Only two years ago, many thought residential real estate had entered a new era.
“South Florida,” said a realtor quoted in the New York Times, “is working off of a totally new economic model than any of us have ever experienced in the past.”
The dimensions may have been a bit stretched, but the model was the same boom-bust model Florida had followed in the 1920s. And now, the fabric is snapping back to its normal size. Just two weeks ago, an auction of Miami condos shrank prices down to half their level of 2005.
In the late ‘90s was another new era – one based on communications technology and centred on dotcom start-ups. The technology proved remarkably resilient and productive. Even Alan Greenspan said he thought we were onto something new. But the bubble in tech stocks blew up anyway – as they always do.
One bubble bursts only to puff up another.
Now, the bubble du jour is in China.
In Shanghai, cab drivers offer stock tips. People stand in line in brokerage offices to open accounts. China’s largest brokerage, CITIC, is bigger than Bear Stearns (NYSE:BSC) and Lehman Bros. (NYSE:LEH) combined. And stocks are soaring… Now they’re trading at an average of about 50 times earnings. Pretty rich.
“Déjà vu” is a French expression, well known to investors in the West. We wonder if there is an equivalent in Mandarin.
Markets and Money