All Stock Market Bubbles End

3 events that have preceded the end of every stock market bubble

Edward Iftody
Feb 17 · 8 min read
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Is that really my account balance? … Say it ain’t so! — Photo by Tessa Rampersad on Unsplash
  1. An ever-increasing number of stocks are wildly detached from underlying fundamentals
  2. The vast majority of investors are betting on the bull continuing
  3. How this bubble might end

The Dunning-Kruger Effect

The Marx Brothers were big comedy stars in 1929. They started their careers in vaudeville but quickly moved into the rapidly expanding movie industry. By 1929, Groucho Marx had amassed a small fortune of around $250,000 through a combination of savings and investments. However, like many new investors in the roaring 20s, Groucho was quickly realizing acting was a whole lot more work and a whole lot less financially rewarding than investing in the stock market.

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Groucho Marx

Cognitive dissonance

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Photo by Ronen Sigan on Unsplash

Confirmation bias

Comments on YouTube videos and on investing message boards are full of bullish comments and bearish comments are met with hostility. It seems if you only wish hard enough and don’t jinx it with negative thoughts, the stock market will continue to relentlessly rise.

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Final thoughts

Like many bubbles before it, the current stock market bubble is likely to drain away more slowly than it inflated. As always, there will be short, sharp corrections down followed by short relief rallies, before once again falling to another new low. The full unwinding will likely be quite slow — perhaps taking many months or even years. All the stop-loss orders and option selling that seemed so easy as the market relentlessly climbed, will suddenly turn against the inexperienced investor.

Disclosure — I have no positions in any of the stocks referenced in this article. Please seek professional advice before making any investment decisions.

Iftody.com

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Edward Iftody

Written by

Edward Iftody is a Communication Coach, author of Surviving Work, a veteran of the Canadian fin-tech industry and a blockchain enthusiast.

Iftody.com

Today’s Most Disruptive Technology Companies and Innovations — Long Form Articles for Investors

Edward Iftody

Written by

Edward Iftody is a Communication Coach, author of Surviving Work, a veteran of the Canadian fin-tech industry and a blockchain enthusiast.

Iftody.com

Today’s Most Disruptive Technology Companies and Innovations — Long Form Articles for Investors

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