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Commentary: Economic Bust Really Isn't That 'Different'

Michael Steinhardt was on Squawk Box this morning. In the category of famous last words about the investment bubbles and bottoms, the legendary investor used the phrase “it's different this time.” He used it to explain away how all his very smart buddies got it so wrong in the last year, and how hard it is to make investing decisions right now. (See video below.)

“It's different this time.”

Sound familiar? It should.

People said “it's different this time” at the height of the Internet bubble to justify sky-high valuations on any stock with “dotcom” at the end of its name. (The Internet is creating a new paradigm — remember? Amazon was worth $400, said Henry Blodget.)

People said it about Google at $700. (They have revolutionized search and all that ad money directed at TV will move to the Internet! Still waiting.)

People said it at the height of the housing bubble to justify prices climbing 20 percent a year. (Housing is no longer cyclical because there is massive industry consolidation. There are far fewer mom-and-pop developers out there doing stupid things like building on spec. Companies like Toll Brothers , Hovnanian , and Pulteare smarter than that! They will “rationalize capacity.”)

People said it when we'd had nearly a decade of steady smooth gains in the market. (Credit default swaps had smoothed out risk.)

It's different this time. It’s a phrase that gets said at extremes, and frankly, Steinhardt saying it is one of the most compelling signs yet we are close to a bottom.

The more I cover business cycles, the more I believe: it’s never different. There are booms and there are busts. And there will always be booms and busts — Google, “tulipmania” — and remember, the more things change, the more they stay the same. And every time, there will be people telling you “it's different this time.”