The Appearance of Bubbles - Huxiu.com#
Omnivore#
The Appearance of Bubbles#
The following chart shows the statistics of bubbles from 1720 to the present:
Including the time of bubble burst, the highest increase, the maximum drawdown, the peak valuation, whether there is an interest rate hike, and the annual growth rate.
The craziest bubbles in history occurred simultaneously in 1720, the Mississippi Bubble and the South Sea Bubble.
Before the bubble bursts, the valuation is often unbelievably high, such as the 205 times PE ratio of the dot-com bubble.
Before the bubble bursts, there is often a period of "final madness," which is also an important reason for its demise - to make it perish, it must first make it crazy.
Let's take a different perspective:
The appearance of bubbles:
The following chart shows the annual performance of Bitcoin:
P.S. Looking at the recent two years' returns, the question is: After a 65% drop, followed by a 129% increase, have you broken even?
To be honest, in 2021, I didn't realize that "innovative drugs" and the like were actually bubbles...
Personal thoughts:
The history of bubbles over hundreds of years precisely shows that as a whole, human nature remains unchanged. The financial market has become a container for carrying this human nature, and the birth and burst of bubbles are manifestations of human nature.
For any type of asset, extreme caution should be exercised if the increase exceeds 150% within 1-2 years!
Are bubbles a bad thing? To some extent, it may be the key to increasing long-term compound annual returns. Of course, the premise is to have a flexible position and be able to escape.
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