Bubblecovery

  

"Bubblecovery" is a term coined by a Forbes contributor named Jesse Colombo. This is a situation where an economy appears to be improving, but that appearance is a flimsy bubble with nothing supporting it.

Colombo believes this is a current situation in the U.S. due to excessively low interest rates, the overvaluation of social media companies and houses, and the wildly inflating costs of healthcare and education. These things are considered valuable currently...but the value is rising too fast and will eventually get so high that no one will be able to make the payments anymore, and there will be enough defaults to drag down the whole market.

Colombo believes the global economy is at risk, not just the U.S., and fears the housing bubble burst of 2008 was just the beginning. There is no fun quip to be made here...let's just all hope he's wrong.

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Finance: What is a Bubble?5 Views

00:00

Finance allah shmoop what is ah bubble All right well

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this is a bubble See what happened there got bigger

00:10

and bigger and bigger And then it popped and here's

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the stock market from about nineteen Ninety two until about

00:16

two thousand It got bigger and bigger and bigger And

00:19

then it popped And yet was a bubble not just

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a big fat bull market It was a crazy ludicrous

00:25

tulip mania Kind of time like start ups with almost

00:29

no revenues trading and billions of dollars Yep And tulip

00:33

mania That was a really thing One tulip sold for

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forty grand go figure wasn't like if you ate it

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you lived forever So yeah it was a bubble So

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what caused the ninety nine bubble Well greed and it

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wasn't good At least for some The internet had come

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along It was a new thing consumers by the millions

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could download in the privacy of their homes Art films

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Yeah That's what we'll call them art films by the

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terabyte money was flowing from silicon valley investors into startups

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at record pace hoping to take advantage of this new

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amazing internet thing and the valuations of companies got higher

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And higher and higher Nasdaq went up some four hundred

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percent in just half a dozen years and the blessed

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cos traded at one hundred times trailing revenue not earnings

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but revenue So if you think about the idea that

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if you invest a dollar and you want to get

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more than that back and that dollar comes from profits

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of companies than one hundred times revenues cos we're probably

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something like five hundred times earnings or more So for

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one hundred dollars oven investment you've got like a dollar

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of revenues in twenty cents of potential earnings Like maybe

01:39

a a decade later maybe yeah that's a bubble and

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it burst At least you don't have that danger with

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actual tulips or bitcoins Yeah they take bitcoins when you

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buy tulips Would be kind of a good marriage there

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