{"id":15403,"date":"2018-02-07T09:00:17","date_gmt":"2018-02-07T17:00:17","guid":{"rendered":"http:\/\/www.nexusnewspaper.com\/?p=15403"},"modified":"2018-02-05T13:32:21","modified_gmt":"2018-02-05T21:32:21","slug":"calculated-thought","status":"publish","type":"post","link":"https:\/\/www.nexusnewspaper.com\/newsite\/2018\/02\/07\/calculated-thought\/","title":{"rendered":"Calculated Thought<\/em>: A tale of three bubbles"},"content":{"rendered":"

Whether it was the tulip mania of the 1600s or the dot-com bubble in the \u201990s, bubbles form when investor interest turns to hysteria and people start buying things not because they are useful but simply because they believe the price will rise high and fast.<\/p>\n

Recently, three particularly bubbly markets have been making headlines: Canadian real estate, weed stocks, and cryptocurrencies.<\/p>\n

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Calculated Thought<\/em> is a column dealing with student finances that is featured in every issue of Nexus<\/em>.<\/figcaption><\/figure>\n

In Canadian real estate, Vancouver and Toronto were the markets that had analysts scratching their heads. In Vancouver, it took 24 years\u2014from 1981 to 2005\u2014for the average price of a detached house to go from $180,000 to $600,000. In 2016, it took five months for that same $420,000 growth in price, when the average went from around $1.4 to $1.8 million. Low interest rates helped people get into the real-estate market, as carrying a mortgage became cheaper. The proverbial \u201cbank of mom and dad\u201d helped offspring make a bigger down payment and avoid mortgage insurance. Everyone wanted in as prices soared, hoping they could make big money, and speculation ran rampant. Now, with taxes on foreign real-estate purchases in Vancouver, new stress tests introduced by banking regulators, and rising interest rates, many say this bubble hasn\u2019t exactly popped but is deflating.<\/p>\n

As Canada primes for legal, recreational cannabis, weed companies listed on stock exchanges have seen big price movement. Canopy\u2014one of the largest Canadian cannabis companies\u2014had only $40 million in revenue last year, yet is valued higher than Air Canada, which posted 350 times that amount in sales. Investors are hoping to ride the way up and profit, betting on the idea that once legalization happens and the market starts cooking, these companies will be worth much more. Analysts are worried that the market values of these companies are already overpriced based on the demand for cannabis as the market matures.<\/p>\n

As for cryptocurrencies, such as Bitcoin and Ether, we\u2019re in a completely different universe. Well over 1,000 cryptocurrencies now exist, and they have a combined market capitalization of over $570 billion. Some coins saw gains as high as 10,000 percent this year. If you\u2019ve read this column, you\u2019ll know I\u2019m a fan of the driving force behind crypto\u2014blockchain technology\u2014but I worry that this market is a bloated blimp ready to explode. Bitcoin has proven too slow and expensive to be used as a currency in its current state, and other projects that plan to use blockchain tech in other ways are still in their infancy. Some may end up being useful tokens to transact in new ways, but the majority could very well end up useless. As shown by the dot-com bubble in the \u201990s, not every company will end up like Google.<\/p>\n

Former US Federal Reserve chairman Alan Greenspan put it well when he said, \u201cFear and euphoria are dominant forces, and fear is many multiples the size of euphoria. Bubbles go up very slowly as euphoria builds. Then fear hits, and it comes down very sharply.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Whether it was the tulip mania of the 1600s or the dot-com bubble in the \u201990s, bubbles form when investor interest turns to hysteria and people start buying things not because they are useful but simply because they believe the price will rise high and fast. Recently, three particularly bubbly markets have been making headlines: […]<\/p>\n","protected":false},"author":2,"featured_media":12581,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5,206],"tags":[],"class_list":["post-15403","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-columns","category-february-7-2018"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/15403","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/comments?post=15403"}],"version-history":[{"count":2,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/15403\/revisions"}],"predecessor-version":[{"id":15405,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/15403\/revisions\/15405"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/media\/12581"}],"wp:attachment":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/media?parent=15403"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/categories?post=15403"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/tags?post=15403"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}