Remember Beanie Babies?
These little stuffed children’s toys made out of beanbags were wildly popular when I was a teenager in the 1990s. They were every bit of a bubble as the tech stocks of the day.
Beanie Babies — toys for children to play with — retailed for around $5 … yet some of the rarest and most sought after ones traded for over $5,000 in the secondary markets … enabled by the flashy, new technology of the day in online auctioneer eBay.
Children and adults alike would stockpile Beanie Babies as “investments,” with no intention of ever taking them out of the box, let alone playing with them. And why would they? These little plush toys were going to sell for 1,000 times their initial investment!
This market bubble didn’t last.
When the Beanie Baby Market Bubble Burst
The bubble had burst by the late 1990s, and it was hard to even give Beanie Babies away.
The price rose in a feedback loop of buying begetting buying. Nothing was supporting the price, so there wasn’t an obvious floor when the selling ramped up.
Even at the time, Beanie Baby speculation seemed ridiculous. And it doesn’t seem any less ridiculous three decades later.
If you lost your life savings in the stock market, your friends and neighbors might have thought you were a little reckless, but most would have still respected you. I don’t know that we can make the same claim about losing it all in a Beanie Baby trade gone wrong!
At least the Beanie Baby bubble was mostly limited to bored suburbanites.
Looking back in history, Tulipmania of the 1600s enraptured an entire nation.
One Flower Worth $750,000?!
The Netherlands — a nation of people known for good sense and frugality — became obsessed with flowers and bid their prices up to absurd levels. At the peak, some of the rarest tulip bulbs traded for as much as $750,000 in today’s money, while many, many more traded for around $50,000 to $100,000 each.
The money lost when the tulip bubble burst was on par with a modern-day stock market crash in terms of the damage it did to the Dutch economy.
But this goes to show you that human nature doesn’t change, at least not when it comes to speculation.
Emotion Creates Powerful Market Bubbles — and Profit Opportunities
We’ve seen the same mentality in everything from dog-themed cryptocurrencies to meme stocks in today’s market … and it always ends the same way.
It’s like humans are hardwired to do irrational things with their money. They swing from irrational greed to irrational fear, pushing prices to crazy highs and then equally crazy lows, only to swing back to irrational greed again in a vicious cycle.
We’re not going to change that. This seems to be the fate of humankind. But we can profit from it and do so using a system.
As I wrote recently, I look to take the other side of crowded trades. To borrow a line from Warren Buffett, I like to be “greedy when others are fearful and fearful when others are greedy.”
Another example is British noble Nathan Rothschild. He made his fortune in the 19th century because he bought during the panic and market bubble that followed Napoleon’s defeat at Waterloo. Maybe you’ve come across his now infamous advice to “buy when there’s blood in the streets.”
Buffett seems to have a superhuman sense of cool about him that leaves him unaffected by the wild emotional swings that affect the rest of us.
Well, I don’t have Buffett’s demeanor. The man is one of a kind! But I’m able to trade through a crisis, generating massive profits along the way, because I sideline my emotions by following a system.
What to Do in Today’s Market
Today, the pendulum has swung into extreme fear. We have high inflation, an uncertain economy and conflict abroad.
But throughout the chaos of 2022, my Max Profit Alert system has led to gains as high as 221% in 86 days by taking the other side of a crowded trade.
And we’re just getting started. I expect to find more profitable trades using my unique signal I designed to remove all the emotional and irrational behavior of investors. I’ll capitalize on irrational traders by finding hidden profit opportunities when there’s an overreaction in a stock’s price.
I’ll have more information about Max Profit Alert in my August 30 presentation. Click here to sign up for my free webinar.
You don’t want to miss this opportunity to capitalize on a market gone mad!
To good profits,
Adam O’Dell
Chief Investment Strategist
