How To Recognise A Bubble That May Be About To Burst

(The following content is not a personal recommendation to buy any of the following companies as I am not taking your personal financial situation into account.)

Every time a significant innovation has occurred, it has always led to a bubble. And that bubble has ultimately burst, causing a lot of financial pain for the uneducated investor.

The following is a list of the major innovative periods throughout the last 120 years that have caused bubbles to burst.

1920’s Automobile Phase

Have you ever heard of any of these car manufacturers? 

Ace, Alsace, Astra, Binghamton Electric, Carroll, Colonial, Friend, Gardner, Gray Light Car, LaFayette, Lorraine, Mason Truck, Sheridan, Standard Steam Car, Stanwood. 

Every one of them went bust when the Auto phase finally burst in the 1930’s. 

Can you believe they had an electric car in the 1930’s? It sounds like the guy that started the car manufacturer Lorraine named the company after his wife.

When the automobile was becoming popular, what do you think everyone wanted to invest in? You guessed it, an automobile manufacturer. And most of those who did, lost all of their money.

1940’s-50’s The Electronic Phase

The “tronic” phase ushered in hundreds of new electronics companies. 

The growth of electronics around the world was rapid. Commercial radio broadcasting and communications were becoming widespread, and electronic amplifiers were being used in such diverse applications as long-distance telephony and the music recording industry.

Virtually every electronic company used the word “tronic” in their name and the electronics phase led to all sorts of new innovations such as fridges, vacuum cleaners, stereo systems and much more. 

This led to hundreds of “tronics” companies being listed on the New York Stock Exchange and a bubble formed throughout the 40’s & 50’s. 

Just like all bubbles, it ultimately burst and by the late 60’s the vast majority of “tronics” companies were bust. And so too was investors’ money.

1990’s The dotcom Phase

As the internet gained popularity in the late 1990’s, dotcom businesses were popping up everywhere and once again a bubble was forming. 

In 1996, 677 companies in the US went public. This was followed by 474 in 1997, 281 in 1998, 476 in 1999 and 380 in 2000. 

By 1999, 39% of all venture-capital investments were for internet companies. 

These companies were able to raise enough money to go public without a business plan, product, or track record of profits. Investors were simply buying “hope” and what they thought was the future.

Of course, the bubble burst in 2000 and a tiny fraction of the dotcom businesses that went public between 1997 and 2000 still existed 3 years later. 

Once again, uneducated investors lost a fortune.

2020’s The Crypto & EV Phase

I believe we have two new phases, the first being the Crypto phase and the second being the EV (Electronic Vehicles) phase. 

Both of these new innovations have all the hallmarks of the phases we have seen in the 1920’s, 1940’s and 1990’s. 

The enthusiasm is there, the key indicators of innovation are there, the fear of missing out is gripping investors like we saw in the previous phases. 

And whilst the Crypto market has a head start on the EV market, in my opinion both will result in a bubble. 

In fact, I would argue a Crypto bubble has already formed. 

When you add to this the trillions of dollars currently being inherited by millennials and their lack of knowledge and experience, the new bubbles that are forming will burst at some point and the vast majority of uneducated investors will lose a ton of money. 

Why do bubbles and stock market crashes happen roughly every 15 years?

It is simple, because the investors that got burnt in the last crash, 15 years on, have forgotten. And now there is a fresh crop of investors who have not yet felt the pain of a bubble bursting and are happily driving prices higher and higher.

However successful the Crypto and EV phases prove to be, it will no doubt spin off and create wealth for some individuals and companies. And the new found spending power will benefit the companies that I own. 

I do not have to participate in the Crypto or the EV phase to benefit. 

And I am not interested in buying markets or companies that are clearly behaving like there is a “new phase.” 

In fact, I plan to do the opposite.

When the internet became extraordinarily popular in the late 1990’s those investors and companies that didn’t leap to buy a dotcom company were still able to thrive throughout this “new phase” and did incredibly well in the following years. 

The investors and companies that stuck to their core success principles, focused on their superior competitive advantages thrived through the internet phase. They were not sidetracked trying to chase something they knew little or nothing about. 

As time went on and it became clearer how these companies and investors could best use or engage with the internet, they’ve done so. And have done so in very measured ways and with many making a fortune. 

All without having to chase the bubble and join the crowd.

The farmers back in the 1920’s that didn’t flee their farms for the cities, didn’t chase the industrial revolution, but rather stayed on the land, kept things simple, kept sowing seeds, kept their heads down and kept working hard, were, over the next 50 years, presented with extraordinary opportunities of wealth and prosperity. 

The following generations have become some of the richest land holders in the world and they have their ancestors to thank for playing it smart, refusing to join the crowd and sticking to their circle of competence. 

Now that you know what causes a bubble, the question becomes…

‘What are the businesses to invest in and
how do you get started if you have not invested before?’ 

To answer these questions, I’ve got 2 special resources for you:

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The course is quick, easy and concise. Each lesson is between 5 and 10 minutes, so you can get through it quickly. 

To get the course for free, simply register for my FREE Live Online Training Webinar.

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