Health Talk Community

Stock Market Bubbles can Burst - Is anything unique Today?

The crisis dejour - throughout history, markets have experienced a crowd mindset.  The more popular a market becomes, the more people want to buy in, and the higher the prices are pushed up.

This bubble has occured throughout history and the cycles can be studied consistently.  Professor Watson teaches business strategy and the role of the market economy. Regardless of whether we want to analyze recent banking markets which have Burst, these events are not unique.  They have routinely occurred throughout history.

One of the most popular historical markets that broke was Amsterdam’s Tuplip sector.  We can study the Tulipmania of the tulip market that burst in 1637 as a popularly known historical account of a industry that overheated.

Tulips were originally introduced from Turkey in the early 16th century.  As new “varieties” of tulips were marketed, competition intensified and their prices soared.  One apparently rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623.  That price was more than six times the average annual income.

This economic mania continued - and 10 years later the value had risen another ten times.  At the market peak, the price of a single Semper Augustus tulip bulb reached 10,000 florins - the equivalent of what it cost to acquire a house in the middle of Amsterdam at the time.

With time the market peaked and there was no-one remaining who still wanted to acquire these bulbs at such high valuations.  Within months, the market price crashed and thousands of people were left in financial ruin.

Throughout history - we have seen similar bubbles develop.  As the crowd continues to get more excited, those contrary views become less and less popular to be heard.  Are any of the recent market bubbles any different?  In modern environment of politically correct speech, are the contrarian voices that stand up for morality, ethics, and integrity any different?  Throughout history, these contrarian voices have been demeaned and ignored.  But the market for products and the market for principles has a way of eventually correcting itself from the heat of the crowd - and those polar views tend to have their bubbles burst as the required correction occurs. Today’s market is no different.