How often do economic bubbles happen?

  • #1
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There was the dot.com bubble, the housing bubble etc where lots of people became really rich. Seems there is potentially a bitcoin bubble going on currently. So I suppose in my lifetime, there will be more of these opportunities to cash in on.
 

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  • #2
George Jones
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"How often do economic bubbles occurs?"

How could this possibly be predictable?
 
  • #3
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Historically, maybe one a decade.... is about as good of an answer as any..... by other reckoning, it might as well be an imponderable.

I _can_ say, however, that profiting from such a bubble is tricky and very difficult. Many people look at these things in hindsight and say: 'Duck soup.'

In fact, for many reasons, lots of people get smeared across the pavement throughout such bubble events, and most of the 'get rich' stories are very exaggerated, wishful thinking, a mix of both, etc. Trying to hitch a ride on an unguided missile is usually a disaster.

diogenesNY
 
  • #4
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So I suppose in my lifetime, there will be more of these opportunities to cash in on.
Well, I don't actually know how often it happens, but there is a phenomenon regarding markets what I call 'housewife market phase'. (It is a translation, I don't actually know if this term exists in English - or in what form does it exists.)
It is usually the last phase of a trend//bubble when the market is made to be tempting to the uneducated masses. Like you, like me, like any common folk (like housewives). (This term swings both long and short direction. )
So, take it as a rule of thumb: if it's not your expertise, but you hear THE THING everywhere and everybody around is about to jump, and you too about to jump - then it is very likely already a bubble, in a late phase.
 
  • #5
russ_watters
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How often do economic bubbles happen?

There was the dot.com bubble, the housing bubble etc where lots of people became really rich. Seems there is potentially a bitcoin bubble going on currently.
Depends on how wide a net you cast. Do we include the Beanie Baby and Tulip bubbles? There's probably always several in progress.
So I suppose in my lifetime, there will be more of these opportunities to cash in on.
Trying to cash in on an in progress bubble is a better way to lose money than make money.
 
  • #6
Vanadium 50
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I suspect the answer is "all the time", as bubbles occur at all scales and intensities.
 
  • #7
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The expected return on your 'investment' in such an endeavor is not likely remarkable. Of course, you say now that selling your soul to the devil for bitcoin prior to the burst late 2017 was a chance of a lifetime. Well, it was and a lot of people became entranced by it and threw their money away, but they certainly don't talk about that, do they? And why would they? Paints a much prettier picture if everybody was a winner. In other news, it is not possible to exchange huge amounts of btc immediately for some actual currency like usd or eur - there's an AML (Anti Money Laundering) obstacle course. Hell, even my handful of btc took forever (read: almost 3 months) to clear. Cryptocurrency market is potentially a very fruitful opportunity for launderers.

What you are eventually alluding to is not very different compared to 'how do I win at lottery?' . You need to get lucky or you need inside information. Hindsight is 20/20 vision.
 
  • #8
jtbell
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'housewife market phase'. (It is a translation, I don't actually know if this term exists in English - or in what form does it exists.)
In the US, a common phrase for this used to be "when the shoe-shine boys start giving stock market tips." (How many shoe-shine boys are there nowadays?)

In order to make a killing in a bubble, or with market-timing in general, you need to time it right twice: when you get in, and when you get out. But market bottoms and tops are clear only in hindsight, so it's basically luck that determines whether you time them correctly.

People have been saying for the last five years or more that a big stock-market downturn is "just around the corner." Someday they'll be right, but when?
 
  • #9
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How many shoe-shine boys are there nowadays?
There are plenty of financial 'advisors' on the market who I would rather see in the shoe-shine business o0)
 
  • #10
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In the US, a common phrase for this used to be "when the shoe-shine boys start giving stock market tips." (How many shoe-shine boys are there nowadays?)

In order to make a killing in a bubble, or with market-timing in general, you need to time it right twice: when you get in, and when you get out. But market bottoms and tops are clear only in hindsight, so it's basically luck that determines whether you time them correctly.

People have been saying for the last five years or more that a big stock-market downturn is "just around the corner." Someday they'll be right, but when?
Right now I'm refining my skills in machine learning. Hopefully in several years, I will be adept at forecasting. Still risky but should be better than going in cold.
 
  • #11
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The general wisdom in economics is that the boom-bust cycle is about 10 years long, give or take a few years.

One wonders if this is actually due to some cyclic phenomenon in market forces or if it's just become a self-fulfilling prophecy with investors and policymakers acting as though it was true.
 
  • #12
russ_watters
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The general wisdom in economics is that the boom-bust cycle is about 10 years long, give or take a few years.

One wonders if this is actually due to some cyclic phenomenon in market forces or if it's just become a self-fulfilling prophecy with investors and policymakers acting as though it was true.
I read an article recently that I'll try to locate, that said it is conventional wisdom in economics that the economy (gdp growth) is fundamentally cyclical. But economists are starting to explore the idea that recessions must have triggers.

Looking back through history you can find a trigger for most, but the cycle duration is relatively consistent, so maybe it is a bit of both. Still, if policymakers were smart and made policies for the benefit of the market, it should be possible to smooth the cycles.

...or from the other direction: they should stop making the cycles more extreme with obviously bad decisions.
 
  • #13
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But economists are starting to explore the idea that recessions must have triggers.
Both might be true. If you have a strong economy, a triggering event might not cause a recession, but in a weak economy, it might.
 
  • #14
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...or from the other direction: they should stop making the cycles more extreme with obviously bad decisions.
Bad decisions are usually going on the good old 'seemed to be a good idea at the time' way... I don't think there is a real cure for greed and/or worry.
 
  • #15
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"How often do economic bubbles occurs?"

How could this possibly be predictable?
In the field of econophysics, more specifically according to the mathematical method of multifractal analysis as applied to finance (2018 review on arxiv), the frequency of bubbles and other such crises follow power law distributions. If I remember correctly, the occurrence of such large crisis events in financial markets was something in the order of once a decade, based on centuries long historical data.
 
  • #16
jtbell
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  • #17
256bits
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Both might be true. If you have a strong economy, a triggering event might not cause a recession, but in a weak economy, it might.
The so called bitcoin bubble wherever it goes will have negligible effect on overall world economy, only local areas that fed into the hype.
Same for a whole range of commodities - graphite bubble, and the possible lithium bubble, for example.
https://smallcappower.com/expert-articles/lithium-the-new-graphite/
 

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