Trend Following Manifesto

I caught this article this morning. An excerpt:

Armando Falcon, who clashed frequently with the companies during his six years as Fannie and Freddie’s chief government regulator, said in an interview last month that the companies’ woes are similar to the downfall of other major corporate titans like Enron and WorldCom earlier this decade. “It boils down to a whole lot of greed and arrogance,” he said. The companies, he said, took advantage of the perception on Wall Street that the government would stand behind them in a time of crisis, as is now the case. With that implied government backing, the companies generated large profits for years, but ultimately took on too much risk, causing investors to lose faith in their ability to navigate the historic housing bust. Economists who long warned the housing boom could not last are baffled that the companies were not better prepared for what they saw as an inevitable downturn. “How could you look at an enormous rise in prices and not think there was a potential for them to fall?” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. Another longtime proponent of the housing bubble concept is Dean Baker, co-director of the Washington-based Center for Economic and Policy Research. He recalls several occasions when he debated top Fannie and Freddie economists, who dismissed the idea that U.S. home prices could decline. “Even if they didn’t want to listen to me, they should have at least thought this could be a possibility,” he said.

I don’t care what year it is. I don’t care what decade it is. These bubbles are all the same. Sure, the names change, the specifics might change, but bubbles are all about “everyone” thinking they are going to get rich at the exact same time while doing little if any real work. Think about it. The United States has put together two massive financial bubbles back to back. First dot-com, then real estate. Any chance the majority of the population will learn from these historic bubbles? Doubtful. The next massive bubble is most likely underway, we just don’t know what it is yet!