This week Josh and Austin are talking about asset bubbles! If there’s one thing we know about bubbles, it’s that they eventually POP! So The Invested Dads are going to explore several cases of bubbles throughout history like Bitcoin, the Dot-Com bubble, the housing market in 2008, and…tulips? Yes, you heard right…tulips. Even flowers are not immune to radical price swings. Learn about tulips and many others in today’s episode of The Invested Dads! Oh, and Happy Mother’s Day to moms everywhere!
Main Talking Points
[1:07] – What is an Asset Bubble?
[3:13] – One of the First Bubbles Ever: The Case of Tulips
[7:48] – The Bitcoin Bubble
[11:59] – Dad Joke(s) of the Week!
[12:43] – The Dot-Com Bubble
[14:34] – The Housing Market Bubble of 2007-2008
[19:01] – The Stock Market Crash of the 1920s
[22:28] – One of the Biggest Bubbles Ever: Japan in the Late 1980s
[26:08] – Don’t’ Let FOMO Drive Your Decisions
Links & Resources
Dutch Tulip Bulb Market Bubble Definition (Investopedia)
Asset Bubbles Through History: The Biggest 5 (Investopedia)
The Greatest Asset Bubble of All Time (Of Dollars And Data)
The Greatest Bubble of All Time? (A Wealth of Common Sense)
Social Media
Full Transcript
Intro:
Welcome to the Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, Hey. Hey. Welcome back to the Invested Dads Podcast and a Happy Mother’s Day week to all the moms out there. I’m going to plug a very special shout out to my mom, Debbie. Thanks for making me who I am today.
Josh Robb:
Literally, making you who you are today.
Austin Wilson:
She’s my mom, love her. And for all the invested dads out there, don’t forget, it’s Mother’s Day week, so do something special for the mothers in your life.
Josh Robb:
All right. That’s right, Mother’s Day is here and since you did a shout out, I will shout out to my mom, Bev. Thank you for making me, me. Seems like we should do a song or something.
Austin Wilson:
It’s true. Yeah, you should write a song about that.
Josh Robb:
But yeah, for Mother’s Day we thought we would do some flowers for Mother’s Day. Special flowers, cute, special flowers. You’ll find out in a minute what we’re talking about.
[1:07] – What is an Asset Bubble?
Josh Robb:
Today’s episode, though, is about asset bubbles.
Austin Wilson:
Good stuff.
Josh Robb:
At first, I thought that was like a fart joke, but it’s not. Nope, it’s a whole nother thing. But an asset bubble is when the price of something, it could be anything, rises above the actual value of what it’s worth, and above historic values, or one or the other. I mean it’s really just a displacement in pricing of something.
Austin Wilson:
It’s like, it’s a disconnection between price and value.
Josh Robb:
Yeah. Example, not real, this is not one of the asset bubbles of the past. Let’s say I have bubblegum, and that you could buy for a dollar.
Austin Wilson:
Double Bubble.
Josh Robb:
Yeah. Buy it for a dollar at the store, blow the bubbles, have fun, chew it. And all of a sudden somebody thinks, “Man, I want to make a new digital bubble currency traded with double bubble on the market.” And then all of a sudden, bubblegum is in demand, and now it costs $20 to buy a pack of bubblegum, and it’s only costing that because people are buying it, and it goes up in price. And then all of a sudden people realize, wait a minute, this is bubblegum, this is stupid, and then it drops back down to $1 again, and everybody’s back to normal. Well, that time period, that’s the bubble. It’s like, for a little while things get disconnected from reality, is really what happens.
Austin Wilson:
So, at some point, bubbles will pop.
Josh Robb:
Yes. Bubbles pop at some point, which to the dissatisfaction of little kids everywhere, bubbles pop, and then it’s sad.
Austin Wilson:
Yeah, and you think you can just blow those things bigger and bigger, and then you just get it all over your clothes.
Josh Robb:
Yep. Then it’s soap, in the mouth. Kids are just like eating this, it’s so gross.
Austin Wilson:
I mean I like the flavor of bubble gum,
Josh Robb:
But not bubbles.
Austin Wilson:
Once every five years, I’ll have a piece of Double Bubble. That’s it. I don’t chew gum.
Josh Robb:
Yeah, those, like bubble gum loses flavor fast.
Austin Wilson:
It does, but think about, what is the point in gum?
Josh Robb:
Breath. I get like cinnamon gum. Then I feel like my breath is better.
Austin Wilson:
My breath always smells rosy. Ask my wife.
Josh Robb:
Oh, that’s true.
Austin Wilson:
But gum just seems like a wasted effort.
Josh Robb:
It’s calories, you burn calories, look at all the weight you could lose just chewing gum all the time.
Austin Wilson:
Not if it’s not sugar free.
Josh Robb:
Oh, that’s true.
Austin Wilson:
Then you’re just in the hole.
[3:13] – One of the First Bubbles Ever: The Case of Tulips
Josh Robb:
You’re just going backwards. So, but we talked about flowers. One of the first bubbles ever recorded actually, based on my limited research, was tulips. So flowers for moms, tulips, which are cool flowers that bloom pretty early, we have some in our yard.
Austin Wilson:
Did you pay a bubble price for them?
Josh Robb:
I did not. But what happened actually, this is way back in the early 1600s, let’s go back a couple years. Tulips first arrived to Europe, from Turkey, in the late 1500s, like 1590s-ish. They showed up, along with all the other cool exotic stuff that was coming to Europe, and there was a big demand for new, imported stuff. You had like spices, and oriental rugs, and all that cool stuff.
Well, tulips came along with them, right? Back in the day they were, talked about how fragile they were because it took a lot to, if you had this stem, it took 12 years before they flowered. It was this huge thing to have tulips, right? So they arrived and there was this big demand. In the late 1620s, early 1630s, there’s this demand for tulips because of the rarity. People started buying the bulbs, planting them, and they’re like, “Ooh, look how awesome I am. I have a tulip. I’m pretty important.” So there was the upper-class that was doing this. Then in Europe there was, especially in the Netherlands where the Dutch lived, there were the, what we would call, a middle class or upper middle class, and they saw that and wanted to participate as well, because you know, it’s like I like to think I’m a little bit higher socially, economically than I really am, so I’m going to extend myself a little farther. We see that today.
Austin Wilson:
It’s like buying a Rolex when you were-
Josh Robb:
Like the Joneses. I always want to be like the Joneses, a little bit better than I am. That caused this to get a little bit crazier, but they wanted to own tulips. It was a status symbol. In fact, at the height of this time period, a rare tulip, because again, there’s all different colors of tulips, and then they had this disease actually, it went through tulips that caused them to have multi-colors, which actually was a positive thing, which made them even more rare.
Austin Wilson:
I want the one with the disease.
Josh Robb:
Yeah, look at that. They traded for as much as six times the average person’s annual salary. That’s a pretty important Mother’s Day gift right there. I got you a flower mom. By the way, we have no money for the next six years.
Austin Wilson:
I’m living with you now.
Josh Robb:
That was crazy. They had found, though, that with bulbs and stuff, you could get certain ones that would bloom within a year. So the rarity kind of went away, weren’t as fragile as they thought. And if I’m not mistaken, tulips come back up every year. So, it’s kind of this whole, I don’t have to replenish my supply and everything. By 1938, prices have fallen about 99%.
Austin Wilson:
1938?
Josh Robb:
1638. What did I say, 1938?
Austin Wilson:
You said 1938.
Josh Robb:
Whenever, it wasn’t that long ago. 1638, prices had fallen 99% or back to normal.
Austin Wilson:
Like a normal price of one flower.
Josh Robb:
For a flower that only blooms for about 10 days.
Austin Wilson:
That is so funny.
Josh Robb:
I guarantee you, had I been alive in the 1600s, I would not have fallen for this.
Austin Wilson:
But you guarantee that?
Josh Robb:
Guarantee you, because I actually just got flowers for my wife a couple of days ago, hopefully she doesn’t listen to this episode, but when I was shopping for flowers, I picked the cheapest flowers. Not like the type of flowers, there’s roses, she loves a variety of colors, so I was looking for a variety of colors, but they had like spring flowers, which were just a variety of random flowers, and that was on sale. So I got that. Don’t tell her. But the idea was I would not fall for stinking tulips because flowers to me have zero value in my life.
Austin Wilson:
Frugal Josh over here.
Josh Robb:
Oh man, flowers and cards, like don’t get me a card, because cards are horrible. Like, what’s the point?
Austin Wilson:
Right. Now, to be fair, recent research has actually suggested that this particular bubble was limited to a smaller number of people. It was not crazy widespread. It was really, like Josh said, the upper middle class and the wealthy class at that time. It’s an interesting thing, but it really wasn’t as big as maybe some people would make it sound. But it definitely was a bubble and it’s thought that some groups of people built up this incident, really to warn investors from getting out of control with other asset classes or other bubbles going down the road.
Josh Robb:
Looking back on it, it was so dumb what they were bidding the price up on, that they were using that as a teaching tool. I saw one where they said it was maybe hundreds of people, not huge countries getting caught up in this, but just this group of people that were, in a sense, trying to outdo each other with this thing. Kind of reminded me of Beanie Babies type of thing. I don’t think that was really a bubble, but I mean it’s just such a small, limited thing, but that’s kind of the idea.
[7:48] – The Bitcoin Bubble
Austin Wilson:
Precious moments. Let’s talk about a more recent bubble. I don’t even really know if it’s old enough yet that we can look back and say it was a bubble, but it was definitely bubble-esque in many ways. So think about Bitcoin. Now we have a, there’s a specific episode we recorded talking about cryptocurrencies in general. We’ll throw it out in the show notes. But Bitcoin, specifically, is the most famous cryptocurrency in general, it’s the largest and most well traded one.
It definitely had some bubble-like movements over the last handful of years. Some days, it’ll gain, or it’s not some days, but some periods, it will gain 20% here and fall 85% the following year. I remember back in the end of, was it 2017? Yeah, at the end of 2017, that thing was going crazy, bitcoin was up, a hundred and some percent, easy, in a year, over 16,000 per Bitcoin, and then pretty much tanked, at the beginning of the next year. So, that definitely reminded me of a bubble.
And that movement over that time period was speculation as a result of a lot of investors getting caught when the price drops. So they’re like, buy, buy, buy, buy, buy everyone. It’s going up all the time. Why wouldn’t you buy? And then all of a sudden people are like, hmm, “I don’t really know what’s-”
Josh Robb:
Do I want to pay 19,000 for one Bitcoin?
Austin Wilson:
“What is a Bitcoin and what does it do? Do I really want to do that?” So they started pulling out, and people start pulling out, the price fell, and a lot of people lost their shirts. Now, to be honest, a lot of people-
Josh Robb:
Their digital shirts, they lost the digital shirts.
Austin Wilson:
Digitally running around naked, that’s not cool. But to be fair, a lot of people made a lot of money too, but it’s all about-
Josh Robb:
Timing.
Austin Wilson:
If you time at right, you can do well in a bubble, but most people don’t because of greed.
Josh Robb:
Yep. And that’s the thing, like we talked about with Bitcoin. Bubbles don’t mean that necessarily, whatever the asset was that got appreciated and depreciated, went away. Tulips are still around, they’re just not priced to an extreme level.
Austin Wilson:
Exactly.
Josh Robb:
Bitcoin’s still around, and it’s priced, hard to say relatively, but it’s at a more realistic spot now where the average investor says, “Yeah, that’s a fair value for what I perceive it to be at.” That’s the thing about bubbles is, it can happen to anything, and it can still be a good asset, because we’re going to talk about the housing bubble later on where, they’re still, houses are good to own. But at some point in the price may be a little bit more extreme or where it should be.
Austin Wilson:
Yeah. It’s really all about supply and demand. Everything has a finite amount of supply, and when there’s less of something, scarcities up and prices go up. So it’s about supply and demand, but it’s really also about underlying fundamentals. When you talk about these two examples, Bitcoin and tulips, Bitcoin, the underlying fundamentals are very hard to understand. The quantities, hard to understand, and all of that stuff, really tricky. With tulips, it’s a tulip.
Josh Robb:
Yeah. But the underlying value is something new, something that people hadn’t seen before, and there was perceived value of like other people will want this new item.
Austin Wilson:
So specifically with crypto, there’s really not enough regulation and transparency to make them super reliable with understanding how the movements work anyway. They’re kind of more speculatory at this point.
Josh Robb:
And speculation or, in a sense, a lot of people have the FOMO, Fear Of Missing Out.
Austin Wilson:
Oh, that’s much better. I didn’t want to have to check the explicit box on our podcast.
Josh Robb:
Thanks. The idea there, the FOMO, is the idea that “Hey, everybody else’s gaining all this”, on whatever the asset is, the tulip or whatever, “I want to participate. I’m afraid I’m going to be left behind in this grand thing.”
Austin Wilson:
You’re going to miss out.
Josh Robb:
At some point I disregard maybe my early warnings, what kept me out in the original spot, when I said, “It’s just a flower.” Then now it’s like, “Well, okay, it’s just a flower, but…” Then I add that “but” in there, and then whatever follows that is just irrational thoughts, and I go into it, in a sense, against my better judgment. The fear of missing out.
Austin Wilson:
Right. It’s like you’ll buy in at whatever price because you would just want to ride it up because it’s gone up and gone up and gone up. It’s not about really what’s going on. So yeah, FOMO is a real thing and it’s driven a lot of these bubbles, and we’ll talk about a few more examples here shortly.
[11:59] – Your Dad Joke(s) of the Week!
Josh Robb:
All right. But first, I have the dad joke of the week.
Austin Wilson:
Dad joke of the week.
Josh Robb:
I actually have two.
Austin Wilson:
Dad jokes of the week.
Josh Robb:
They’re both bubble related.
Austin Wilson:
All right.
Josh Robb:
You ready, Austin?
Austin Wilson:
Oh, I’m born ready.
Josh Robb:
Okay. What do you call James Bond when he’s in a jacuzzi?
Austin Wilson:
Josh, I do not know.
Josh Robb:
Bubble O seven.
Austin Wilson:
That’s awesome.
Josh Robb:
Yep. Next one. What kind of scientist put bubbles in soda?
Austin Wilson:
Yep. Got nothing.
Josh Robb:
A physicist. Fizz-i-cist.
Austin Wilson:
Okay, Josh, I’m going to cut you off.
Josh Robb:
Good times. Bubble jokes.
[12:43] –The Dot-Com Bubble
Austin Wilson:
It’s bubble jokes. It’s dad joke of the week. Enjoy. So real life examples of some bubbles other than the ones we talked about. There’s been a lot of bubbles in history. We’re going to talk about four more here. So here’s one, remember the dot com bubble, Josh?
Josh Robb:
Yes.
Austin Wilson:
So, 99, 2000 time period. In the late nineties, into 2000, investors were crazy about the internet. So really anything with dot com in the name, or associated with the internet at all, the business just took off, either from its IPO, or if it was already publicly traded, the stock prices just took off. It was unbelievable. Investors were getting crazy returns for a few years in these tech companies, and they were just buying and buying and buying, and bidding the prices up on them.
The problem is that the vast majority of these companies were not actually profitable. And if they were, it was minuscule compared to the prices and the valuations that these companies were trading for. After some time, this became evident, tech prices crashed, I mean hard. So the NASDAQ, specifically, was trading at nearly 4600 on March 31st, 2000, but closed at less than 1200 on 9-30 or September 30th, 2002. So yeah, 74% of value in that tech-heavy index gone in a year and a half. Now it is worth pointing out that as of 12-31-19, the NASDAQ was back up over 650% since that time. So the tech companies that did survive, survived very, very well.
Josh Robb:
Yeah. And us being in the financial industry, I look at that and say, “Yeah, you could see just got a little carried with stocks, and then look at those stinkin’ tulips, and like who in the world would do that?” Right? But it’s the same concept. Tech companies, they were new, selling products on the internet, was a new concept to a lot of people. This is the same idea as, I want to get in on this, it’s a new thing. It’s awesome. Everybody’s going to want this, and then got carried away.
[14:34] – The Housing Market Bubble of 2007-2008
Austin Wilson:
Yeah. Another example is the housing market in 2007 and 2008. So like we just talked about, throughout the 90s people in the US were making money hand over fist, the economy was booming, international trade was growing, it was really strong, and technology was becoming huge. People were getting big raises every year, they were buying new cars, and bling-bling watches, and lavish vacations, oh, and a lot of house. They were buying houses like never before.
I mean we’re talking houses in size, they’re buying bigger houses, and money, they were buying more expensive houses. So housing, it was booming in the 90s, and into the 2000s for sure, and this was made easy by greedy banks, extending large mortgages to almost anyone with a paycheck. So, people working at Taco Bell were buying huge homes. Now part of this was-
Josh Robb:
They’re Grande.
Austin Wilson:
They’re what?
Josh Robb:
They were Grande.
Austin Wilson:
They were the Verde Grande, that’s a green large, that’s not cool. But what happened was, during the Dot-Com bubble we just talked about, Alan Greenspan, the Fed chair, cut rates, to stave off this Dot Com bubble and re-introduce some stimulus and some growth into, specifically, the stock market at that point. What that did was it took short term interest rates down, which took mortgage interest rates down, and a lot of people got hung out to dry when they got an adjustable rate mortgage, right?
Josh Robb:
Yep. Yeah. And part of that too was during the early 2000s to mid-2000s, there was a lot of push for more people to be homeowners. The idea, the American Dream of owning your home and blah, blah, blah. That was pushed to say not enough people are able to experience that dream, let’s make it easier. So they adjusted the lending procedures, and the criteria needed for accepting a loan. They were a little more lenient and that caused some problems because there was less scrutiny on who was getting these loans.
Austin Wilson:
So just like the tech bubble that we just talked about, as people were getting mortgages and buying homes, which admittedly were much more home and much more expensive than they really should have been able to afford, housing prices were bid up because there was a lot more demand for people to be able to buy homes and to have a house.
So the problem was that the economy, which it was strong and growing at that time, those economies that are strong and growing very rapidly, they don’t last forever, right? So when things start to slow down and people start having a little less money in their pockets, maybe comparatively speaking anyway, they’re overextended on the house that they got approved for and their mortgage payment becomes very, very large compared to what they’re taking home, and they foreclose on their home. Then there’s a lot of houses on the market, and all of a sudden the prices crashed.
Josh Robb:
And a lot of, if you think about, you mentioned the adjustable rate mortgage. What you do is you start out with a lower interest rate for a couple of years, maybe five years, and then after five years, readjust, usually upwards, to a higher rate. A lot of people were buying these with nothing down, so they had no equity in the home, with the thought that in five years when this rate’s going to adjust, I’ll either have equity, so I can refinance, or I’ll sell it for a profit and move on to the next one. Well, what happened a lot of times was this lower payment barely fit into their budget, and now that it’s adjusting upwards, they can’t afford the new payment. They can’t afford to sell it because they owe more money than it’s worth, so they were stuck. A lot of people just had to walk away.
Austin Wilson:
That’s what caused housing prices to just drop, drastically. So, I mean, hindsight’s 20/20, but looking back at these bubbles, these bubbles ended up being the ultimate buying time if you have some dry powder, or cash, laying around. The problem is that most people don’t just sit on a bunch of cash. Much of it’s is being used for day to day expenses, or it’s already invested in the market, or whatever. So it’s really, really tough to time those things, but if you did, you could have bought into tech for pennies on the dollar, and become very, very wealthy over time, or you could have bought your home for half price, who knows?
Josh Robb:
Yeah. And that’s, a lot of investing, there’s timing involved. There’s smart timing in that you want to avoid these extremes. But in general, most people don’t have the ability to go all in on the low, or be able to identify that low point. Because again, the fear of missing out on the high point, but then at the low point, the worry that, is there still more to come? Then, you kind of wait to feel better about it and then it’s too late.
Austin Wilson:
Exactly.
[19:01] – The Stock Market Crash of the 1920s
Josh Robb:
Another example is the stock market crash in the late 1920s. The Roaring 20s, I wasn’t around for that, but apparently it was roaring. That had a good impact on the stock market, from 1920 to 1929, in fact, the stock market was up 670% during that time. Great. Awesome.
In 1929 though, and this is what’s crazy, shortly before the crash, an economist Irving Fisher said, “Stock prices have reached what looks like a permanently high plateau.” In other words, we’re never going down from here, which should always be a warning sign. Yeah, plateau, I guess maybe they were just like, this is it, we’re good. Then in October, the market hit a new high in September, 3rd or something right around there, then in October, they had what was called Black Thursday. The market, at the opening bell, lost 11%. Can you imagine that if tomorrow morning you, stock market opens, and immediately drops 11%.
Austin Wilson:
In a day.
Josh Robb:
Not in a day.
Austin Wilson:
No, at open.
Josh Robb:
At opening bell, like we’re talking 9:30 in the morning. Back in the 20s, they had the, ever heard of stock ticker?
Austin Wilson:
Yes.
Josh Robb:
And ticker tape? They actually literally had a ticker tape, like physically tape that would go through all this stuff because of this huge onslaught of selling that happened from this. The ticker tape was taking so long to spit out all this stuff that everything was delayed, and so the average person actually, that was not on the trading floor, did not even realize it was happening because it was so delayed on this tape printing out, all the crap that it had to do.
What then happened was a bunch of leading bankers got together and they said, “Okay, we’ve done this in the past, we are actually going to come in with all of our banks, assets and wealth, and start buying above what the asking prices for some of these large blue chip stocks.” The idea being is alleviating the panic. So, whatever big blue chip stock is paying, let’s say $10, and it’s dropping in price, start at 15 now it’s down to 10, they’ll say, I’ll buy it for 12. And so it kind of puts this floor in it makes, Oh wait 12 okay, they’re not too worried about it, maybe I’m okay with it, and they’re kind of slowing down that drop.
Austin Wilson:
It still did not stop the entire drop.
Josh Robb:
Well, so, from the end of the day it was only down six, so they brought it back up on the end of that day. But then Black Monday happened. So, that was Thursday. Then Black Monday happened where the market lost 13%, then we had Black Tuesday, where the market lost another 12%. So, that was fun-
Austin Wilson:
That’s a bad week.
Josh Robb:
But overall the market lost 89%, almost 90%, of value during that timeframe. This happened 1929. The market did not make a new high until November of 1954.
Austin Wilson:
That is a long bear market.
Josh Robb:
That’s a long recovery, during that timeframe. That was a big crash in, when we talk about bubble, it was the market in general. It wasn’t one particular asset class that was causing it, but the market in general had this bubble effect, partly because fewer people actually investing in stocks during that timeframe. So, in a sense, it was its own smaller asset class from, you look at from an old US economic thing, a lot of people owned their farmland, things like that. But the market cap was like, I don’t know, 1.5 trillion for the top grouping of stocks. They lost about $1 trillion in assets. They lost a lot of money, it was pretty rough.
[22:28] – One of the Biggest Bubbles Ever: Japan in the Late 1980s
Josh Robb:
Another example, and I was looking at a couple of articles for this, they were kind of determining to be one of the biggest bubbles of all time. And the reason for that is the size, the scope and the impact of this. I’m talking about Japan. In 1986, Japan went on this big run. From 1986 to 1991, Japan had a growth in the real estate and in the stock market. They were doing well.
In fact, Ben Carlson, who we actually did a cool interview with a while back, he wrote an article about this bubble in particular, we’ll link it in the show notes, but he said, “At the peak, the Japanese Imperial Palace,”, so that building, property, “was considered to be worth more than all the real estate in California, combined, or Canada.” Imagine that. That’s how much asset prices happened in Japan that the Imperial Palace in Japan-
Austin Wilson:
Was that like the Capitol building?
Josh Robb:
Yeah. It’s where the Emperor lives, was worth more than all the real estate in California or Canada, so there’s value there.
Austin Wilson:
Fun fact, the Japanese Capital Building is called the Diet building, I believe.
Josh Robb:
Oh yeah?
Austin Wilson:
Yeah, I’ve been there.
Josh Robb:
It’s weird.
Austin Wilson:
I don’t know why it’s called that.
Josh Robb:
Weird fact. Thank you.
Austin Wilson:
Totally weird, sidebar fact. But anyway, Josh-
Josh Robb:
Also, during that time, the stock market in Japan had grown 1000%, or 10 X.
Austin Wilson:
In five years.
Josh Robb:
In 1986 to 1991. Good growth. Ben Carlson, in the article said, “If you had $100,000 to invest in 1970”, so he just using some timeframes to show this growth, 1970, “By 1989 you would have had $5.7 million on that $100,000 dollar investment.”
Austin Wilson:
That’s pretty good.
Josh Robb:
That’s awesome. Now, post the crash, and we’ll talk about that when it dropped, from 1990 to 2015 your $100,000 investment, if you would have started in 1990 would actually be worth $90,400 so you actually would have lost $9,600. So you can see the difference between those two timeframes.
Austin Wilson:
Yep.
Josh Robb:
Oh, also, in Japan there were 20 golf clubs that cost $1 million to join the golf club.
Austin Wilson:
You’re not talking about like the actual-
Josh Robb:
Not to buy the property.
Austin Wilson:
Not the clubs themselves, but to-
Josh Robb:
Like if I wanted to be a member of this golf club, the membership fee was $1 million to join it.
Austin Wilson:
That’s a pricey one. I thought we were talking about million dollar actual golf club.
Josh Robb:
No, not clubs itself, but like the club of the golf resort, the membership there is-
Austin Wilson:
And that’s in 1980-some dollars.
Josh Robb:
It’s crazy.
Austin Wilson:
That’s a lot of money.
Josh Robb:
Yeah. But all of a sudden people realize, okay, going crazy. Oh, total Japanese property, I talked about the Imperial Palace, what it was worth. If you look at Japan, which from a countryside, it’s not as big as the United States, their value of all their property was four times more valuable than the real estate in the US.
Austin Wilson:
Woo Wee.
Josh Robb:
So you could see how extreme things got there. Needless to say, there was a big crash. Japan took a beating and they lost about 80% of the stock market value, and then overall their real estate value, everything, they went into a very rough period of time. And in fact they have yet to make new all-time highs from that peak.
Austin Wilson:
That is crazy.
Josh Robb:
They’re still struggling 30 plus years later. It’s interesting, but you can see the long term impact of these bubbles if they’re allowed to play out to the extremes.
[26:08] – Don’t’ Let FOMO Drive Your Decisions
Austin Wilson:
Now, it sounds like asset bubbles can really happen in any time, right? So think about it in a bull or a bear market. In a bull market, things are going up all the time, you really get FOMO. So you have that fear of missing out going up. In a bear market, you can become more aggressive. You feel like, so in a bear market you become overly aggressive, or have to get creative to make up for lost time, or a down account or whatever. So you can really get it on both sides, getting these bubble impacts on both sides of the way that the overall trend is moving. And a lot of really smart people have gotten caught up in these over time but the biggest thing to remember is not to let FOMO drive your decisions. So don’t have that fear of missing out. You just have to stick to the plan. And if something doesn’t make sense, you can’t explain the reason for the rapid price movement, it’s really not probably worth taking a risk on and investing in.
Josh Robb:
Yeah. The key is to know, wealth takes time. To do it right, to do it without taking those crazy risks that have that high probability of success or failure with those extremes. It takes time to build wealth. Consistency is key. Get a plan, stick to it, periodically be adding your money, especially while you’re working. We talked about that, 401k, those payroll deductions. Make sure you’re doing the steps yourself and then let the market do what historically it has done, and to grow faster than inflation. That’s really the goal.
We advise everybody out there, focus on those long term goals, build a sustainable plan, and then make sure you have an advisor there to help because hopefully there’ll be people there to help you, to discourage you from looking into those things. There were advisors got caught up in these as well, they’re not immune, but hopefully with a couple heads together you can say, “Okay, realistically are we thinking rationally on this?” Or at least “Am I putting too much of my assets in a venture that could not turn out?” Because again, we’ve talked about it before, maybe it’s fun to try things or take a little risk. If you can match that in your portfolio and you have the tolerance for it, great. But make sure it’s not going to hurt your long-term goals by taking those risks, and a venture that, even in starting a business, there’s risk involved. Like, what will that do to my long term chances?
Austin Wilson:
To make sure that you keep track and keep on the path with your long term goals, just don’t forget we’ve got a free gift for you on our website, a brief list of eight timeless principles of investing. These are overarching themes meant to keep you on track to meet those goals over time. So check it out. It’s on our website.
Josh Robb:
Also, if you want to help us, subscribing to our podcast is great. We love that you’ll be able to get the most recent updates every Thursday when it comes out. If you could leave us a review, that’d be awesome. And then we love answering questions and doing podcasts on things you’d like to hear about.
Austin Wilson:
True story.
Josh Robb:
So if you have any ideas or have a question, reach out to us at hello at theinvesteddads.com.
Austin Wilson:
Don’t forget, it’s Mother’s Day week. So get your mom a card, or flowers, or a tulip even, and get your wife something from your kids.
Josh Robb:
That’s right. Get all the moms in your life something.
Austin Wilson:
Exactly. Thanks for being here. We appreciate it.
Josh Robb:
Yep. We’ll talk to you next time.
Outro:
Thank you for listening to the Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode, and we had a positive impact on your life, leave us a review. Click subscribe and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guests are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast.
There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.
