Ask HN: Did past "bubbles" have so many people claiming we were in a bubble?

19 points by bmau5 209 days ago | 18 comments

I see a new "we're in an AI bubble" post every day, which got me thinking - was this what it was like in past pre-bubble environments?

donavanm 209 days ago |

Yes. Simplistically, its all about incentives, “you've got to dance while the music is playing.” If a professional money manager doesnt follow the mania theyre going to significantly underperform their competitors/benchmarks. If they underperform for multiple quarters theyre going to lose allocation, customers, and their jobs. See also the “perma bears” who have predicted “15 of the last 3 recessions.”

As an individual you can change your risk profile by rebalancing or profit taking during the mania. trying to find quality places to put your gains to reduce the downside risk. That said, in even a moderate correction youre going to underperform the index due to the silly magnitude of those mania gains over time. Eg an additional 2 years of +30% and then a 25% correction is going to outperform your “safe” 7% returns.

labrador 209 days ago |

John Kenneth Galbraith says in his book The Great Crash 1929 that most knew it was heading for a fall, but everyone assumed they could get out before losing their money. Turns out the order system was over-whelmed so they couldn't get out.

Maybe in these times it will be a flash crash that catches everyone off guard. A flash crash that doesn't rebound like the one in 2010

https://en.wikipedia.org/wiki/2010_flash_crash

araes 209 days ago |

Yes, here's a couple examples from a quick search on [1] 2006 to 2008 timeframe.

[1] https://www.google.com/search?q=financial+real+estate+warnin...

Reuters, 8/9/2007, "House bubble could be a self-fulfilling prophecy", https://www.reuters.com/article/world/house-bubble-could-be-...

"experts fear is that excessive focus on the issue could generate enough fear among homebuyers to lead to the first-ever nationwide housing drop"

"Alan Greenspan doubts there is a national bubble but warns repeatedly of "froth" in local housing markets and imminent regional downturns."

"Barely a day goes by without blaring headlines about housing bubbles in newspapers and magazines."

NBC News, 8/10/2007, "High-risk mortgages turning into toxic mess"

"the option and interest-only ARMs held by more creditworthy borrowers loom as another calamity in the making"

"If the worst fears about these loans materialize, the economic damage would likely extend well beyond the United States because much of the debt has been packaged into securities sold to pension funds, banks and other investors around the world who were hungry for high yields."

"there is still reason to be alarmed because the trouble with option and interest-only ARMs still appears to be in its early stages"

"Those loans are begging to blow up. This is a true financial crisis"

idontwantthis 209 days ago | |

I remember so many "bubble" stories on NPR that I just assumed we were headed for a pop and didn't know why it was a surprise.

bitlax 209 days ago | |

Peter Schiff was right!

jqpabc123 209 days ago |

Short answer --- yes.

AI does not reflect reality. It struggles to tell the difference between fact and fiction. And it will gladly invent info in order to pacify the user.

Likewise, the investment being poured into this flawed technology does not reflect economic reality.

Reality is nothing if not persistent and will eventually intrude on this fantasy.

laughing_man 209 days ago |

I remember hearing about the real estate bubble for about three years before it popped in 2008. Most bubbles are pretty obvious even before they pop, since it's clear the money doesn't work.

And classically, you know it's about to pop when you hear "this time is different".

abraxas 209 days ago |

Yes, absolutely yes, The dotcom bubble was precipitated by lots of people in mainstream media sounding the alarm. Ditto for the real estate bubble that led to the stock market collapse of 2008.

donavanm 209 days ago | |

I personally remember the string of “us re makes no damn sense” articles in the financial press end of ‘06 and early ‘07. Iirc credit ratings and mortgage exposure specifically was being widely panned by 07. And still it took another year for it to shake out to the financial system at large.

kingstnap 209 days ago |

The classic joke is economists have predicted 11 of the last 4 recessions.

In case you've never seen it. There are people posting their takes on some sort of economic catastrophe in China, US, Japan, wherever, basically 24/7 365 days a year on YouTube.

It's a very very very common finance bro hobby to do this. Every single outcome that can happen has a million people having "called it" well in advance.

kevin061 209 days ago | |

Which is why I'm sceptical of past predictions. Infinite typewriters and monkeys, and such.

I've seen "China is collapsing" videos for the past 10 years. They seem to be going rather well over there so far. They're making the best EVs while American and German cat veterans struggle with electrification. Go figure.

bobthepanda 209 days ago | | |

I mean there are legitimate problems with the Chinese economy like youth unemployment.

JohnFen 209 days ago |

Lots of people were sounding the alarm while the .com bubble was inflating.

anthony100 209 days ago |

To answer your question - Yes. But you also need to keep in mind the great quote by J.M. Keynes, “Markets can remain irrational longer than you can remain solvent.”

HardwareLust 209 days ago |

Yes, both the real estate and dotcom bubbles both had their alarmists, same as for AI.

runjake 209 days ago |

I had so many smart[1] friends and acquaintances warn me about the 1999 tech bubble and the 2008 crash 6-12 months before it happened.

1. The kind of people who watched a lot of candlestick graphs and obsessed over sites like Seeking Alpha and OpenInsider.com

dlcarrier 209 days ago |

You sent me down a rabbit hole, but apparently discussions of previous bubbles were quite large:

https://books.google.com/ngrams/graph?content=tech+bubble%2C...

and

https://trends.google.com/explore?q=tech%2520bubble%2Creal%2...

Discussions of a bubble are always common in retrospect, so they peak after the bubble bursts. The Google Books data includes magazines and newspapers, but ends in 2022. The Google Search data is newer and closer tracks the interests of individuals than reporters and commentators, but has much lower precision.

The dot-com bubble burst in early 2000, but the term didn't exist at the time. It was called a "tech bubble" or "internet bubble", with usage of the two tracking similarly and "tech bubble" being far more dominant. The terms' usages peaked in 2007, but had already gained some prominence at the time of the bubble burst.

The real-estate bubble (really a real-estate lending bubble) burst in 2008 with the already strong usage of the term "real estate bubble" really accelerating at the start of 2005, and peaking in 2012.

Interestingly, usage of the term "tech bubble" started falling right when the real-estate peaked, perhaps with its prominence relegating the dot-com bubble to history.

Despite AI being an on-and-off overhyped buzzword since the 70's "AI buble", doesn't really show up in Google Books before the 2022 cutoff, which is also the year of the public release of ChatGPT, when LLMs quickly became a hot topic, but before there was enough hype for a bubble. Searches for "AI bubble" overtook "bitcoin bubble" at the start of 2023.

The growth in searches for "AI bubble" started accelerating last April, and report as peaking last November, although with the noisier data from Google Search, it may be a false peak. The AI bubble is itself a tech bubble, but with AI being the buzzword this time around, instead of the internet domains that ruled the last tech bubble. Searches for "tech bubble" are much lower than "AI bubble" but follow the same trend, with both showing a small peak in July, a dip in August, and a strong peak in November.