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"Bubbles are invisible to those inside the bubbles"
and we have been through one of the biggest economic bubble
in history, but none of us saw it because we were inside
that bubble. After the "Tech Wreck" of 2000 and
other Chaotic Events, you need to be aware of "Bubbles"
and the "Stage of the Bubble" in order to get
on the right side of the equation and to profit.
Previous
Bubbles have included:
The Japanese "Take Over the World" Bubble of
the late 1980's
The Asian Currency Bubble of the mid 1990's
The Internet/High Tech Bubble of the late 1990's
The Residential Real Estate Bubble of 2000-2003
The coming Inflationary Bubble caused by the U.S. Government's
attempt to mitigate the effects of the crash of these
Bubbles and 9/11.
How Bubbles
Grow: 12 Easy Steps
1. A believable concept offers a revolutionary and unlimited
path to growth.
2. Surplus of funds and lack of opportunities lead to
buying or investing in anything available.
3. An idea is complex and cannot be totally explained
or related to an investor.
4. The crowd imitates the leader. All Aboard! Even the
gardener has a tip!?
5. Prices fluctuate from traditional level to overvalued
level, THEN to all new ground and all time highs.
6. New levels are sanctioned by experts. "We are
in a new Paradigm!"
7. Fear of missing the boat takes over. Cloning of the
idea occurs as many new overvalued competitors enter the
market.
8. Lending practices are eased. Money flows like water
to anything or anyone with a new idea.
9. Cult figures emerge for the new paradigm. The media
promotes lifestyles, not substance.
10. The Bubble lasts longer than expected. Critics are
dismissed. The last suckers are sucked in.
11. Fraud emerges as partly responsible for the bubble
as the first cracks show in the bubble.
12. Finally, everyone has a reason why it cannot continue.
But nobody dumps, and all hold onto their profits. No
new buyers. Market stalls.
How a Bubble Bursts
1. A continued new supply of lower priced offerings occurs
from rising prices. New IPO's get bigger and bigger
2. There is a rise in interest costs. The Government
declares "Excessive Exuberance" and tightens
credit too quickly.
3. Prices collapse and everyone heads for the exits at
the same time. With no more buyers, prices hit free fall.
4. Fraud is uncovered in many diverse industries, and
in monitoring and auditing agencies. This leads to more
selling.
5. Governments intervene and give investors time to get
out before the real decline.
Rules to Live By
1. Do not extrapolate the future from the present.
2. Trends continue for a long time (2-5 years) and then
suddenly reverse chaotically. Witness the Tech Bubble.
3. Intermittent secondary corrections occur at Fibonacci
Levels of 38%, 50% and 62% that result in classic Bull
or Bear Traps.
4. Bottom picking begins several different times, trying
to restart the Bubble, but to no avail. Massive losses
occur to professionals trying to manipulate the markets.
5. Finally everyone recognizes that "Trends go further
than you expect, and last longer than expected."
Everyone gives up and sells.
6. As the volume of the decline decreases, a slow recovery
begins.
How to Use this Information
Whenever you are involved in owning, investing or trading
anything, review these macro-economic lessons. They may
save you TONS of money and make you a TON of money in
the long run.
All stocks, commodities, technologies, currencies and
real estate are subject to local, national and international
Bubble Behavior. Whenever you hear the phrase "you
can't lose on this...." Remember to start running
the other direction.
Written by Bill McCready of FuturesTradingSecrets.com.
Their Futures Trading Secrets Course offers a complete
guide to high probability setups, including live annotated
videos that show the trade setups before they occur, so
you can learn to trade at the "Right Edge" of
the chart. Visit
them today.
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