Calamity and Confusion

"Times of great calamity and confusion have been productive for the greatest minds. The purest ore is produced from the hottest furnace. The brightest thunder-bolt is elicited from the darkest storm."

Colton, Charles Caleb · Difficulties

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Economic Cycles

During this past two years I have been observing the same excesses that lead up to the original dot.com meltdown at the end of the last decade and earlier in this one.

Now, I am over 60 years old and I have seen these cycles many times before, and not just in the computer industry. As a matter of fact, before retiring, I used to teach economics and finance at two universities.

In industry I observed a 'melt-down' about every 8 years. 6 years of build up leads to excess that seems to require a 2 year correction.

When I have been attending conferences and even in the local Internet Café everyone seems to be buying into all of the new and latest technology – the 'bleeding-edge' stuff. Now, I did that myself when I was younger. Like many others I went into debt to finance the purchases. Did I rue the day? You bet.

Here's what I think. Two years and two months ago I saw at the conferences and elsewhere that individuals were living 'high off the hog', living on their real estate 'equity', off their expense accounts; marketing like crazy – and investing in many new .com start-ups and technology stocks that had never made a profit, nor likely ever would.

Many of those 'start-ups' were only concepts, they had not even gotten to Alpha testing, let alone market acceptance. Stand by to watch for this next shoe to drop, the real estate and Dot.com 2.0 Boom and Bust.

Timing economic cycles is a 'mugs' game. Dark Ages 2.0 post, August 16, 2008

Yet, the timing of the economic outlook in previous posts now looks fortuitous.

In the past I have found that just prior to a downturn there seems to be a speculative rush into markets, a 'speculative bubble', just before an end of increases and the beginning of a recessionary downturn, or a depression.

Let's see if this economic cycle proceeds as predicted.