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Bubble Spotting Omnibus 2014

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The Bubble Spotting Omnibus presentation takes you through some of the significant financial investment bubbles of the past, and identifies some of the key characteristics and commonalities between ...

The Bubble Spotting Omnibus presentation takes you through some of the significant financial investment bubbles of the past, and identifies some of the key characteristics and commonalities between these bubbles.

This presentation provides an easy-to-understand explanation on a serious and often difficult-to-understand topic. It covers many attributes that typically are exhibited or may happen in the process of building-up, and bust of a financial bubble. This is explained with practical examples and some memes.

Hope you find it interesting. Feedback appreciated.

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Bubble Spotting Omnibus 2014 Bubble Spotting Omnibus 2014 Presentation Transcript

  • LOTS OF EXAMPLES 30 “EASY STEPS” TO SPOT A BUBBLE *WARNING: CONTAINS MEMES
  • Everything* (well, almost) you wanted to know about bubbles, but were too afraid to ask – stylishly combined in a single nifty presentation. *Obviously one presentation cannot cover everything Cover page art: Minions –”Despicable me” © Universal Pictures – (wallpaper)
  • NO, NOT THAT KIND OF BUBBLE (well ok …maybe kind off slightly similar …) ctdblog.northwestern.edu
  • WHY SHOULD YOU CARE? BECAUSE YOU PROBABLY DON’T WANT THIS TO HAPPEN TO YOU … flickr - danielmoyle
  • OR THIS …
  • AND MAYBE NOT THIS … eideard.com – art by Banksy (graffiti artist)
  • PROBABLY NOT THIS EITHER …
  • AND DEFINITELY NOT THIS:
  • DEFINITION OF 'BUBBLE' “A surge in (equity) prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive sell-off occurs.” Investopedia.com pixabay.com - adriana7_9
  • AND ANOTHER DEFINITION OF 'BUBBLE' “Speculative or market bubbles occur when prices rise far higher than can be justified by fundamentals and for no other reason than that investors believe that something bought today can be sold at a higher price in the future. Bubbles can occur in any tradeable item or instrument, from tech stocks to tulips.” Reuters.com pixabay.com - adriana7_9
  • FEATURES: • Chats to your friends when you don’t want to • Jabbertalky™ battery – charges itself each time you talk • Me-gination ™ (32 patents pending) - codes and sells THE apps YOU DREAM ABOUT • NETIZEN © reports your neighbours for not paying tax – free airtime reward ! • Solves unemployment and brings about world peace Terms and conditions apply: • Max 1 X unit per customer • Accessories and world peace-beta sold separately The-Window-Phone-Concept www.shutupandtakemymoney.org
  • beatlemania culturexchange1.wordpress.com
  • CONSUMERS START RE-SELLING P R I C E H Y P E 0 TIME PRICE GOES UP, HYPE INCREASES
  • SUPPLY CHAIN PROBLEMS… photoblog.nbcnews.com unitenews.wordpress.com www.sail3oceans.wordpress.com reuters
  • P R I C E H Y P E 0 TIME DUE TO SCARCITY AND DEMAND, THE PRICE GOES UP, AND UP
  • onedirectionland2.blogspot.com
  • P R I C E H Y P E 0 TIME …UP, AND UP, AND UP …
  • THE NEXT DAY… Unsplash.Com
  • ANOTHER NEW EXCITING PRODUCT LAUNCHES, RENDERING THIS PRODUCT
  • P R I C E H Y P E 0 TIME PRICE PLUNGES THROUGH THE FLOOR
  • THOSE WHO THOUGHT THAT PRICES WILL KEEP ON RISING, AND INVESTED WHEN PRICES ACTUALLY PEAKED, ARE NOW PRACTICALLY GIVING AWAY THE PHONE FOR FREE JUST TO GET LITTLE MONEY BACK (ASSUMING SHORT SELLING IS NOT POSSIBLE) www.kamagrashop.uk.com
  • IF YOU THINK MY EXAMPLE WAS A BIT OTT OR UNREALISTIC …
  • NOW IMAGINE THE NEXT DAY AFTER YOU BOUGHT THAT PHONE ON EBAY…. FLAPPY BIRD COMES BACK !
  • IF THIS HAPPENED TO YOU …
  • e.g. Bought Flappy Phone here P R I C E H Y P E 0 TIME
  • HOW WOULD YOU FEEL?
  • THAT WAS A SIMPLIFIED & MOSTLY FICTIONAL EXAMPLE NOW LET’S LOOK AT … Wing-Chi Poon Wikicommons.com
  • YOU ARE PROBABLY WONDERING WHAT CAN YOU POSSIBLY CAN LEARN FROM THE PAST …. IT’S HISTORY !? www.unsplash.com
  • www.unsplash.com
  • www.unsplash.com
  • The following section deals specifically with major historical bubbles. Each separate bubble is available as a separate presentation, and has been hyper-linked to this presentation. It is highly recommended to read each of these quick summaries.
  • On previous page the orange frame denotes independent hyperlinked presentations: - Viewing on Mobile – clicking the hyperlink will connect you to the next presentation - Viewing on PC – clicking on the hyperlink should open a new window
  • Click on title below to visit this presentation Flickr - The shifted librarian
  • Click on title below to visit this presentation WIKICOMMONS. -Petar Milošević
  • Click on title below to visit this presentation wtf.thebizzare.com
  • Click on title below to visit this presentation
  • Click on title below to visit this presentation
  • Click on title below to visit this presentation www.dailyfresher.com
  • www.unsplash.com
  • THROUGH THE YEARS THERE HAVE BEEN MANY OTHER BUBBLES - IF YOU WANT, ALSO LOOK INTO : • THE SOUTH SEA BUBBLE (1711-1720) • THE MISSISSIPPI BUBBLE (1716-1720) • THE FLORIDA PROPERTY BUBBLE OF THE 1920S • KUWAIT’S SOUK AL-MANAKH STOCK BUBBLE & CRASH 1982 • STOCK MARKET CRASH OF 1987 • JAPAN’S BUBBLE ECONOMY OF THE 1980S Unsplash.com
  • kingwicked.deviantart.com
  • flickr Kalexanderson
  • Unsplash.com
  • BUBBLES CAN HAPPEN WITH ALMOST ANY COMMODITY, IN ALMOST ANY MARKET*, ALL OVER THE WORLD, WHEN THE CONDITIONS ARE CONDUCIVE. * MORE LIKELY IN ACTIVELY TRADED MARKETS
  • . graphics.ucsd.edu~iman Soap_bubbles_RGB
  • SUPPLY & DEMAND Markets are affected by VARIOUS FACTORS e.g. supply and demand, which can change over time. Scarcity, as well as supply vs, demand (and many other factors) can have a direct impact on the price.
  • FEAR & GREED When sellers or buyers get GREEDY or become SCARED, they may behave differently from their normal behaviour. This behaviour can have a SIGNIFICANT and sometimes UNEXPECTED impact on the markets, and on prices. http://www.4shared.com Deviantart - krizeii
  • KNOWYOURMEME.COM
  • BUBBLES CAN BE VERY COMPLEX There may be many cocontributing factors leading to the build-up or blow-off phase of a market bubble. These factors may behave either directly or indirectly proportional, independently or lag one another. E.g. the initial low interest rates (which contributed to an increase in demand), may already have increased significantly, however the net effect is that demand has not yet cooled down and is still increasing. http://physicsworld.com/cws/article/news/2013/may/10/getting-to-the-bottom-of-foamy-physics
  • COMPLEX (Cont.) Due to the potentially complex nature and interrelationships of many variables, market bubbles do not necessarily end with a single “pop” or “big bang” event. Contributing factors may peak and “pop” independently, and not all necessarily have an equal effect. Using the analogy of a complex bubble rising in the air (similar to picture indicated above), once a sufficient number of the independent (but connected) bubbles cease to exist or reduce in size, the complex bubble as a whole will lose momentum, and will begin to drop, ultimately ceasing to exist.
  • A TICKING TIME BOMB It is theoretically possible to prevent or slow down a bubble, or maybe even turn market conditions around back to normal. But the process is complex and difficult. Too much or too little of the right or wrong thing, at the wrong time, invariably leads to unintended consequences.
  • BUBBLES CAN BE TOXIC As can be seen from the Asian Debt Crisis and Subprime Crisis, even though bubbles are first observed in one product (or market), the possibility exists that CONTAGION can spread to other products or markets. (due to complex underlying financial transactions or the instruments involved and their interrelationships).
  • tumblr
  • like this presentation so far ? Tweet a friend.
  • DURING THE BUILD UP AND BLOW OFF PHASE OF A BUBBLE, MANY OF THE FOLLOWING (BUT NOT NECESSARILY ALL), MAY BE OCCUR
  • STAGES OF A BUBBLE economist.com
  • THE S QU NCE MIGHT DIFFER SLIGHTLY THAN INDICATED HERE, HOWEVER MORE OR LESS ALL OF THE FOLLOWING HAPPENS
  • THE UNDERLYING BUSINESS IDEA(S) COULD BE A SOLUTION / APP / CONCEPT FOR: __________________ E.g. this could be a solution / app for a) taking notes, b) Booking taxis, c) Alternative currency, d) Or …. flickr -nhuisman
  • 2 DEBT IS PLENTIFUL AND CREDIT EASILY ATTAINABLE MONEY FLOWS LIKE WATER oldgregg.net/bob/halloween2009/themound.jpg
  • credit
  • 3 THE CONCEPT MAY HOWEVER BE A BIT COMPLEX AND CANNOT BE FULLY EXPLAINED OR EASILY UNDERSTOOD. IF IT CONTAINS A NEW FINANCIAL DERIVATIVE, BE EXTRA CAREFUL
  • http://www.usagold.com/op-ed/cartoons.html
  • 4 INVESTOR EXCITEMENT BUILDS AND EVERYBODY WANTS TO JUMP ON THE BAND WAGON, MANY WITH EXCESS LEVERAGE www.myconfinedspace.com/2010/07/18/overloaded-train/overloaded-train-2/
  • 5 PRICE STARTS TAKING OFF LIKE A ROCKET… WELL ABOVE RECENT MARKET AVERAGES AND SIGNIFICANTLY ABOVE RETURNS, WHICH FUEL EXPECTATIONS OF EVEN HIGHER PRICE INCREASES. VOLUME STARTS SPIKING TOO commoditiesman.files.wordpress.com
  • 6 CENTRAL BANKS, REGULATORY AGENCIES OR SIMILAR ROLE PLAYERS MAY EXPERIENCE DIFFICULTY IN COMING TO TERMS WITH THIS SUDDEN NEW MARKET PHENOMENON (OR WARN AGAINST IT, OR CHOOSE TO IGNORE IT)
  • pandawhale.com
  • bitcoinexaminer.org/18-awesome-bitcoin-memes/
  • 7 6 EXPERTS AND POSSIBLY EVEN ACADEMICS PROUDLY ANNOUNCE THE NEW PARADIGM AND JUSTIFY ANOMALIES WITH therealsingapore.com NEW ERA THEORIES
  • 8 OLD SCHOOL VALUATION METHODS ARE THROWN OUT OF THE WINDOW IN FAVOUR OF MORE RADICAL AND UNTESTED “NEW ECONOMY” VALUATION APPROACHES
  • MEMEGENERATOR.NET
  • 9 MEDIA HYPE BUILDS EXCITEMENT IN THE MARKET
  • 10 SOME MARKET PLAYERS MAY SEE EXCITING NEW OPPORTUNITIES
  • myblessedwestlife.files.wordpress.com
  • 1 blogspot.com
  • 1 CLONES OR REASONABLE COPIES MAY APPEAR, OFFERING BASICALLY THE SAME VALUE PROPOSITION, HOPING TO CASH IN ON THE TREND onlyhdwallpapers.com the matrix agent smith
  • bitcointalk.org
  • 1 NOBODY WANTS TO BE LEFT BEHIND (FOMO*) NOVICE INVESTORS ARE SUCKED IN BY THE PROMISE OF EASY MONEY INVESTORS START TAKING ON MORE RISK THAN THEY OTHERWISE WOULD *FEAR OF MISSING OUT
  • www.hdwallpapers.org
  • 1 GREED AND OVERLY POSITIVE MARKET SENTIMENT PUSHES THE MARKET WAY BEYOND THE FUNDAMENTALS INTO UNCHARTERED AND RISKY TERRITORY Looney Tunes
  • Looney Tunes
  • 1 TRADITIONALLY CAUTIOUS AND CONSERVATIVE FUND MANAGERS START THROWING CAUTION TO THE WIND dilbert.com © Scott Adams
  • 1 INVESTORS AND MARKET PARTICIPANTS LIVE THE HIGH LIFE http://www.fandango.com
  • EXCITED BY ALL THE HYPE, EVERYBODY AND HIS DOG START INVESTING
  • THE ROOKIE INVESTORS LOVE TO SHARE THEIR HOT TIPS ON WHERE TO INVEST FOR A QUICK PROFIT
  • 1 CENTRAL BANKS MAY GO THROUGH VARIOUS ROUNDS OF CREDIT TIGHTENING IN ORDER TO CURB SPENDING AND LENDING
  • 1
  • 1 EVEN THE CAUTIOUS INVESTORS ARE PULLED IN dilbert.com – © Scott Adams
  • mattsouthern.com
  • 2 GOVERNMENTS MAY ATTEMPT TO IMPLEMENT ADDITIONAL INDUSTRY REGULATIONS AT THIS LATE STAGE. THIS MAY HAVE UNINTENDED CONSEQUENCES. Far-Side – © Gary Larson
  • 1 THE MARKET STALLS, EVERYBODY HOLDS ON TO THEIR RICHES.
  • NOBODY WANTS TO BUY BECAUSE THEY DON’T THINK THE PRICE WILL INCREASE FURTHER.
  • 2 BUT THEN THE UNTHINKABLE HAPPENS…
  • Pinterest – Heroikx
  • www.pinterest.com
  • 3 VOLUME INCREASES AND PRICES START DROPPING looney tunes
  • 4 DESPERATE SELLERS MAY AT FIRST TRY TO CONTAIN LOSSES Jerry Maguire (1996) TriStar Pictures
  • INVESTORS SOON DO ANYTHING TO 5 GET RID OFF SHARES
  • LOSSES ARE SUBSTANTIAL 6 AND GROWING BY THE DAY – THE AVERAGE INVESTOR LOSES HIS … Deviant art Propaganda_Panda
  • COMMISSIONS OF ENQUIRY ARE LAUNCHED TO DETERMINE POSSIBLE CAUSES OF THE CRASH. 7 ON OPENING THE CAN, THEY MIGHT FIND ALL KINDS OF WORMS. deviantart.- in-tays-head
  • NON-DISCLOSURES, CONFLICTS OF INTEREST, INSUFFICIENT REGULATORY OVERSIGHT, VIOLATIONS OF ACCOUNTING POLICY, AND POSSIBLY EVEN WORSE www.addletters.com
  • 8 SOME MAY FEEL STRONG URGES OF SPONTANEOUS CREATIVITY
  • SOMEBODY HAS TO TAKE THE BLAME lgsquirrel.files.wordpress.com
  • Southparkstudios.com
  • 9 SCEPTICS AND DISSENTERS FIND THEIR VOICE AGAIN AND SPEAK OUT MOSTLY TO SAY “TOLD YOU SO”
  • LIFE SLOWLY RETURNS TO NORMAL. MEANWHILE SOMEWHERE …
  • NEW DEVELOPMENTS SPIKE PUBLIC INTEREST
  • AND SPIKE SOME MORE www.businessofbitcoin.com Meme- reddit.com
  • http://www.kulfoto.com
  • Contact details: benjaminv.za@gmail.com This presentation is provided in the sake of public interest and for broad consumer educational non-profit purposes, and has been compiled based on publically available information sources on the web. While great care has been taken in the preparation and compilation of information indicated here, the author does not accept any legal or other liability for any inaccuracy, mistake, misstatement or any other error of whatsoever nature contained herein. This presentation is not investment advice, not a solicitation for any type of investment, financial or otherwise, nor is this presentation an opinion expressed on, nor endorsement of markets, commodities or investments. Any names, trademarks and images are copyright their respective owners and rights in the graphic artwork and photos used in this presentation belongs to, and are courtesy of the respective owners thereof. Unless where otherwise indicated, I don’t claim to have any rights therein.
  • The following section contains a list of information sources and suggested reading material.
  • Tulip Bubble: http://www.investopedia.com/features/crashes/ crashes2.asp http://www.economist.com/blogs/freeexchange/ 2013/10/economic-history http://www.thebubblebubble.com/tulip-mania/ http://www.damninteresting.com/the-dutch-tulipbubble-of-1637/ http://www.thetulipomania.com/ http://en.wikipedia.org/wiki/Tulip_mania
  • Railway Bubble http://www.thebubblebubble.com/1929-crash/ http://www.investopedia.com/terms/s/stockmarket-crash-1929.asp http://www.reuters.com/article/2008/01/21/usmarket-crashes-idUSL2126592320080121 http://www3.nd.edu/~jstiver/FIN462/US%20Mar ket%20Crashes.pdf http://en.wikipedia.org/wiki/Wall_Street_Crash_o f_1929
  • 1929 Wall Street Crash http://globaltrehttp://en.wikipedia.org/wiki/Wall _Street_Crash_of_1929 http://www.thebubblebubble.com/1929-crash/ http://www.investopedia.com/terms/s/stockmarket-crash-1929.asp http://www3.nd.edu/~jstiver/FIN462/US%20Mar ket%20Crashes.pdf http://www.wallstreetsurvivor.com/blog/2013/0 6/28/fridays-not-so-fun-fact-the-1929-stockmarket-crash/ http://www.reuters.com/article/2008/01/21/usmarket-crashes-idUSL2126592320080121 http://globaltrendtraders.com/stock-marketcrash/learning-from-the-stock-market-crash-of1929/
  • Asia Debt and Currency Crisis http://www.ifg.org/khor.html http://www.tradingeconomics.com http://internationalinvest.about.com/od/gettingst arted/a/What-Was-The-Asian-Financial-Crisis.htm http://www.wright.edu/~tdung/asiancrisishill.htm http://www.fes.de/ipg/ipg2_98/debschulmeister. html http://en.wikipedia.org/wiki/1997_Asian_financial _crisis http://pendientedemigracion.ucm.es/info/eid/pb /ICEIwp10.pdf http://www.uv.es/~mperezs/intpoleco/Lecturco mp/Geoeconomia%20y%20Globalizacion/Asian% 20crisis%20de%20King.pdf http://www.imf.org/external/np/pp/eng/2012/0 31312.pdf http://www.ucm.es/info/icei/asia/Bustweb1.htm HTtp://www.newyorkfed.org/research/economist s/pesenti/whatjapwor.pdf http://www.twnside.org.sg/title/fire-cn.htm https://www.mtholyoke.edu/courses/sgabriel/ile ne_grabel.htm http://www.imf.org/external/np/seminars/eng/ 2006/cpem/pdf/kihwan.pdf
  • Dot.com bubble http://www.thebubblebubble.com/dot-combubble/ http://www.investopedia.com/terms/d/dotcombubble.asp http://www.moneycrashers.com/dot-combubble-burst/ http://www.businessinsider.com/heres-why-thedot-com-bubble-began-and-why-it-popped-2010-12 http://www.scaruffi.com/politics/sv.html http://www.cnet.com/1990-11136_1-62783871.html http://www.imf.org/external/np/seminars/eng/ 2012/fincrises/pdf/ch12.pdf http://www.cnet.com/1990-11136_1-62783871.html http://www.cnet.com/1990-11136_1-62783871.html http://thenextweb.com/entrepreneur/2011/10/2 7/17-dot-com-failures-and-their-moderncounterparts/#!qzNFE http://en.wikipedia.org/wiki/Dot-com_bubble Also See Irrational Exuberance - Robert Shiller Extraordinary Delusions and the Popular Madness of Crowds - Charles Mackay
  • Sub-prime crisis / housing bubble http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf http://www.milkeninstitute.org/pdf/riseandfallexcerpt.pdf http://www.oecd.org/finance/financial-markets/40451721.pdf http://www.slideshare.net/robinthieu/subprime-mortgage-crisis2008-presentation-646026 http://www.slideshare.net/amarranu/sl-vs-subprime-final http://money.cnn.com/news/storysupplement/economy/bailouttr acker/ http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZc hK__XUF84 http://en.wikipedia.org/wiki/Subprime_mortgage_crisis http://www.nytimes.com/interactive/2009/02/04/business/200 90205-bailout-totals-graphic.html?_r=0 http://www.conservapedia.com/Financial_Crisis_of_2008 http://online.wsj.com/news/articles/SB1000142412788732405970 4578473310943230002 http://money.cnn.com/news/storysupplement/economy/bailouttr acker/ http://www.investopedia.com/articles/07/housing_bubble.asp http://economistsview.typepad.com/economistsview/2009 /07/what-caused-the-housing-bubble.html The Journal of Business Inquiry http://www.uvu.edu/woodbury/jbi/volume8/journals/Sum maryofthePrimaryCauseoftheHousingBubble.pdf http://online.wsj.com/news/articles/SB12381122571645324 3 http://www.frbsf.org/education/publications/doctorecon/2002/january/federal-funds-discount-rate-2001 http://www.imf.org/external/np/seminars/eng/2012/finc rises/pdf/ch12.pdf http://www.ritholtz.com/blog/2011/12/bailout-total-29616-trillion-dollars/ http://www.conservapedia.com/Financial_Crisis_of_2008 http://topinfopost.com/2013/12/18/700-billion-bankbailout-was-a-lie-it-was-secretly-7-trillion
  • 30 Criteria Condensed and adjusted from Sources of the various aforementioned sections, in addition to the following: http://www.solerinvestments.com/Online-Trading/Stock-MarketCrash.html http://pages.stern.nyu.edu/~%20adamodar/New_Home_Page/inv fables/bubbles.htm http://sandyyadav.com/2013/11/18/stock-market-bubbles-laws/ http://www.alsosprachanalyst.com/markets/five-criteria-toidentify-asset-bubbles.html http://www.forbes.com/2009/04/26/market-panic-vinesmarkets-equities-asia.html http://www.investopedia.com/financial-edge/1209/5-ways-tospot-the-next-stock-bubble---and-avoid-it.aspx http://sabew.org/2009/08/how-to-spot-the-next-investmentbubble-2/ http://en.wikipedia.org/wiki/Economic_bubble flickr Kalexanderson