We need to learning from previous market movements, and try 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.
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