Right now there is a scandal going on somewhere, we just don't know where. Maybe Facebook, maybe LinkedIn, maybe Yahoo, maybe even Google. Maybe someone else, who knows. It always starts with a scandal. WorldCom, Enron, Lehmans, AIG, etc.. When a company can no longer meet growth targets to stay competitive they start lying to keep the capital flowing. They build a bigger house around the main house, but it's built out of cards and eventually it crumbles. This is what no one wants to believe, but it always happens. "It's different this time.™" It's never different. There's always going to be that incentive to cheat, and multiple people will take that bet. Someone eventually gets caught.

Once one of the titans fall, investors get scared and pull back. Companies like Google and Apple, with huge cash positions, are okay. Everyone else runs out of capital in a few months. The fallen firm lets 10,000 people go. Everyone else either does layoffs or initiates a hiring freeze. Now you've got 10,000+ locals out of work who can't get jobs. Now you've got 10,000+ people who are a few months away from defaulting on a mortgage they could barely afford in the first place because it was so expensive to live in an area propped up by cheap money and heavy leverage.

People start defaulting, and things get even worse. You've got a bunch of people in San Francisco who got $200,000 no interest downpayment loans from the city. They can't pay them back and the city gets stuck with the debt. Now there's public crisis.

Everyone and everything attached to the real estate market starts to freak out that home prices might decline. More panic, more layoffs, more defaults.

The dust settles and we start over.

One of the most bubbly signs (to me) is I hear people I consider reasonably intelligent saying it's impossible for real estate to lose value, especially in SF. Now's the time to buy, since it's only going to go higher.

Of course I heard the same lines in 2006....

Well if you look at bay area real estate since 1984, if you buy 1 or 2 years before the peak, it never drops below the point 1 year before the peak occurred. Except on the 2007 US real estate bubble pop, which was 2 years.

Then you have places where I am from, like Vancouver, for which the past ~15 years has been rising quite a bit, and now staying at very high price levels. $1 million dollar houses are pretty average, and whats even worse is people don't make nearly enough income to live there.

So this recent rise is pretty worrying from my perspective. If I want to buy a place, my savings will be wiped out. I personally wish it didn't cost so much.

People keep using the word "never" and "always" to describe periods of time that are relatively short.

We wouldn't say "never" with a sample size of 5 in any other scenario, but with finance we seem to look at small samples and confidently say things like always and never.

How does this make any sense?

I qualified my use of never with a specific time span. Within that period of time you never see X. Any other word I could think of would just be more complicated and thus harder to read.

And my timespan was 31 years. That is after several booms and busts. If the pattern holds for even a decade +, that is a pretty significant part of my life span and something I have to consider.

Also on a more personal note, my father was basically forced out of Vancouver due to not buying a house when he had the chance 10 years ago, so it's a very real possibility that I might be forced out too here.

So the reason why people use 'small' samples is because those timespans are not small for a human being!

The added difficulty over the (for instance) Enron scandal is that this time, we don't have a nice set of publicly available SEC documents to look through (obviously not talking about GOOG/FB/TWTR). But with so many firms growing huge on private capital, we don't have the same opportunities for investigation that were available with many of the previous scandals. Most of Enron's malfeasances were documented, everyone was just so exuberant they didn't bother to look that closely. Once people did (a key short seller and a few journalists), Enron collapsed in about six weeks.

Finding the scandal will be much harder this time, but I agree it's out there. Cash prize to the one who finds it.

Weren't there a lot of accounting irregularities at Groupon?

There was never a stock I wanted to short as bad as GPRN when it first floated, but my broker wouldn't let me, and it was too new for options. So frustrating.

It's not the failed IPOs like Groupon and Zynga you have to worry about. Those are actually good outcomes.

It's the ones that are "too big to fail" that you have to worry about. And it might not even be explicitly accounting this time.

I've had this strange suspicion for a while that a lot of the companies selling ads are doing some bogus stuff. I mean, we all know there's a lot of fraud happening in terms of ad serving/tracking and accountability, but I suspect that it's been institutionalized somewhere.

Or it could be any number of things. The amount of bullshit I've personally witnessed by startups to close a new round is staggering. The number of times I've seen people find creative solutions to adding an extra zero to "monthly active users" is just too damn high. Investors keep investing, established firms keep acquiring, and no one cares.

Worse, Facebook makes a lot of mobile advertising money from app install ads. If startup investors cut back the flow of money, that advertising revenue dries up. There will be a glut of unemployed developers just as Facebook starts reporting declining revenues. Facebook will need to start reducing costs, not hiring, and definitely no acquihires (startups with viable business models might be a different story).

Google might clean up with their pick of the best surviving startups and the best devs going cheap, because they have more diverse sources of advertising revenue, but they might also be under pressure to control costs if investors panic and flee tech.

That Facebook makes money from mobile advertising is a good point: In the dot com era, many dot coms made money very briefly selling ads or services to other dot coms, who were willing to pay way too much. Now many companies are valuable because other companies will pay too much for user acquisition. If they stopped, their would be repercussions for a lot of companies in the middle (not Facebook) who see their business model go away.

If the base of the value chain isn't making money (and I think honestly in the current case even the middle isn't) the whole ecosystem will probably contract.

Everything is connected. If there's a collapse in private equity funding, you could see consequences such as a decrease in advertising on major platforms such as Facebook, which would hurt their earning and market cap. I definitely think it would have some systemic consequences, but not at the magnitude of early 2000s unless it's triggered by a general equity market crash or some sort of global debt crisis.

If there is going to be a crash my money is it being on Student loans

While I agree student loan debt may be unsustainable and start defaulting, I don't think it's as disastrous as the subprime crash because (from my understanding) most of student loan debt is on the books of the Federal government, and is not being monetized in anywhere near the magnitude that subprime mortgages were being sold on a global market.

The student loan situation is bubble-y, but one big difference is that the loans can't be discharged in bankruptcy. That makes the situation fundamentally different from most bubbles.

I'm not saying you're wrong per se, because I think the way student loans are heading is almost bound to be problematic, I just can't picture that bubble "bursting" like we usually think of it.

A couple outcomes I could think of would be a law making student loans dischargeable in bankruptcy again, a government bailout type program, or a law greatly reducing the availability of student loan debt. Any of those would have drastic consequences, but I'm still not sure it'd be right to call any of them a bursting bubble (except maybe the first).

Ads are the one thing that folks focus too much on in quest of bubble quarry. I run a large boutique display ad platform, and I'm reasonably confident that advertisements change form, function, and price -- but advertising never goes away. Even the display ad markets in post-Great Recession 2008 were not too bad.