One of the great problems of asset bubbles is not only the creation of too much capacity, but the misallocation of resources. Our good friend and market guru extraordinaire, Barry Ritholtz, wrote of one such case back in 2005, during the height of the housing bubble,
Gary sent in these very interesting comments:
Geez, just as the dot.com distorted the allocation of capital and resources (i.e., too much broadband, not enough energy infrastructure), so too is the housing bubble!
What is he referring to? He was pointing to this article in the Washington Post:
“It feels as if Playboy’s Playmate of the Month for May is speaking for the entire country.
Fort Lauderdale native Jamie Westenhiser, 23, told the magazine recently that she is ditching her modeling career to take up real estate investing.
In the magazine’s May issue, Westenhiser poses in her lacy lavender baby doll, wearing nothing else except furry boots, leaning on a computer desk next to a stack of books with titles including “All About Escrow” and “Real Estate Principles.” In her “playmate data sheet,” she writes that her ambition in life is to have a “successful career in real estate.”
That’s correct, a potentially lucrative career as a model is being tossed aside for real estate investing. Gary calls that a misallocation of resources.
And apparently, you don’t need to be a scantily clad purty young thing to do it.
Misallocation of resources, indeed!
What makes us more optimistic about the economy we’re rebuilding today as opposed to the bubble economy of 2005 is reflected in the following video. If Lady Gaga is allocating her resources in advancing transformative tech, there is hope! And we do hope this is the Lady Gaga our children emulate and use as a role model as opposed to the Lady Gaga of the stage!
Gaga’s goggles. Another set of spectacles that caught Babbage’s attention were worn by Lady Gaga, who showed up at the show to promote a new line of products that she helped design for Polaroid. The picture-taking sunglasses that the pop star modelled capture and display external images on the inside of the lenses. The data for the pictures are transferred to a USB earpiece and can be sent to a printer via a Bluetooth link. So long as one doesn’t mind walking round looking pretty ridiculous—clearly not a problem for Lady G—then these giant wraparound shades are for you.
Commodities are so last year’s trade and just too Malthusian. In fact, some commodities are reaching “tipping point” prices, which will be disruptive to the economy and to society. We suspect regulators and policymakers will soon get more aggressive and start their “whack a mole” games with speculators. Expect the trend for higher margins, position limits, and tougher regulation on specs to continue.
Transformative tech is where were placing our bet and is the hope and future of our children. We’re on the elbow of the exponential tech curve and these disruptive technologies are going blow our mind and force real adjustments in the economy and labor market, probably even more so than the internet. Stay tuned.