In this video, I discuss:
– What exactly is a bubble?
is a situation in which asset prices appear to be based on implausible or inconsistent views about the future. (5 Stages of a bubble)
– How do you know if you are in a bubble?
People are buying assets for irrational reasons that seem rational in the present. Only makes sense if price continues to rise as demand increases but supply remains the same, or falls
– Why bubbles are bad
The good guys usually get punished while the bad guys usually make out well. Pyramid schemes are great if you get in early, but the problem is that you never do
– Why bubbles are good
Broad market bubbles give you a peak into the future. When bubbles raise the tides of all ships, some ships get raised higher than others. When the pop happens, all ships sink together, but now you know where the value is on the next upswing.
– How to prepare for the pop
- Have an emergency fund in cash (about 6 months reserves)
- Maintain long term investing goals (don’t invest money you might need soon)
- Give yourself a ‘to the moon’ fund if you want to play the game on the side