"History demonstrates the accuracy of what some of us
were saying last year and the year before: That things like the
equities prices in the tech sector were based on ridiculous
assumptions, and sooner or later someone was going to notice this,
pronounce the emperor naked, and it would all come crashing down.
Which it has done and to some extent continues to do.
It's very much like the story of the counterfeit money in
Morocco. The way this story goes, Americans visiting that country
on buying trips a few years ago would use a color copier to produce
fairly large sums of counterfeit U.S. currency. It wasn't bad
looking stuff, though it wouldn't make it undetected for very long
in the U.S. But in more remote regions of a foreign land, it would
pass for the real thing. It worked. It worked so well, in fact,
that there are nice little local economies there that are based
entirely on the phony cash. It's a decent portable store of wealth,
for as long as everybody involved in the transactions has faith in
it. Of course, if the whistle is blown the whole local economy will
collapse and whoever is holding the "currency" at the time will be
out of luck. In this particular situation, there's no reason to
believe that the whistle will ever be blown. But that cannot be
said of the American stock market.
It was inevitable that one day someone was going to say, "Hey.
Aren't these companies we're investing in supposed to make money at
some point, rather than lose huge amounts of money all the time,
for as far into the future as can be seen?" And somebody else was
going to say, "Once everyone who wants one has a computer, can we
really expect people to blow a grand or more on a new one every
single year?" Whereupon the unsettling noise of cracks forming in
the flimsy foundation were heard. They broadened quickly. Some
people escaped with their lives, while others were crushed.
A whole lot of money, much of which had existed only on paper,
simply disappeared. Ceased to exist. People who were surprised by
wealth were even more surprised by its departure. The smart ones
didn't behave, when they were rich on paper, as if they were rich,
and therefore do not now face huge debts they have no way to