Haven’t we seen this movie before?

The latest issue of Fortune will mark the top of the real estate bubble…at least for the time being.  We are clearly in a nation-wide housing bubble with speculation running fairly rampant.  It reminds me erily of 1996 in the stock market – when small cap stocks like Iomega and Prestek were all the rage and made amature investors think they knew what they were doing.  Of course they didn’t and the small cap bubble burst shortly thereafter…only to be followed by the Internet bubble in the beginning of 1998 and then the real estate bubble starting in 2003. 

The reason that I’m certain this will mark at least the near term top in real estate is not only the cover of the magazine, which is a glaring sign. 

But the real striking similarity is between the experience and motivation of the investors investing in small cap stocks in 1996 and in tech stocks in 1999.   

Here are a couple of passages from the Fortune article:

"Tahmassebian, just 22, is a big, affable guy who dresses the way a budding young speculator should: black trousers, a blue-and-white-striped shirt, cuff links, a Cartier watch, black suede loafers, and rimless purple sunglasses. The son of Armenian immigrants, he has spent the past four years in Las Vegas working as a mortgage banker, a job that he says paid him $250,000 in salary and commissions last year. He has taken the day off to fly to Arizona for a "frame inspection." The houses he’s inspecting are somewhere inside the Cholla Ranch development that’s being put up by KB Home, one of the nation’s largest builders. Right now he’s in the general area—cruising southeast down Highway 10 in a white Chrysler 300M rental car—but lacking specifics. "Is that Tempe?" he asks. "I think I have some houses there."
After several uninterrupted miles of cactus, desert, and tumbleweed, it becomes clear that he’s missed the turn, and he exits the freeway while dialing his broker. "Papa John!" Tahmassebian says into his cellphone. "Where are my houses?" "

Even worse:

"At the Investing Get-Together at the Durango Hills Golf Club in Las Vegas, Debbie Smith, a thirtysomething blond, is grappling with one of the many dilemmas facing the modern real estate speculator: remembering exactly how many houses you have. "We have four, five, six, seven, eight—wait, let me think," Debbie is saying.
She begins counting homes on her fingers, ticking off the names of developments. "Palmilla, Terracina, Cliff Shadows—"
Mid-count, her husband, Jason Jones, with whom she hosts the monthly Get-Togethers, comes over to help. "There’s the Mount Charleston cabin," he says.
"And Mar-a-Lago," she adds. "So what is that? Twelve properties? I’m trying to think if there are any more…"
Debbie takes out a business card and begins writing down the names of the communities—in Las Vegas mostly, but also in Boise and Albuquerque—on the back. She gets 12 again. And pauses.
"Oh! We have Solana," she says, suddenly brightening, as if a dam has burst. Her heavily mascaraed eyelashes flutter. "That just closed this week. Oh! And I have one in Mississippi too. I forgot about that. Fourteen." (Actually the couple have 20 properties; they’re forgetting a block of apartments they picked up last winter.)

The similarity between these quotes and the quotes from a fabulous Frontline show in Jan 1997 called "Betting on the Market" is scary:

"SHARON GORNIE:  Here’s the America’s 100 Fastest-Growing Companies.
I saw an article in Women’s Day magazine, "How to start an investment club," and I said to my mom, "Mom, do you want to start a club with me? Let’s do this."
We could get The Wall Street Journal and see what the high was.
Why not take a shot at it? Why not be with everyone else that everyone’s making so much money, a lot of money?
Because we’re working very hard and not furthering ourselves. It’s too slow. We have got to do something aggressive.
RUSS GORNIE: It is scary, but, you know, it’s… at this point, she just wants to… Sharon… well, actually, she took a little more and just invested recently that was very conservative and she kind of went and did something that I think we’ll make out on, as long as the market doesn’t crash. But yeah, right now, just about everything is in there. INTERVIEWER: What’d she do?
RUSS GORNIE: She went and invested in a stock that she was told was going to do very well.
SHARON GORNIE: To tell you the truth, I don’t even know the name of it. I know the call letters are A-M-L-N. It’s supposed to double by August.
INTERVIEWER: Do you worry about your future, financially?
RUSS GORNIE: Oh, yeah. All the time. That’s why we’re trying to do something. That’s just what I’m saying. There’s really nothing to depend on except yourself, so… yeah, we worry about it.