The Last Decade was Stained by a Series of Investment Bubbles

The ten years of the first decade of the 21st century (2000 to 2009) has been stained by a series of investment bubbles. It kicked off with the dot.com bubble and came to a close with foreclosures and oil dominating the decade. It looks like the first year of the next decade will be the same.

Hedge fund dealers and other smart investors are not bothered by the showing of Standard & Poor’s index indicating that the losses over the decade has dropped 23% from 1,469.25 at the beginning of 2000 to its present figure of 1,126.20.

It seems to be of no consequence that investors created and then destroyed the bubbles that reduced the value of stocks by $2.5 trillion since the start of the decade. The figure is prior to adding the negative impact of the inflation.

The bubbles were created by a cocktail of investor’s arrogance and over confidence, and loads of easy dollars. The new ideas rolling in about investing seemed to be tamperproof and greed snuffed out any lingering doubt.

Many of the investors sniffing around for maximum gains were blind to the imminent problems connected with doing business on the Internet sans any sales plan. One never gave a thought that the day of reckoning would come after purchasing not hundreds but thousands of costly houses without making any down payment. The foreclosure crisis was inevitable – the writing was on the wall.

Currently these same investors who had escaped the consequences of the last bust are running bang into another set of troubles. With the ostensible purpose of keeping the cost of borrowing low the Federal Reserve is keeping interest rates negligible. But this has meant that once more plenty of easy dollars is floating around enable the traders to jack up the price of nearly everything from stocks to gold and other commodities.

Commenting on this Haag Sherman of Salient Partners of Houston said, “They’ve put out the biggest punch bowl in U.S. history and people are guzzling from it.”

The volatile situation is posing several questions about when the next bubble would surface if it has not already done so and how would the individual now protect his or her savings?

Some of the pundits are saying that the huge rebound made by the stocks this year is one such bubble. The S&P 500 has shot up by 68.9% presenting its best feat since the 30s.

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