On market gyration and turbulent economy...

It's always exhilarating to witness turbulent times as a spectator. Of course, it helps that you're not in the blood sport yourself.

Tech stock bubble...

Such was a time to see the coming of age of the internet era in the late 1990s. I could feel the charge of energy in the air when you're in CalTech, Pasadena, Stanford, and MIT, Boston. There was so much excitement, initially for bringing about changes to the world, and then the big money came. Back then, one of the favorable past-time was to have the little yahoo ticker app installed, and see the ticker slide by right on your own machine (PC, Mac, you-name-it). For a while, even just the thought of a (paper) millionaire is enough to deliver orgasm to folks. Everyone wants to start their own company, much like every Senator in Washington thinks they are president material. It feels good even just to see it, to feel it, and be part of the movement. I feel privileged.

I didn't feel particularly burnt when the tech stock market bubble bursted in 2000. Afterall, they had only been paper profit. It's like playing monopoly. It's fun going to a party, after every party ends, and so should this.

Housing bubble...

And then there was the housing bubble. At the time, after the tech bubble burst, I recall almost every so-called analyst and financial advisers would say, housing is the way to go. It's long term investment. You can go wrong with it. Over time, property value always goes up. Even Bush was advocating the "ownership society" from the White House.

We bought our first home in the late 1990s, not for speculation, but for our real need. We paid it off, bought a second home in mid 2000s, and rented the first one out, but all based on our needs at the time (since we need more room for the kids). We never went for the extravagant. Afterall, I don't like big houses. I prefer smaller dig, but with each space fully utilized. I don't like have lots of rooms that only gather dust, with no one using them.

And we sold our first home in mid 2006, almost right at the peak of the market. I never tried to time the market. But it's indeed providence, that there's this buyer in the same building, who's so keen on buying out all units in the multi-family and convert it into a single-family, all for themselves; and he would hassle us every year to sell, ever since we moved to our second home. So, I reckon, the price was right, and we sold.

By end 2006, housing prices started plateauing and falling. Do I feel sorry for the guy who hassled us to sell to him? Not particularly. Afterall, he has an MBA and a good job (CFO) for a decent company; but so does he have 5 mortgages (4 for the various units in that same building, including his own home there, and 1 vacation home in Maine). Does he overstretch himself? I certainly think so. But that's the kind of market craze that drives people to do irrational things, even though this guy thinks he has all angles covered (except when the property market turns).

We still live in that same second home we bought. It has enough space for us for now, and I'm happy with it. My mom keeps reminding me that we would need more space as the kids grow. But for now, they can wait for a while.

Does it feel good to see the housing bubble, reap some nice profit (sold the first home for 3 times its original price, can you believe it?!?), then witness its deflation? It's almost surreal, and I know the collapse of the housing market would have hurt alot of people, including the guy who forced our hand to sell to him. But for the most part, they asked for it.

Credit market squeeze...

By now, of course we know how this plays out. The housing market downturn triggers the subprime mortgage market to collapse. That fires off the credit market squeeze since the derivatives that base on the value of subprime collaterals have all but evaporated. The Fed was sleeping at their watch. Rating agencies sucker up to the banks, investment banks, and all kinds of financial institutions, and giving AAA ratings to all tranche of securitized instruments like candies to kids at Halloween.

Another stock market plunge...

It's still hurting now. Yesterday, Dow plunged another 800 points at one point, after falling some 770 points a few days before. The crisis looks to be spreading to Europe. (Should there be any surprise?!?) Stock markets around the world fell precipitously. (And Asia still think they're immune to a recession in Europe and even US? They must still be dreaming.)

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Do I feel exhilarated just to recount what has gone through in less than 10 years, with bubble (burst) after bubble (burst)? Most definitely.

Sometimes, though, it's an interesting thought, to see gyrations and turbulance in economy like these as opportunities, and the "invisible hand" at work, in redistributing wealth from one group to another, and from one part of the world to the next. I sure hope this redistribution is making the wealth more evenly distributed. So far, though, the signs are not good. Wealth looks to be more and more focused on a shrinking group of individuals. Oftentimes, it takes money to make money. If average joes want to play in the big league, they would need the capital. With borrowed capital, when times like this come, lenders are going to turn off the faucet.

We'll have to play safe. I hope my kids will read these one day, after they grow up, and learn something from history, since history does repeat itself. It might not be in the same form; but one way or the way, it would. That's a law of nature.