TIP784: History's Biggest Market Bubbles w/ Clay Finck

You're listening to TIP. On today's episode, we'll be outlining three of the biggest bubbles in financial history, the seventeen twenty South Sea bubble, the railway mania of eighteen forty five, and the Japanese stock market and property bubble of nineteen eighty nine. They say that history doesn't repeat itself, but it often rhymes. And that is the theme that plays right into all three of these bubbles. Each displayed unprecedented levels of greed, speculative excess, and the belief that fundamentals did not matter for investors. I believe that studying the financial bubbles of the past is practically essential to ensuring that we ourselves don't fall prey to one during our investing lifetime. Bubbles remind me a bit about house fires. We assume that it's something that only happens to other people. It's easy for us as investors to become complacent and assume that the good times of the past will almost certainly continue. This kind of thinking led investors in Japan, for example, to lose tremendous amounts of wealth in a matter of a few years. As John Maynard Keynes said, the market can stay irrational longer than you can stay solvent, so sometimes bubbles can last much longer than we'd probably expect. In studying these three historic bubbles, I picked up Edward Chancellor's book, Devil Take the Hindmost, which was a sobering reminder that our mistakes as humans have repeated themselves time and time again throughout history. So with that, I hope you enjoy today's episode on history's most historic market bubbles. Since 2014 and through more than 180,000,000 downloads, we've studied the financial markets and read the books that influence self made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Clay Finck. Welcome to The Investor's Podcast. I'm your host, Clay Finck. And today we'll be discussing Edward Chancellor's book, Devil Take the Hindmost. This book is one of the best books ever written about speculation, bubbles, and why investors keep repeating the same mistakes across centuries. Through these historic events, Chancellor shares the key factors at play that helped fuel each bubble and how exactly investors got led astray. What's really interesting to me about historic bubbles is that they just tend to repeat themselves and show up in these different forms. And Chancellor is a perfect person to cover such examples as he's practically a walking library. He's read practically everything on the subject and clearly understands investor psychology and what is really driving human behavior. I think this is a really important topic to cover on the show because learning about and understanding past bubbles can be one of our best defenses against getting caught up in one ourselves. When you consider that bubbles can lead people to losing, say, 70% to 80% of their capital in the more extreme examples, the payoff of avoiding such bubbles can be extraordinary over the long run. So I hope this episode will be a useful tool for you …