November 1998 - Stated that the stock market itself and Internet stocks in particular represented an asset bubble that we owed to a special set of economic, political and market conditions that attend all financial manias.  The bubble began in 1996 where the bull market ended, following a policy change by the US Fed to permit the broad money supply M3 to increase at historically abnormal rates (M3 grew 4% from 1990 - 1995 and 32% from 1995 to 1999) and an influx of foreign investment that doubled foreign holdings of US debt between 1995 and 1999.

December 1998 - Described how financial bubbles form, their characteristics and how the US stock market bubble conformed to the profile.

January 1999 - On Internet stock prices, we predicted: "The average Internet stock will lose 87% of peak price."  As of November 27 2000 our index of Internet stocks was down 85.48%.  Safe to say the index is off more than 90% today.

August 1999 - On Y2K, we predicted: "What the heck's gonna go down after Dec. 31, 1999?  Do we at iTulip.com envision a world in chaos ruled by tribal warlords marauding the strife torn land in ox drawn Rolls Royces, plundering suburban America for precious caches of bottled water and canned tuna fish?  Time to invest in a bomb silo apartment?  Nah.  After the clocks roll over into 2000, a lot of crappy software that doesn't work very well and breaks all the time will continue to be crappy and not work very well and break all the time."

October 18, 1999 - On the market crash, we predicted that the market was to crash on October 19th.  This was unwise and broke with our tradition of not attempting to target specific dates, a tradition we returned to after that.  We did, however, anticipate the NASDAQ drop on April 16 by taking note of trends that paralleled past bubble declines that we detailed in We're Almost There on March 6, 2000.

November 24, 1999 - On the triggers for the future collapse of the Internet stock bubble: "Credit Squeeze, Bankruptcy, Fraud, and Weakness in the Real Economy."  The first of these triggers, revelations of fraud, did not occur until the early part of 2000 with announcements of accounting irregularities among certain Internet companies.  The credit squeeze did not really begin until late March, the delayed effect of Fed tightening nine months earlier.  Bankruptcies among the dot coms are only just now beginning. Weakness in the real economy will not show up until Q3 or Q4 2000.

March 6, 2000 - Near the final top in Internet stocks, we predicted: "Careful students of financial manias -- and daily readers of iTulip.com -- know that the entire world and a wide array of economic segments of each nation's society need become engaged in a speculative mania for it to develop to the terminal stage..."

April 5, 2000 - On the bear market, we predicted: "A bear market is born."

April 16, 2000 - On Recession 2000, we predicted: "We believe that this crash is the result of the markets pricing in a long overdue US recession."  We will have to wait another six months before this prediction is proved accurate or not.

Debate rages today about whether or not a housing bubble exists in the U.S.  The fact that there is even any controversy about the bubble's existence testifies to the power of the forces of misinformation and proves that the long habit of wishful thinking among the millions of victims of the so-called New Economy has yet to start to dissipate.  But we're used to that.  We recall the debate that we endured in the late 1990s on the existence of a bubble in stocks when iTulip.com first opened shop.  In those days, nearly everyone was in on the game of justifying the bubble.  Alan Greenspan said in testimony before the U.S. Congress Joint Economic Committee June 1999, "But bubbles generally are perceptible only after the fact. To spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong."  At the time, we dug up a similarly evasive statement by Professor Lawrence of Princeton University in September 1929 when he said, "[T]he consensus of judgment of millions whose valuations function on that admirable market... is that stocks are not at present over-valued.  Where is that group of men with the all-embracing wisdom which will entitle them to veto the judgment of this intelligent multitude?"  Today, Greenspan is in the no-bubble camp again, this time defending historically anomalous housing price appreciation with statements that are reminiscent of his defenses of stock valuations during the stock market bubble.  Who is the Fed to say that prices are too high?  Markets know best.

Fact is, housing bubbles, like stock market bubbles, are not at all hard to spot.  We grant that they are politically challenging to discuss in public, especially when they are needed to prevent the aftermath of a previous monetary disaster, the 1990s stock market bubble, from dragging the real economy into a deflationary depression.  Putting aside New Economy obfuscation, the measure of a stock market bubble is simple: prices rise much faster than future earnings possibly can.  A stock market bubble looks like this...

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Dow 8,313.13 -193.49 (-2.23%)

Nasdaq 1,247.92 -32.08 (-2.51%)

Paul Volcker 
Ex-Chairman of the Federal Reserve 
September, 1999