Historical bubbles after 1900

The current financial crisis, as we know is the result of an economic bubble in real estate markets as well as in equity markets

Although the current crisis is of an unusually fierce strength, then the bubbles is not an unfamiliar concept. Bubbles occur regularly and have done so far back in history

We can try to learn some from the current crisis, but new bubbles will unerring be rising again. Explore the history, learn how to get through the current crisis and how to predict future bubbles in the economy

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Historical bubbles before 1900

Upturn after the crisis

Investment strategies

1920's Real estate bubble in Florida

U.S. first real estate bubble blew up early in the roaring 1920'ere to burst in 1925. In this period the American worker for the first time got paid holidays, the car had become accessible and it opened up Florida for the American middle class.

Speculators threw themselves over the swamps to turn them into hotels. Despite several warnings that land prices were not based on real values, the prices kept increased, but at the same moment new buyers stopped coming the party had ended.

1929 crash on Wall Street

The roaring 1920's were characterized by huge optimism. Henry Ford introducing assembly line production had revolutionized the entire production apparatus of industry and huge fortunes were made on the stock exchange. Despite warnings against speculation, the consistent stand of the American people was that the shares could easily bear the high pricing.

In September 1929, the average P / E value - that is the price for access to a surplus U.S. dollars in a company by the current price level - in the S & P index 32.6. Euphoria had thousands of Americans to put all their money in shares, and many invested with borrowed money.

On 24 October everything changed when rates started to decline and people began selling their shares in panic - a sale, which continued for the following business days, and thus the crack was a reality.

2000 it-bubble

The promises of the blessings of the new IT world and the story about "new economy" based on the capabilities of the internet, made technology shares to rise dramatically throughout the 1990s, the bubble exploded with a bang in 2000. Thousands of so-called dotcom companies were formed, and investors - both private and professional bunch up on them to shoot capital into the companies lured by the rapid price developments.

A new way of thinking was introduced as it was no longer a criteria of success that the companies were earning money. Instead criteria's was 'market share' in the sense of number of visitors and the concept of 'burn rate' was introduced - how fast can you spend your investor capital.

But if a simple projection had been made, before the bubble broke, it would have turned out that if all the companies on the Nasdaq continued the price development, they would in short time exceed the value of U.S. gross domestic product. From March 10. to 15. 2000 the bubble bursted, as technology shares on the Nasdaq fell by almost nine percent.

2007/08 The real estate bubble

Low interest rates, exotic forms of lending and speculation sent the real estate prices to the stars in many countries. Numerous people who simply could not afford to buy their own house, came suddenly into the property market.

Speculators exchanged properties in great style - bought the real estate projects and sold them with great winnings shortly after. The gas went out of the balloon first in the U.S. as buyers disappeared, and we had a surplus of housing. Thus, liquidity disappeared and the party was over

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