9/22/2022 - Economy and Finance

Financial Burbuja: What are and what are the most famous

By Roman Gutierrez

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It is a medium and long-term process, driven by important prolonged capital flows (Money Flow), which originate an upward formation in the prices of a certain class of financial assets or real assets, or in a particular business sector of an economy.It is considered Technically a "burbuja", when the market value of these assets is totally divergent from its fundamentals (price and market unions) or its main financials (intrinsic value). Consequently, the prices to which they are traded do not correspond with their historical or average assessment, nor compared with other similar assets of the same potential (Benchmarking).
In practical terms, you enter a Burbuja, When you are paying more money from the reasonable asset value. It usually occurs in an overvaluation of expectations.Among the historically best known bubbles we have:

  • Tulipomania (speculation with the Dutch tulipanes in the 17th century).
  • Mississippi and South Sea Companies. The first of France and the second of England, both in the year 1720.
  • Crack Bursátil of 1929 in the US.
  • Financial and real estate bureau in Japan. Between 1955-1989 the value of Japanese real estate had multiplied by 75, and they assumed 20% of world wealth.
  • Asian financial crisis, 1997.
  • Point.com (The correction of the increase was 80%.) This bubble was formed between 1995 and 2000.
  • Real estate crisis and mortgages Subprime USA. It stayed in 2008 and its climax was the bankruptcy of the famous Lehman Brothers Investment Bank.
Bubbles are characterized by periods of great euphoria and psychological optimism of the market, its institutions and participants.Finally it is important to highlight that they are cyclical formations and can take years to break or decompose, and lead to a recession or financial crisis with widespread losses, as happened in the recent past with the mortgages “Subprime” and the real estate market in the USA, and earlier in 2000 with the technological companies. with

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roman gutierrez

Roman Gutierrez

I help people organize their personal finances and investments. I am passionate about entrepreneurship and stock markets. I have 26 years of experience in the Professional Investment Administration. I am a Venezuelan consultant based in Buenos Aires.

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