Hoping for Three "Good" Bubbles

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By Stephen Pizzo (about the author) Page 2 of 2 page(s)

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"We will likely see a marked slowdown of new investments as venture capitalists turn their attention to supporting existing companies," said Mark Heesen, NVCA president. Despite the overall slowdown expected in venture funding, 48% of venture capitalists predicted increased investment in clean technology businesses, ranking that sector at the top of list of industries likely to get more funding. The life sciences industry, including biotech, ranked second.” (Full)

The pressure on the incoming Obama administration to change the direction of the Bush bailouts will be overwhelming. Ordinary Americans have no sympathy for Wall Street companies and bankers who took it up the assets when the housing market collapsed. Nor do Americans have much of appetite for saving the Big Three auto companies, which wasted the last decade rock stupid products like Hummers and other four-wheeled dinosaurs.

So between now and eight years from now over a trillion dollars will be lavished on our long-neglected national infrastructure, expanding and modernizing our healthcare systems and on R&D/deployment of clean, renewable energy sources and technolgies.

Sure, all three areas will become investment bubbles. Duh. America is now and will always be a capitalist nation. It's in our DNA. Everyone wants a piece of whatever is happening now. Don't you? (Don't try that holier than thou crap with me.... you would too.)

And so, “The Greater Fool Theory” will again kick in. New companies will form, new ideas will not only be funded, but over-funded, by venture capitalists eager to grow these new infrastructure, healthcare or green companies fast as they can so they can take them them public, (IPO) and start over again...for as long as the bubble lasts.

Once again, the general public will serve as the greatest fools. As they hear about the millions being made in these three new bubbles they will begin pestering their broker to get them in on these hot IPOs. Day traders will stay up all night online, prowling amatuer investor chat rooms where the sharks play "pump and dump,” with the newbies drop who stumble in drooling for an opportunity to snap up the "hottest" new green or healthcare company IPO.

Then, at some point, each of these three bubbles will burst, as all bubbles must. A small number of healthcare and green start ups will actually survive in some form. The lucky ones will be acquired by biggies, like Johnson & Johnson, Exxon, Kaiser Permanente, etc.

But, like the dot.com companies of yore, most will not make it, and they will disappear, along with billions of investor dollars.

But this time, at least, the stuff left behind by the healthcare, infrastructure and green bubbles, will endure long after their creators and funders are long gone. And they will form a modernized foundation upon which a resurgent American economy can not only stand, but grow.

That's what happened after FDR lavished federal funds on dams, roads and bridges, most of which are still in use today. And it happend again when, after WWII, Ike lavished more federal money, knitting the nation together with a new national highway system. Imagine how the America of the 1960 on could have been anything near what it became without all that infrastructure.

And so it will be with the federal money that will spark the healthcare, infrastructure and green bubble of 2009-2017. After that bubblemisters of the future will have new bridges, highways and high-speed trains on which to deliver their goods and services. All Americans will have cleaner water, cleaner air and safer food. Air travelers will enjoy less delays due to new airports and modernized air traffic control systems. Universal healthcare will extend lives and the quality of those lives.

(Of course, conservatives out there will shake their heads at all this. "The government can dump all the money they want into those three areas and the private sector is still not going to invest in something they could lose money on," they'd claim.

Not so. NOT so. And don't force me to list all money-losing schemes the private sector dumped trillions into over the past couple of decades. The private sector always follows the money... be it other people's money or Uncle Sam's money. Just lay it out in the warm sunlight and they show up like flies attracted to camel dung. Oh, and the very people who claim they won't be attracted to it will be among the first banging on the door to get in once those trains start leaving the station. You can bet the farm on it. History tells us so.)

Ah, but I digress.

The biggest bang for the buck will be generated by all the green technologies nourished and grown by the combination of government and speculative money. Those investments will pay dividends for a century –no, for centuries to come. The return on those investments will be incalculable. Not because we can't do the math, but because all the human wealth on earth would be drop in the bucket by comparison.

Finally we'd enjoy investment bubbles that leave more behind than they consume -- bridges to somewhere..bridges to the future. Imagine if we had a green technology bubble, for example, as large as the recent housing bubble. Imagine that, and what it would leave behind for the future generations.

And that's why I'm rooting for one more round of bubbles; a healthcare bubble, an infrastructure bubble and a green bubble.

So, bubble on, dudes.

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Stephen Pizzo has been published everywhere from The New York Times to Mother Jones magazine. His book, Inside Job: The Looting of America's Savings and Loans, was nominated for a (more...)

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