IS THE NEXT BUBBLE ABOUT TO BURST?
Economics is all about learning from previous market movements, and trying to predict the next big move. Let’s look at historic bubbles to see what’s next.
What are bubbles and crashes?
Bubble: over-demand on a stock drive prices beyond actual worth based on performance of the underlying company.
Crash: Significant drop in the value of a market where a majority of investors are trying to flee the market.
–> Leading to: Panic selling, stocks lose value and investors lose money to invest in the future.
–> Often leads to a depression.
Stages of Bubbles:
1.) Stealth phase – “smart money” enters.
2.) Awareness phase – Institutions begin to invest.
3.) Mania Phase–Media broadcasts to general public who invest. Speculation rises, prices soar.