama administration to change the
direction of the Bush bailouts will be overwhelming. Ordinary
Americans have no sympathy for Wall Street companies and bankers who
took it up the assets when the housing market collapsed. Nor do
Americans have much of appetite for saving the Big Three auto
companies, which wasted the last decade rock stupid products like
Hummers and other four-wheeled dinosaurs.
So between now and eight years from now over a trillion dollars will
be lavished on our long-neglected national infrastructure, expanding
and modernizing our healthcare systems and on R&D/deployment of clean,
renewable energy sources and technolgies.
Sure, all three areas will become investment bubbles. Duh. America is
now and will always be a capitalist nation. It's in our DNA. Everyone
wants a piece of whatever is happening now. Don't you? (Don't try that
holier than thou crap with me . you would too.)
And so, "The Greater Fool Theory" will again kick in. New companies
will form, new ideas will not only be funded, but over-funded, by
venture capitalists eager to grow these new infrastructure, healthcare
or green companies fast as they can so they can take them them public,
(IPO) and start over again for as long as the bubble lasts.
Once again, the general public will serve as the greatest fools. As
they hear about the millions being made in these three new bubbles
they will begin pestering their broker to get them in on these hot
IPOs. Day traders will stay up all night online, prowling amatuer
investor chat rooms where the sharks play "pump and dump," with the
newbies drop who stumble in drooling for an opportunity to snap up the
"hottest" new green or healthcare company IPO.
Then, at some point, each of these three bubbles will burst, as all
bubbles must. A small number of healthcare and green start ups will
actually survive in some form. The lucky ones will be acquired by
biggies, like Johnson & Johnson, Exxon, Kaiser Permanente, etc.
But, like the dot.com companies of yore, most will not make it, and
they will disappear, along with billions of investor dollars.
But this time, at least, the stuff left behind by the healthcare,
infrastructure and green bubbles, will endure long after their
creators and funders are long gone. And they will form a modernized
foundation upon which a resurgent American economy can not only stand,
but grow.
That's what happened after FDR lavished federal funds on dams, roads
and bridges, most of which are still in use today. And it happend
again when, after WWII, Ike lavished more federal money, knitting the
nation together with a new national highway system. Imagine how the
America of the 1960 on could have been anything near what it became
without all that infrastructure.
And so it will be with the federal money that will spark the
healthcare, infrastructure and green bubble of 2009-2017. After that
bubblemisters of the future will have new bridges, highways and
high-speed trains on which to deliver their goods and services. All
Americans will have cleaner water, cleaner air and safer food. Air
travelers will enjoy less delays due to new airports and modernized
air traffic control systems. Universal healthcare will extend lives
and the quality of those lives.
(Of course, conservatives out there will shake their heads at all
this. "The government can dump all the money they want into those
three areas and the private sector is still not going to invest in
something they could lose money on," they'd claim. Not so. Not so. And
don't force me to list all money-losing schemes the private sector
dumped trillions into over the past couple of decades. The private
sector always follows the money be it other people's money or Uncle
Sam's money. Just lay out in the warm sunlight and they'll show up
like flies attracted to camel dung. And the very people who claim they
won't be attracted to it will be among the first banging on the door
to get in once those trains start leaving the station. You can bet the
farm on it. History tells us so.)
Ah, but I digress.
The biggest bang for the buck will be generated by all the green
technologies nourished and grown by the combination of government and
speculative money. Those investments will pay dividends for a century
-no, for centuries to come. The return on those investments will be
incalculable. Not because we can't do the math, but because all the
human wealth on earth would be drop in the bucket by comparison.
Finally we'd enjoy investment bubbles that leave more behind than they
consume -- bridges to somewhere..bridges to the future. Imagine if we
had a green technology bubble, for example, as large as the recent
housing bubble. Imagine that, and what it would leave behind for the
future generations.
Bubble on, dudes.
By Stephen Pizzo, News for Real. Posted December 26, 2008.
We need a healthcare bubble, an infrastructure bubble and a green
bubble right now -- or else the whole thing will pop.
Let's see, I've lived and worked through how many bubbles and bubble
pops?
My first bubble must have been the real estate bubble that developed
during the Carter Presidency. Housing prices in my Northern California
region were popping up 2% a month. Everyone and their uncle suddenly
wanted to buy a "fixer upper" and cash in.
That bubble burst sometime late in 1979, if I recall properly, which I
should since I owned a real estate company at the time. I knew the end
was near for that bubble when suddenly the investors showing up in my
office weren't grizzled old pros, but average Joes. "Hi, my neighbor
and I scrapped together five grand and we want to invest it in a fixer
upper," they'd tell me.
I took that as a sure sign that the jig was up. I sold my office and
went looking for another line of work. That turned out being the
newspaper business, which is a story for another day.
After that I avoided bubbles until 1996, when I suddenly found myself
in wallet deep in a San Francisco Internet startup, Quokka Sports.
Eeeeeeeeeeeeeeeeeha! What ride that was. We burnt through $164 million
in venture capital money in less than 40 months. And when the dust
settled in 2001 all that was left were 438 over-priced Herman Miller
desk chairs, a ping pong table and a couple of tons of empty Cheeto
bags.
Of course, we were just one of hundreds of dot com companies that
flared like new-born stars, burnt brightly for a short time, then went
super nova, leaving nothing behind but a big ass echo and lot of dust.
(The dust would be all that dot.com stock ordinary folks bought like
lemmings at the top of the curve . as they always do - just like those
two neighbors I mentioned above who were gonna get rich buying fixer
uppers..)
That's the way of bubbles. They are fueled by hope, greed and -- most
of all -- other people's money. And the money is easy to get. Hell the
bubblemisters don't even have go get the stuff. Other people bring it
to them by the truckload and beg them to take the stuff.
When the bubble bursts the bubblemisters shrug and mumble things like,
"Oh well, nothing ventured, nothing gained," and "Hey, don't blame me,
you're the one who begged us to let you in on the action." (My
favorite rationalization during the dot.com bubble came when a
reporter asked a venture capitalist why they continue funding CEOs who
ran failed dot.com companies. "Because you can't encourage risk-taking
by punishing failure," he replied. Easy for him to say, since he was
investing what? - Other people's money.)
But the real problem with most bubbles is not that people lose money.
The real problem with bubbles is that the amount of money lavished on
bubble-stuff rarely creates anything near the amount of useful
tangibles that could have invented/produced with the commensurate
amount of money.
Nobel Prize winning economist and columnist, Paul Krugman recently
wrote;
" once the economy has perked up a bit, there will be a lot of
pressure on the new administration to pull back, to throw away the
economy's crutches .The point is that it may take a lot longer than
many people think before the U.S. economy is ready to live without
bubbles.."
Now, while I agree with that in principle, I am rooting for three more
bubbles;
An infrastructure building boom bubble
A universal healthcare bubble
A green technologies bubble.
Because that's the only way we're going to deal with the challenges
that face us.
Thanks to Global Warming deniers in both government and industry, we
are at least 25-years behind the curve on addressing human
contributions to global climate change. And there's simply no way
normal market forces are going to spend what it will take to catch up.
In fact many industries, like coal and oil, have taken a page right
out of the old Big Tobacco playbook, pumping out junk science and
junkier scientists to counter such efforts.
The only way to catch up is to ignite the same animal passion that
fuels every bubble - greed. "Make some green by investing green,"
needs to become one of America's investment mantras. "A healthy
American is a consuming American" is another good one.
There are some early signs that just that kind of thing may be
beginning to happen. With Democrats back in power, and the billions of
fresh dollars rolling off the presses in DC, investors smell new
opportunities in new places - the kind of places Democrats and the
incoming Obama administration say they favor - healthcare,
infrastructure and all things green.
Need capital? Green start-ups may fare best in tough '09
December 17, 2008 -- Start-up companies in green industries stand the
best chance of getting venture capital funding in 2009 -- in what will
otherwise be a dismal year for entrepreneurs looking for money, a new
venture industry survey suggests.
"We will likely see a marked slowdown of new investments as venture
capitalists turn their attention to supporting existing companies,"
said Mark Heesen, NVCA president. Despite the overall slowdown
expected in venture funding, 48% of venture capitalists predicted
increased investment in clean technology businesses, ranking that
sector at the top of list of industries likely to get more funding.
The life sciences industry, including biotech, ranked second." (Full)
The pressure on the incoming Obama administration to change the
direction of the Bush bailouts will be overwhelming. Ordinary
Americans have no sympathy for Wall Street companies and bankers who
took it up the assets when the housing market collapsed. Nor do
Americans have much of appetite for saving the Big Three auto
companies, which wasted the last decade rock stupid products like
Hummers and other four-wheeled dinosaurs.
So between now and eight years from now over a trillion dollars will
be lavished on our long-neglected national infrastructure, expanding
and modernizing our healthcare systems and on R&D/deployment of clean,
renewable energy sources and technolgies.
Sure, all three areas will become investment bubbles. Duh. America is
now and will always be a capitalist nation. It's in our DNA. Everyone
wants a piece of whatever is happening now. Don't you? (Don't try that
holier than thou crap with me . you would too.)
And so, "The Greater Fool Theory" will again kick in. New companies
will form, new ideas will not only be funded, but over-funded, by
venture capitalists eager to grow these new infrastructure, healthcare
or green companies fast as they can so they can take them them public,
(IPO) and start over again for as long as the bubble lasts.
Once again, the general public will serve as the greatest fools. As
they hear about the millions being made in these three new bubbles
they will begin pestering their broker to get them in on these hot
IPOs. Day traders will stay up all night online, prowling amatuer
investor chat rooms where the sharks play "pump and dump," with the
newbies drop who stumble in drooling for an opportunity to snap up the
"hottest" new green or healthcare company IPO.
Then, at some point, each of these three bubbles will burst, as all
bubbles must. A small number of healthcare and green start ups will
actually survive in some form. The lucky ones will be acquired by
biggies, like Johnson & Johnson, Exxon, Kaiser Permanente, etc.
But, like the dot.com companies of yore, most will not make it, and
they will disappear, along with billions of investor dollars.
But this time, at least, the stuff left behind by the healthcare,
infrastructure and green bubbles, will endure long after their
creators and funders are long gone. And they will form a modernized
foundation upon which a resurgent American economy can not only stand,
but grow.
That's what happened after FDR lavished federal funds on dams, roads
and bridges, most of which are still in use today. And it happend
again when, after WWII, Ike lavished more federal money, knitting the
nation together with a new national highway system. Imagine how the
America of the 1960 on could have been anything near what it became
without all that infrastructure.
And so it will be with the federal money that will spark the
healthcare, infrastructure and green bubble of 2009-2017. After that
bubblemisters of the future will have new bridges, highways and
high-speed trains on which to deliver their goods and services. All
Americans will have cleaner water, cleaner air and safer food. Air
travelers will enjoy less delays due to new airports and modernized
air traffic control systems. Universal healthcare will extend lives
and the quality of those lives.
(Of course, conservatives out there will shake their heads at all
this. "The government can dump all the money they want into those
three areas and the private sector is still not going to invest in
something they could lose money on," they'd claim. Not so. Not so. And
don't force me to list all money-losing schemes the private sector
dumped trillions into over the past couple of decades. The private
sector always follows the money be it other people's money or Uncle
Sam's money. Just lay out in the warm sunlight and they'll show up
like flies attracted to camel dung. And the very people who claim they
won't be attracted to it will be among the first banging on the door
to get in once those trains start leaving the station. You can bet the
farm on it. History tells us so.)
Ah, but I digress.
The biggest bang for the buck will be generated by all the green
technologies nourished and grown by the combination of government and
speculative money. Those investments will pay dividends for a century
-no, for centuries to come. The return on those investments will be
incalculable. Not because we can't do the math, but because all the
human wealth on earth would be drop in the bucket by comparison.
Finally we'd enjoy investment bubbles that leave more behind than they
consume -- bridges to somewhere..bridges to the future. Imagine if we
had a green technology bubble, for example, as large as the recent
housing bubble. Imagine that, and what it would leave behind for the
future generations.
Bubble on, dudes.