7 famous market bubbles The investment bubbles on this page demonstrate that if something looks too good to be true, then it probably is. Bitcoin, for example, has seen tremendous highs and lows. That’s why we take a pragmatic approach, diversifying and creating portfolios designed to rise with the market but also to be resilient if the market falls.
South Sea bubble In 1720, the South Sea Company underwrote the UK government’s debt and was granted an exclusive charter to trade in the south seas. Shares immediately rose tenfold and the company issued more and more shares to meet the insatiable demand. It issued shares for many different ventures all offering riches, including the ludicrously described venture ‘for carrying on an undertaking of great advantage but no-one to know what it is’. When it all came tumbling down, the executives were arrested, members of the government saw their personal fortunes evaporate and the collapse was followed by suicides.
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Wealthsmiths Summer 2021
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Tulip mania In 1634, the world’s first recognised investment bubble began when speculators in the Dutch Republic began frantically buying up tulip bulbs. The bulbs were a highly prized status symbol at the time and the most desirable varieties saw their value surge. At the height of the craze, each bulb cost more than the year’s salary of a skilled worker or a townhouse in Amsterdam. By 1637, things reached a head when even the cheapest bulbs reached absurd prices. Demand soon collapsed and values nosedived, leaving many investors out of pocket and presenting a sobering lesson for today’s investors who may be tempted to get caught up in the latest craze.
