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.
10. 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
11.
12. 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
27. 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
28. IF YOU THINK MY EXAMPLE WAS A BIT
OTT OR UNREALISTIC …
29.
30. NOW IMAGINE THE NEXT DAY AFTER
YOU BOUGHT THAT PHONE ON
EBAY….
FLAPPY BIRD
COMES BACK !
40. 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.
41. 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
42. Click on title below to visit this presentation
Flickr - The shifted librarian
43. Click on title below to visit this presentation
WIKICOMMONS. -Petar Milošević
44. Click on title below to visit this presentation
wtf.thebizzare.com
50. 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
55. 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
57. 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.
58. 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
61. 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
62. 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.
63. 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.
64. 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).
70. THE S QU NCE MIGHT DIFFER SLIGHTLY
THAN INDICATED HERE, HOWEVER
MORE OR LESS ALL OF THE FOLLOWING
HAPPENS
71. 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
72.
73. 2
DEBT
IS PLENTIFUL AND CREDIT
EASILY ATTAINABLE
MONEY FLOWS LIKE WATER
oldgregg.net/bob/halloween2009/themound.jpg
75. 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
80. 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
81. 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)
94. 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
96. 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
120. 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
144. 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.
145. The following section contains a list of information sources and suggested reading material.
152. 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