Dividend Inc

Housing: Did We Learn Nothing from the Dotcom Bust?

Having asked the right question, which is something Wall Street seldom does, we are now faced with the acuity of the answer. The answer in this case is, yes, we have learned a lot from the dot-com bust.

What exactly did we learn? First we learned that as long as the perceived price of the asset continues to increase then you must be a genius. Who cares that there are 24 realtors for every one prospective homebuyers. What does it matter if a bank doesn’t require full documentation; they’re going to sell the loan to Fannie and Freddie anyway. This is reminiscent to the dot-com companies that were not profitable but had a market cap that exceed the combined value of 3M and Intel Corporation.

Next, if the value of your asset is threatened then find alternative means to fudge the numbers. No harm done if everyone else is doing it. After all, the federal government places any unpleasant expenses on the “off-budget” section of the ledger. If it is on the “off budget” section then it really doesn’t exist.

When the value of your company or asset is falling you should assure everyone that all is well. Tell your investors that you’ve got a plan to deal with the problem as soon as someone throws more money at you.

Finally, if someone questions your ability as a viable entity your first response should be to accuse whoever dare question you as a “speculator” and “short seller.” Never admit that you screwed up. Admission of guilt, problems, or incompetence are punishable by not ever getting financed for your next hair-brained, money losing enterprise.

Thankfully, we have learned an enormous amount from the dot-com bust.