Structured Thought . ORG

First, a disclaimer: I do not purport to be, in any way, a financial expert. I’m as much a lay person as anyone else when it comes to the markets. I come at this from an observer who simply tries to understand what’s going on when he sees it, without attempting to make predictions.

That being said… Who didn’t see this coming almost 10 years ago?

The turn of the last century was a period of absolutely unprecedented growth. We have seen, since 1998, at its peak, a nearly 100% increase in the value of the market (I use DJIA as my measuring stick). When I first started watching financial stuff, the Dow was getting ready to break 9,000. At one point this year, we were approaching the 15,000 mark. 6,000 points, 67% increase in less than 10 years.

Even back in 1998, I was watching the growth and thought to myself: This really can’t be sustainable in the long term.

Year in and year out, the market proved me wrong. Even the events of 9/11 only was able to bring the market down about 600 points, at the time a huge drop, but nothing compared to what we’ve seen this week.

Along comes the housing market crash. Suddenly, mortgage companies were left holding millions (if not billions) of dollars of assets that they couldn’t move. Home owners were being stuck in houses they couldn’t sell, and foreclosures started soaring. A self-defeating cycle ensued, drastically reducing the value of the companies holding all of this money. I’m not even talking about (or getting into at this point) the sub-prime market, which is its own bag of nastiness.

So now the market has realized that all of these companies that threw so much money at anything that even remotely looked like it might possibly have some way of maybe producing something that approaches possibly a little bit of profit are now struggling to survive.

Just this week, we’ve seen the complete demise of Lehmann Brothers, one of the largest investment houses in the world, essentially go up in smoke after 158 years in business. 158 years! This company, in some form, has been around since BEFORE THE CIVIL WAR. If you can’t see how messed up it is that something like that could simply evaporate over a weekend, then you’re not looking.

So, my predictions are finally coming true. I said that the market couldn’t sustain such monumental growth for long. It took longer than I thought, but look at where we’re at now.

Robert Scoble (not the nano-projected hologram) follows a LOT of people on Twitter (16,992 at last check). Because of this, he gets asked the same question quite often “What’s it like to follow that many people?”

Today, he got tired of answering viat Twitter and showed us via video. If you listen carefully, you can even hear him say my Twitter name when I send a Tweet while watching.

So, what does all of this power and flood of information do for us? Think of it this way, every follower you have means that number of people are instantly informed of whatever it was you had to say at that moment. So, when Scoble Tweets, 16,000 people know it. Conversely, he is informed instantly when any one of us nearly 17,000 people say something. That’s a lot of information to process, yes, but when filtered properly, it can be a very very powerful tool.

Say, for example, you’re following 3,000 people, scattered throughout the world. At any given time, you’re getting information from each of those places instantaneously, as it happens. You don’t have to wait for the major media to pick it up and put it on TV or the radio. You don’t have to wait for web junkies to craft 800-word dissertations on the effects of the events on the poor of the affected area. You get instant snippets into what’s going on.

Think of it this way: Company A, in which you own stock decides to buy Company B for 20% over the current share price. A tech-savvy member of Company B’s board Tweets ‘Yes! Company A is buying us for $53/share!’, immediately after leaving the filing meeting. Company B is currently trading at $42/share. You are now privy to information that hasn’t hit the media or even the market yet, but is still public information, and therefore not ‘Insider Trading’ (at least, I don’t think so, maybe an econ lawyer can step up and confirm for me). You can now buy Company B stock at $42 and wait for the spike in both Company A and Company B as the news trickles out.

Pretty interesting stuff, methinks.