Who remembers why so many people thought these were practical situations?
Do you see a bubble occuring again whether in the market, real estate or the US and world economies?
I remember very well. I was busily buying puts. But as usual, the market outlasted me, and when it finally broke I had very little remaining on the don't-pass line.
As to your question of how could people think that was a reasonable situation, just look around. People usually don't think, they feel. And what they feel is more or less what the people around them feel. So given a situation like the late 90s, where there were many plausible rationalizations for the run-away market, only a scrooge would demur.
I don't see a bubble in stocks today, in any major equity market. That bubble broke. But that doesn't mean that the bear has gone back into hibernation. In fact, I would be amazed if he has. The rule is usually that any bubble, once it breaks, goes back to or below trend. We are a long way above the long term trend still.
The first year of a presidential term is usually weaker than any other years in the cycle. This is particualrly true when valuations are high, as they are now. If the S&P is down in January 2005, look for a down year. And considering valuations, it could be a doozy. Looking down the road, if life proceeds according to established patterns, the next low risk opportunity to go long S&P type stocks should be in late fall of 2006.
If valuations then are normal or below normal, 2007 could be a barn burner.
Remember, you heard it first here.