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Newton’s Financial Misadventures in the South Sea Bubble [pdf]

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Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#21

Post by Gargoyle »

pimmen wrote: post #7
Casseres wrote: post #6

Earlier quoted context omitted.

That chart shows a little under 10x from beginning to peak. Many people compare cryptocurrencies to the South Sea company, however, many of the different cryptocurrencies have gone 15-30x within the last year. A lot of the hype in the media seems to be gone (or is now "doom and gloom"), so it will be interesting to see whether or not today's values can be sustained without a high rate of people continously buying in.

Because markets move quicker than they did in the 18th century. These bubbles have progressively grown and collapsed quicker and quicker with the introduction of railways, telegraphs, phones, improvements in printing presses, radio, television and finally the Internet. The pattern is still the same. You can look at Railway Mania, the Oil boom of the mid 1800s, the Florida property boom, the airline boom of the early…

Cryptokitties might be seen to have continued that trend on an even faster scale!

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#22

Post by thisisit »

charlesdm wrote: post #8
Casseres wrote: post #6

Earlier quoted context omitted.

That chart shows a little under 10x from beginning to peak. Many people compare cryptocurrencies to the South Sea company, however, many of the different cryptocurrencies have gone 15-30x within the last year. A lot of the hype in the media seems to be gone (or is now "doom and gloom"), so it will be interesting to see whether or not today's values can be sustained without a high rate of people continously buying in.

1. Most bubbles are not global but geographically restricted in some way; crypto is global. 2. There is some value to Blockchain technology, so the value is not $0. 3. When comparing, given all of these assets had a starting value of effectively $0 at launch, you should probably look at them from an angel investment PoV. Peter Thiel got similar returns when investing in Facebook. I'm not saying crypto is (entirely) c…

> 2. There is some value to Blockchain technology, so the value is not $0.

So going from say 20k to 12k or $10 is fine?

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#24

Post by godelmachine »

walrus1066 wrote: post #20
godelmachine wrote: post #18

This article kind of changed my life perspective in so many ways. Till now, I always believed that Newton & Einstein were "otherworldly" scientists who never dabbled in earthly mortal ventures like equity , SIP, mutual funds etc. Now I realize they had to worry about their subsistence & daily bread just as I need to.

Also, that even the smartest of us are vulnerable to the power of greed, 'fear of missing out' and herd mentality, to trump rational thought/judgement. It is why we will always have financial bubbles and scams.

Agree with you, but I always thought highly of Newton coz he died a virgin. Not that I aspire to be like him :D But he was a hardcore scientist through & through. Maybe that's why I always thought of him as "out of this world" genius.

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#25

Post by beefield »

dnautics wrote: post #12
charlesdm wrote: post #8

Earlier quoted context omitted.

1. Most bubbles are not global but geographically restricted in some way; crypto is global. 2. There is some value to Blockchain technology, so the value is not $0. 3. When comparing, given all of these assets had a starting value of effectively $0 at launch, you should probably look at them from an angel investment PoV. Peter Thiel got similar returns when investing in Facebook. I'm not saying crypto is (entirely) c…

Most bubbles are debt driven phenomena. I'm not entirely convinced people are playing the crypto market en masse using debt based instruments (besides the dollar itself, which is our point of reference anyways).

Yes, there is the chance that tether actually is backed by usd reserves 1 to 1. If it happens that they are not, that is one big debt instrument there...

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#26

Post by efoto »

sorokod wrote: post #15
comboy wrote: post #2

For those short on time, here's a TL;DR image: https://i.imgur.com/AEzxuLy.jpg

Was there ever a "epidemiological" study of financial bubbles?

This is exactly the idea Robert Shriller suggests in his recent Narrative Economics lecture.

https://youtu.be/b8l6wLSPnYY

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#27

Post by ShabbosGoy »

godelmachine wrote: post #24
walrus1066 wrote: post #20

Earlier quoted context omitted.

Also, that even the smartest of us are vulnerable to the power of greed, 'fear of missing out' and herd mentality, to trump rational thought/judgement. It is why we will always have financial bubbles and scams.

Agree with you, but I always thought highly of Newton coz he died a virgin. Not that I aspire to be like him :D But he was a hardcore scientist through & through. Maybe that's why I always thought of him as "out of this world" genius.

> Agree with you, but I always thought highly of Newton coz he died a virgin.

What? That’s why you think highly of him? Not because of his contribution to Physics and Newtonian mechanics? That’s really strange.

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#28

Post by gautamnarula »

pimmen wrote: post #5

I read about it first in The Intelligent Investor By Graham, but it's nice to get a more in depth description of this anecdote. One of my friends once asked me how the growth in cryptocurrency value i an unsustainable bubble when so many smart and math proficient people believe in it. This is a handy bit of Newton trivia to make the point that the intelligent investor is not necessarily the one with the best math pro…

Smart people moving into cryptocurrency and cryptocurrency being a bubble aren't mutually exclusive in another way: the long term potential of cryptocurrencies could be valid, even if it's in a short term bubble.

I think there are a lot of parallels between cryptocurrency/block chain tech now and the dot com bubble in the 90s. During the dot com bubbles fortunes were made and lost over nothing and there were many scams and vaporware business, but the underlying tech was sound and if you could identify the real businesses (e.g. Amazon, eBay) from the trash you could still make a lot of money in the long term even as the bubble popped and the market crashed. In a way, the bubble popping was good in a 'creative destruction' sort of way for clearing the brush (scammy and terrible companies) so the real ones could emerge and thrive. I think something similar will happen with cryptocurrency and blockchain tech.

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#29

Post by kasey_junk »

godelmachine wrote: post #24
walrus1066 wrote: post #20

Earlier quoted context omitted.

Also, that even the smartest of us are vulnerable to the power of greed, 'fear of missing out' and herd mentality, to trump rational thought/judgement. It is why we will always have financial bubbles and scams.

Agree with you, but I always thought highly of Newton coz he died a virgin. Not that I aspire to be like him :D But he was a hardcore scientist through & through. Maybe that's why I always thought of him as "out of this world" genius.

That “he was a virgin” thing was largely rumored because he never married and didn’t have known long term relationships with women.

He did of course have lots of long term relationships with men, including living with several. But claiming he wasn’t a virgin because of this would have been considered very odd at the time.

At the end of the day, it’s impossible to know what his love life was like from our point in history, but I’m skeptical he was some otherworldly aesthetic.

He certainly had passions outside of science, such as finance & religion.

Re: Newton’s Financial Misadventures in the South Sea Bubble [pdf]

#30

Post by sinnet3000 »

dharmab wrote: post #23

For those who want an accessible introduction to the South Sea Bubble, Extra History has a video series on the causes and aftermath: https://www.youtube.com/watch?v=k1kndKWJKB8&list=PLEb6sGT7oD...

Thanks for that link! It's really ironic I was getting ads of a Mexican bitcoin exchange while watching this!
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