{"id":114138,"date":"2021-01-29T12:12:37","date_gmt":"2021-01-29T17:12:37","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=114138"},"modified":"2021-01-31T11:12:31","modified_gmt":"2021-01-31T16:12:31","slug":"5-financial-bubbles-that-made-gamestop-look-like-nothing","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/5-financial-bubbles-that-made-gamestop-look-like-nothing\/","title":{"rendered":"5 Financial \u2018Bubbles\u2019 That Made Gamestop Look Like Nothing"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">18<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2F5-financial-bubbles-that-made-gamestop-look-like-nothing%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=114138&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p><span style=\"font-weight: 400\">In recent days, amateur investors coordinated on social media to <\/span><a href=\"https:\/\/www.dailywire.com\/news\/big-tech-bites-back-robinhood-suspends-trading-discord-bans-wallstreetbets-over-gamestocp-surge\"><span style=\"font-weight: 400\">buy<\/span><\/a><span style=\"font-weight: 400\"> massive quantities of stock in GameStop, AMC Entertainment, and other companies. After multibillion-dollar hedge funds took massive losses due to the rising prices, trading platforms \u2014 including Robinhood, which claims to democratize finance \u2014 halted trading of GameStop\u2019s shares.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">There are many important themes to consider with this incident \u2014 especially the power of financial elites and government regulators over access to the markets. Regardless of its implications for American society in 2021, future financiers will likely study the GameStop incident, perhaps as a bubble.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Economist Hyman Minsky once famously <\/span><a href=\"https:\/\/www.youtube.com\/watch?v=3vDPowCDWc8\"><span style=\"font-weight: 400\">explained<\/span><\/a><span style=\"font-weight: 400\"> that bubbles \u2014 sometimes called \u201ccredit cycles\u201d \u2014 follow the course of <\/span><i><span style=\"font-weight: 400\">displacement<\/span><\/i><span style=\"font-weight: 400\">, <\/span><i><span style=\"font-weight: 400\">boom<\/span><\/i><span style=\"font-weight: 400\">, <\/span><i><span style=\"font-weight: 400\">euphoria<\/span><\/i><span style=\"font-weight: 400\">, <\/span><i><span style=\"font-weight: 400\">profit-taking<\/span><\/i><span style=\"font-weight: 400\">, and <\/span><i><span style=\"font-weight: 400\">panic<\/span><\/i><span style=\"font-weight: 400\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">In essence, a surge of funds available for investment leads to inflating asset prices. More and more investors try to get a piece of the action. Smart investors foresee a crash and pull their money out of the market before a massive selloff.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Sound familiar? American financial markets certainly saw these themes at play with GameStop. Small investors wagered their stimulus checks in a coordinated manner to inflate the share prices. People watched their friends get rich and tossed their hats into the ring. On Tuesday \u2014 after investors sold off shares and trading platforms stopped allowing users to buy in \u2014 GameStop stock plummeted from almost $470 to under $200.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Beyond GameStop, here is a look back at some of the wildest bubbles in the history of Western finance.<\/span><\/p>\n<p><b>Tulipmania<\/b><\/p>\n<p><span style=\"font-weight: 400\">For a brief moment in Dutch history, investors lost their minds \u2014 and fortunes \u2014 over the price of flowers.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The tulip made its way to continental Europe in the 16th century from the Ottoman Empire and quickly became a <\/span><a href=\"https:\/\/www.britannica.com\/event\/Tulip-Mania\"><span style=\"font-weight: 400\">desired<\/span><\/a><span style=\"font-weight: 400\"> decoration for wealthy landowners. Within a few decades, a single bulb could serve as sufficient dowry for a bride.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Citizens began mortgaging their homes and businesses to purchase bulbs, as well as a variety of futures contracts and derivative investments. One account <\/span><a href=\"https:\/\/seekingalpha.com\/article\/16074-a-tale-of-tulips-how-a-market-mania-happens\"><span style=\"font-weight: 400\">records<\/span><\/a><span style=\"font-weight: 400\"> that a trader once exchanged a single tulip bulb for eight pigs, twelve sheep, four oxen, and several tons of wheat, barley, cheese, and rye.<\/span><\/p>\n<p><span style=\"font-weight: 400\">By early 1637, investors began to default on their agreements to buy tulips, leading to bankruptcies and the crash of the bulb market. Though modern historians <\/span><a href=\"https:\/\/www.smithsonianmag.com\/history\/there-never-was-real-tulip-fever-180964915\/\"><span style=\"font-weight: 400\">debate<\/span><\/a><span style=\"font-weight: 400\"> the extent to which middle-class people were involved in the speculation, there is no doubt that many Dutch pocketbooks were unceremoniously emptied by the affair.<\/span><\/p>\n<p><b>South Sea Bubble<\/b><\/p>\n<p><span style=\"font-weight: 400\">British investors suffered enormous losses after believing false hopes from a company that promised massive trading revenues.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The South Sea Company <\/span><a href=\"https:\/\/www.britannica.com\/event\/South-Sea-Bubble\"><span style=\"font-weight: 400\">formed<\/span><\/a><span style=\"font-weight: 400\"> in 1711 under the presupposition that the War of Spanish Succession would conclude in a treaty enabling prosperous trade in the New World. Though the promised profits never materialized, speculative fervor picked up in 1718 after King George I became the company\u2019s governor. Parliament approved the refinancing of British debt into shares of the South Sea Company.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The share price increased from roughly 129 pounds in January 1720 to over 1,000 pounds by August. However, the stock price tanked later in the same year.<\/span><\/p>\n<p><b>Junk Bond Bubble<\/b><\/p>\n<p><span style=\"font-weight: 400\">In the 1980s, investment bankers like Michael Milken began using \u201cjunk bonds\u201d \u2014 high-risk, high-yield securities offered by small companies \u2014 to conduct \u201cleveraged buyouts\u201d of large corporations.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Over 2,000 leveraged buyouts <\/span><a href=\"https:\/\/en.wikipedia.org\/wiki\/Journal_of_Finance\"><span style=\"font-weight: 400\">occurred<\/span><\/a><span style=\"font-weight: 400\"> in the 1980s. Private equity traders purchased and resold companies like Safeway, BlackRock, and Marvel Entertainment.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">The junk bond market <\/span><a href=\"https:\/\/www.investopedia.com\/articles\/investing\/022616\/history-high-yield-bond-meltdowns.asp\"><span style=\"font-weight: 400\">grew<\/span><\/a><span style=\"font-weight: 400\"> tremendously over the course of a decade, ballooning from $10 billion in 1979 to $189 billion in 1989. The bubble burst when Rudy Giuliani \u2014 then the United States Attorney for the Southern District of New York \u2014 prosecuted Milken.<\/span><\/p>\n<p><b>Dotcom Bubble<\/b><\/p>\n<p><span style=\"font-weight: 400\">As internet technology advanced in the late 1990s, investors began <\/span><a href=\"https:\/\/www.investopedia.com\/terms\/d\/dotcom.asp\"><span style=\"font-weight: 400\">dumping<\/span><\/a><span style=\"font-weight: 400\"> cash into up-and-coming firms with no physical assets and no profits \u2014 a telltale sign of speculation.<\/span><\/p>\n<p><span style=\"font-weight: 400\">To make matters worse, the Taxpayer Relief Act of 1997 made investing in stocks with low or nonexistent dividends \u2014 such as startups recently introduced to the public markets \u2014 extremely <\/span><a href=\"https:\/\/www.businessinsider.com\/heres-why-the-dot-com-bubble-began-and-why-it-popped-2010-12\"><span style=\"font-weight: 400\">advantageous<\/span><\/a><span style=\"font-weight: 400\"> to investors. For several years, money poured into technology companies.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The bottom soon began falling out of the market. Pets.com <\/span><a href=\"https:\/\/money.cnn.com\/2000\/11\/07\/technology\/pets\/\"><span style=\"font-weight: 400\">folded<\/span><\/a><span style=\"font-weight: 400\"> less than a year after completing its initial public offering. By the end of 2002, $5 trillion in wealth had been erased on American stock exchanges.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Speculation over Silicon Valley startups persists to this day. Uber and Lyft \u2014 which had hardly <\/span><a href=\"https:\/\/www.forbes.com\/sites\/greatspeculations\/2019\/04\/22\/ubers-ipo-valuation-makes-no-sense\/?sh=30d0f76f540d\"><span style=\"font-weight: 400\">turned<\/span><\/a><span style=\"font-weight: 400\"> profits \u2014 witnessed famously embarrassing IPOs in 2019.<\/span><\/p>\n<p><b>Housing Bubble<\/b><\/p>\n<p><span style=\"font-weight: 400\">In 2006 and 2007, rampant and undisciplined lending in the real estate market led to the collapse of the American economy.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Banks issued \u201csubprime loans\u201d \u2014 also known as NINJA (no income, no job, no assets) mortgages \u2014 to Americans who were not financially stable enough to purchase a house. Derivative investments based on the mortgages started circulating on Wall Street.<\/span><\/p>\n<p><span style=\"font-weight: 400\">As Margot Robbie in the film \u201cThe Big Short\u201d describes, markets crashed once Americans began defaulting on their mortgages.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Bringing history full circle in a far less engaging fashion, \u201cThe Daily Show\u201d host Trevor Noah <\/span><a href=\"https:\/\/twitter.com\/TheDailyShow\/status\/1354624259167936513\"><span style=\"font-weight: 400\">photoshopped<\/span><\/a><span style=\"font-weight: 400\"> his face over Robbie\u2019s to explain the GameStop affair.<\/span><\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">Margot Robbie wasn&#039;t available to explain this GameStop situation in a bathtub, so this is the best we could do. <a href=\"https:\/\/t.co\/Mw1dabmIzQ\">pic.twitter.com\/Mw1dabmIzQ<\/a><\/p>\n<p>&mdash; The Daily Show (@TheDailyShow) <a href=\"https:\/\/twitter.com\/TheDailyShow\/status\/1354624259167936513?ref_src=twsrc%5Etfw\">January 28, 2021<\/a><\/p>\n<\/blockquote>\n<p><strong>Related: <a href=\"https:\/\/www.dailywire.com\/news\/is-the-gamestop-surge-a-pump-and-dump-no-evidence-indicates-that-yet\">Is The GameStop Surge A \u2018Pump And Dump\u2019? No Evidence Indicates That Yet<\/a><\/strong><\/p>\n<p><em>The Daily Wire is one of America\u2019s fastest-growing conservative media companies and counter-cultural outlets for news, opinion, and entertainment. Get inside access to The Daily Wire by becoming a\u00a0<\/em><a href=\"https:\/\/www.dailywire.com\/subscribe\"><em>member<\/em><\/a><em>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In recent days, amateur investors coordinated on social media to buy massive quantities of stock in GameStop, AMC Entertainment, and other companies. After multibillion-dollar hedge funds took massive losses due &#8230;<\/p>\n","protected":false},"author":1,"featured_media":1892281,"comment_status":"close","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[4263,3705,3729,4266,4264,3693],"class_list":["post-114138","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","tag-financial","tag-gamestop","tag-like","tag-look","tag-made","tag-that"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/114138","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=114138"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/114138\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1892281"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=114138"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=114138"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=114138"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}