Did we learn nothing from the tech bubble?
The real estate bubble?
The energy bubble?
Apparently not, as here we go again. The next series of bubbles is now in progress (Bitcoin is the first).
Let me go over again the signs of a bubble. Price will usually rally at least 100% or more in a year or less. A clear sign of out of control human emotions.
Price will stretch 40, 50, or even 100%+ above the long term mean (200 day moving average).
Investors will start to rationalize reasons for why this rise in price is justified. In 2000 investors convinced themselves that earnings didn’t matter. All that mattered was how many eyeballs your website was attracting.
In 2006 investors convinced themselves that we were running out of available land in the world and skyrocketing real estate prices were justified. Apparently none of these people had bothered to take a look at the Mohave Desert. Land as far as the eye can see.
In 2008 investors convinced themselves that we had reached peak oil, even though we had tankers sitting in the Gulf of Mexico unable to unload their oil because all of the storage facilities were full.
Investors have now convinced themselves that the ability to counterfeit their own currency really is a viable strategy to get rich.
And finally towards the end of a bubble you will get a massive insurgence of copycats trying to piggyback on the mania. During the final few months in 2000 there were literally thousands of websites coming online, none of which ever had even the remotest chance of making a dime. Here is a list of current Crypto currencies as more and more people try to piggyback on the mania. Again, classic behavior as a bubble nears its top.
I’ve said this before, and I’ll say it again: Human nature never changes.
At the very beginning of a bubble almost no one believes. The very few with the foresight to see what is coming are laughed at and branded as extremists. For almost a year now I’ve been telling investors that once the NASDAQ composite broke out above the 2000 highs we would see an aggressive rally and 10,000 would be a piece of cake, 20,000 wouldn’t be completely out of the question once we get into the nutty phase of the bubble. Most everyone laughed at me then, and many continue to laugh at me now even though the NASDAQ is doing exactly what I said it would do, it’s already almost halfway to 10,000 from the breakout above 5000.
