SAN FRANCISCO (MarketWatch) -- It seemed so obvious at the time, back at the peak of the Internet bubble seven years ago this month. Profits no longer mattered.
You see, it was different this time. It was a new paradigm. Internet companies were changing the world and old measurements of success, such as profitability, didn't apply anymore.
Until of course, they did. And we're still living with the fallout from the resulting collapse in Internet stocks and tech stocks in general, seven years later.
The parallel with what's happening in the mortgage market seems eerily familiar.
The thing about the brewing mortgage debacle, however, is that everyone saw it coming. They just refused to believe it.
But the answer was always the same. It's different this time. The banks and lenders have sold the loans. They don't hold them.
Well, who does? The standard answer, seemingly true, was that they'd all been carved up and sold through various derivative instruments, so the risk was spread over a greater number of investors.
Oh, we all said. Those derivative markets are so hard to understand. The big boys like Bear Stearns and Lehman Brothers know how to hedge against this stuff. And they'd never pass along bad goods, right?
So here we are this week at the popping of another great Wall Street myth; another big con that everybody -- even on the street -- bought into because the money was easy and the returns were great.
So just like with the Internet bubble, investors and in this case many home buyers are learning an expensive lesson about boom and bust. Each day subprime housing loan problems are turning up in new unexpected areas -- General Motors, H&R Block, specific mutual funds tied to real estate. The list will get larger and more unusual with each passing week.
At the end of the day, the horrible reality is that in some way, we all own them. And it serves us right
