PurpleRat50( sorry I don’t know the real name but this is the nickname that is used in Richdad.com) shared an article called “The Seven Stages of a Financial Bubble†is written by Nobel Laureate Hyman Minsky (1919 – 1996). The 7 stages are:
- Financial Disturbance:
• Outside Shock
• Piece of News that Creates Disturbance
• War, Technology, Monetary Policy
• Dotcom started 1989 – busted 2000 - Expansion – Prices Start to Rise
• Easy Credit
• Greed
• Huge Buyer Demand - Euphoria
• Overestimated Future Returns
• No Concern for Fundamentals
• Fools Rush In!
• Pure Speculation - Financial Distress – Prices Reach a Peak
• Market Strength Becomes Fragile
• Cheap Money Becomes Scarce
• Insiders Take Profits
• Greatest Fool Rushes In! - Market Reversal – Prices Start to Fall
• Love of Speculation Ends
• Insiders Start to Exit
• Sellers Outnumber Buyers - Financial Crisis – Panic Rules the Market
• Tightening in Bank Lending
• Panic Feeds Panic
• Low Prices Tempt Buyers - Lender of Last Resort Comes to Rescue
• Collapse of Confidence in Banking
• Federal Government Steps In
• Smart Investors Re-enter
Being an investor, I think it is important to know and sense the signal from the market. I think the list that shared here is quite good to make it as a market checklist to know the market status. Knowing when to enter and exit the market is important and will be an advance for you to make more money.
Source: Richdad.com
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