Tag Archives: Bubbles

The 1980’s Japanese Stock Market Bubble

The Japanese stock market was booming at the end of the 1980’s. The Nikkei reached a high of 40,000.

Long term chart of the Nikkei 225
Long term chart of the Nikkei 225

Because of this boom, Japanese companies were among the most expensive companies in the world. This led to a lot of Japanese companies buying up foreign companies. Newsweek came out with this cover in 1987 capturing the zeitgeist of that time. This zeitgeist was later also captured in the movie Die Hard (the company at the center of the movie being Japanese).

Newsweek 1987 Cover Your next boss maybe Japanese
Newsweek 1987 Cover: Your next boss maybe Japanese

Ultimately the bubble burst and Japanese stocks entered a bear market. Stocks crashed almost 90% from the top and the Nikkei reached a bear market low in 2009 during the credit crisis. Japanese stocks are up 350% since then but still almost 50% below the all time high set almost 30 years ago. Japanese stocks to this day have not yet recovered.

One other way that shows how big this bubble was is how large the market capitalisation of Japanese stocks was as a percentage of global stock market capitalisation.

Japan market capitalisation as a percentage of global market capitalisation
Japan market capitalisation as a percentage of global market capitalisation

This Chart Of Bitcoins Looks A Lot Like An Average Bubble

I love reading about bubbles. It’s the psychological aspect of it that I like the most. Greed and human beings.

The price of Bitcoins has gone parabolic in the last few days. The price went up 152% this month alone! The value of all Bitcoins outstanding is now $ 1 billion.

Some say that the way the Cyprus bailout handles depositors and the capital controls forced on savers is the cause for this rise in the last month.

Too much people are flocking into Bitcoins out of fear for another Cyprus style bailout and it is starting to make the Bitcoins chart look like an average bubble. Compare these two charts.

Bitcoin price in USD at Mt.Gox:

Bitcoins mt gox

How an average bubble forms:

average bubble chart

My take is that we are pretty much near the end of the parabolic rise. But ofcourse these things can continue longer than most can imagine..