America's Bubble Economy

Profit When it Pops

Wiley, 2006

15 min read

10 take-aways

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What's inside?

Overbought markets can quickly decline. But you can profit when the market tumbles – just don’t chase any bubbles.

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Editorial Rating

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Recommendation

This simple book with a catchy title explains how the U.S. became susceptible to a variety of rapidly popping financial bubbles that will all have unhappy endings. David Wiedemer, Robert A. Wiedemer, Cindy Spitzer and Eric Janszen have made their book easy to read, and it certainly describes the current forces at work on Wall Street. Yet, like other predictive books, it goes into more speculative detail than needed in the first section, which considers what factors could trigger a multistage bubble collapse. Readers may find the details in the book’s second half more useful. It explains the investment vehicles that the authors believe could provide some upside protection when the bubbles burst. getAbstract recommends this intriguing, start-up introduction as an accessible first course on market survival, though it seems to need more extensive source citations. Such notes would have made this even more authoritative.

Summary

Finding Real Value

Discerning financial bubbles as they develop is difficult, but you can start by looking for inconsistencies between an asset’s real value and its marketplace price. For example, from 1982 to 2000 – as the technology stock bubble built – the value of blue-chip stocks increased ten times, but blue chips’ real earnings gained only three times their value. During this same period, real earnings and gross domestic product should also have increased significantly, but they did not.

Another traditional way to assess stock value is by evaluating the price-to-earnings ratios. Normally, you should see a causal link between a company’s stock price, and its profits or earnings. When price and profits disconnect, that is, when price accelerates but profits do not, you’ve spotted another symptom that may indicate that a bubble is forming.

Dealing in Asian-Owned Dollars

Very significant currency purchases by the Chinese and the Japanese have altered the value of the U.S. dollar. Over the past few years, the Japanese Central Bank purchased $1 trillion in U.S. dollars, while the Chinese Central Bank bought $800 billion. Those purchases keep the U.S. ...

About the Authors

Evolutional economist David Wiedemer, Ph.D., has held senior positions with high-tech firms and holds 13 IT patents. Robert A. Wiedemer founded a NASDAQ-listed information services firm and heads a business valuation firm that advises the SBA. Writer Cindy Spitzer’s work has appeared in numerous newspapers and other publications. Eric Janszen, an expert on bubbles, developed iTulip.com, headed two companies and managed an angel investment fund.

David Wiedemer, Robert A. Wiedemer, Cindy Spitzer and Eric Janszen

America's Bubble Economy

Profit When it Pops

What's inside?

Editorial Rating

Qualities

Recommendation

Summary

Finding Real Value

Dealing in Asian-Owned Dollars

About the Authors

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