Trading one Bubble for Another

Many economists have suggested that Greeenspan's policy of easy money after the NASDAQ crash allowed people to trade the internet bubble for a real-estate one.  Here's something Bloomberg.com which illustrates that nicely:

Regulars who gather for poker include Mark Kvamme, whose Menlo Park, California-based Sequoia Capital financed Google Inc. and Yahoo! Inc. Kvamme, who owns a lakefront second home in Whitefish, is building a 1,275-acre (516-hectare) luxury residential development called the Homestead with Lehman Brothers Holdings Inc. Chief Executive Officer Richard Fuld.         

Executives and investors enriched by the dot-com boom are buying land around the northwest Montana city of Whitefish, population 6,151, boosting property values, straining county services, and putting the former railroad outpost near Glacier National Park on the road to becoming a wealthy enclave like Aspen, Colorado, or Jackson Hole, Wyoming.                

``In 1999 I bought real estate because I didn't want all my money to be in Nasdaq,'' says Kvamme, 44. The Nasdaq Stock Market composite index has declined 26 percent in the past six years. By contrast, his development, valued at $5,490 an acre two years ago, is for sale today for an average $50,000 an acre.         

Their timing was great the last time around...wonder if they'll sell this time?  Or perhaps we're in a new era, and traditional valuation metrics don't apply.

(Via, of course, Paul Kedrosky)

Comments

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[Thomas]

Hi

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