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AFTER
THE BOOM...ANOTHER BOOM.
These sprawling centers of growth, connecting existing metropolitan areas with outlying edge cities and exurban outposts, are projected to provide ample business and investment opportunities as population increases and demographic shifts reshape the nation. A list of bankable strategies and investment themes accompany growth projections for the would-be megapolitans mentioned within the article. One thing that is interesting about such a forecast is the profound level of change implied. Ironically, it is change that occurs by taking current trends (booming build-out, sprawl, homogenization of landscape) to a kind of logical extreme. Certain questions come to mind, for instance: are these regional development schemes sustainable? What are the environmental impacts that come with the build-out? Can the infrastructure needs be supported and maintained at a reasonable cost? There is some planning discussion of reorganizing train systems to serve the potentially more lucrative routes that would arise from a megapolitan area’s dense population clusters. If feasible, the move towards more efficient commuter train travel could help in making a segment of national transit more energy efficient. However, the efficiencies achieved in one area could be negated by increased energy use in another, such as increased road and highway travel within the sprawling megapolitan areas. In the end, the question of whether such planning is future reality or just a fanciful notion is not something I could answer. What is important is that a grand idea such as this can supply the backdrop for the story of a “long wave boom”. We are all familiar with the endless debate over whether or not a real estate bubble exists. In the midst of hope, doubt, and anticipation of future collapse, a rationalization emerges for all the manic activity and even some wild expectations. A suggestion of further upside potential for investors and speculators is ushered forth in an already frothy environment. It serves as a light at the end of a tunnel, when we’re still not sure if we have entered the dark. Of course, the obvious parallel for such a series of events exists in the tech stock boom of the late 1990s. The magazine covers devoted to the construction and real estate boom of recent years remind me of the same cover stories that trumpeted the glory of the technology revolution not so long ago. I have in front of me Bloomberg Personal Finance’s October 1999 special issue. The cover reads (in large, strong print), “Profit From The Next Tech Boom.” As the existing tech stock boom was preparing its final rocket surge of strength towards the astronomical highs of early 2000, the story of the next boom was already being written. A quick glance at the tables of promising stocks and investment ideas offered for consideration reveals a busted list of prospects. Most of the stocks mentioned are trading at a fraction of their 1999 prices. Many of them no longer exist, having folded up or merged into surviving companies. In the end, the build-out of the Net did happen on a fantastic scale and was already underway as the pundits and magazine stories were mulling over the changes to come. In this arena, profound changes occurred and further innovations and growth will come. But who was monetarily enriched in the aftermath of the “new economy’s” boom and bust? Managers and early investors who held stock options pocketed the overwhelming share of dollar value. Real gains proved illusory for many shareholders. Even the companies at the vanguard of technological development were taken down with the larger market. As with the development of American railroads, a new infrastructure was built out and largely made possible with the financial support of eager investors. The process has occurred many times in the past and will likely repeat itself in the future. Perhaps the widespread investment, over-investment, and ensuing wealth erosion was a necessary social cost needed to sow the seed of transformation.
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