Living with a probable bubble market.

Living with a probable bubble market

by tonytran2015 (Melbourne, Australia).

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(Blog No.73).

#bubble, #market, #speculate, #bankrupt,

Living with a probable bubble market.

Please note that this blog is only a sharing of life experience. This blog does NOT give any FINANCIAL ADVICES.
Whether it is a house for living in or a government bond with positive (and hopefully inflation compensated, if you can still find them) interest for incomes, or some shares of a listed company on your local share markets for gambling thrill plus income for few years, you don’t want to buy that when it is priced in a bubble market.
The following shows how to spot the signs of a bubble market.

1. A bubble market can badly burn your business plan.

A bubble market is one where the prices are too high for any long term plan and those prices are predicted to fall down to level afforded by buyers.

If you buy too high in a bubble market you will not be able to pay bank interests on your business loans and suffer an asset loss when the bubble bursts. You yourself may go bankrupt.

Even for a speculator planning to sell to a greater fool, there is still a real chance that he will be the last one holding the speculated stock !

2. Common excuses from sellers/marketers in a bubble market.

2a. “The economy is different this time”:
The dotcom’s excuse that clicks are more important than incomes in its “New Economy” has been an expensive lesson to many speculators.
The FUNDAMENTAL PRINCIPLE of economiccs is forever UNCHANGED: Money earned minus money spent is the left over in the cash box.
2b. The whole nation is asleep with only your seller and you staying awake to do the half baked financial analysis:
This childish reasoning is not for reasonable investors.
2c. The seller is sharing privileged information with you:
If the information turns out to be false you will have no financial recourse to recover your money.
2d. A different plan is coming from the government this time and it will alter all financial planning !
However all government plans do follow the same method and the government has to uphold accountability. History should be a guide to those plans.
All companies also want to avoid their plans revealed causing their unjustified expenses. Is your seller a good anticipator of their moves?

3. Characteristic of a bubble market.

1. Price increases in a bubble market are not in line with historical records. The effects of any excuses given by sellers are still too small for the jump in prices.
2. The supplies and demands are one sided in a bubble market: The manipulators of the market have bought most available stocks before starting the game.
They then increase the current purchase prices on the market to send up the value of their existing stocks to obtain even more loans from the banks. They then would off-load all their stocks at high price and realize their profits before any crash.
3. There are not a variety of sellers. This makes it easier for someone to manipulate the market.
4. The register of current owners has no increase in long term investors/businesses: Only speculators own the stocks and their prices are not justified by the benefit of ownership. All respectable investors have sold out their holdings when the prices have been high enough.
However, accessing the register may not be easy for ordinary investors.
5. If you can still comfortably operate your long term business in the market, facing all anticipated ups and downs, then that market definitely has NO BUBBLE to you and you may only just missed its cheapper period. On the other hand, if you cannot operate your long term business in the market then that market IS A BUBBLE MARKET

4. Any bubble market still has its own long term buyers.

Those people who just sold something into a bubble market can still immediately buy something else from it with that same amount of money.
There are also investors who have to realize their capital gains every year and they will sell shares from one account while simultaneously buying back on another account. They do it to smooth out their yearly income taxes.
For someone who has not sold anything into that bubble market he would be wise to GO FOR ANOTHER TYPE of investment and to come back to buy from that market only after the bubble has bursted. It may take a few year or even a very long while for the bubble to burst but by that time he would have made much more profit on the other type of investment.

5. Conclusion.

If there is any suspicion that a market has become a bubble and you have not been involved in that market for a long while then you should GO FOR ANOTHER TYPE of investment while researching on it.
If the benefit of ownership is MUCH MORE than the payment of the purchase then the market is definitely not a bubble market for you, you just missed its cheaper period: You can still execute your purchase despite all talks about the any bubble bursting.


[1]. Greg Jericho,, April 06, 2017.

[2]. Michael Janda,, May 29, 2017.

[3]. Jackson Stiles,, June 02, 2017.

[4]. Lana Clements,, June 02, 2017.

[5]. Shane Hickey,, June 17, 2017.

[5]. Shane Hickey,, June 17, 2017.

Added after 2018 May 04:










Added after 2018 Nov 10:


Understanding the disconnect between an actual company on the stock market, and the bets for and against that company stock, helps to understand what can happen when fiscal policy is geared toward the underlying company (Main Street MAGAnomics), and not toward the bets therein (Investment Class).




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