08-17-2016, 04:24 PM
(08-16-2016, 06:33 AM)Mikebert Wrote: He misses an awful lot of crashes and financial crises. Just off the top of my head there were the 18th century panics: The South Sea and Mississippi bubble crashes in 1720, the City of London Panic in 1772 that triggered the American revolution, the American crisis of 1792 which had little impact thanks to the deft hand on Alexander Hamilton. Moving to the 19th century, we have had the Panic of 1819, the first politically-important financial crisis, the 1837 Cotton Crash, 1847 British railway panic, the Panic of 1857 (first international crisis), the Panic of 1873 (began the Long Crash), the Overender and Gurney crash in 1884, and the Panic of 1893. In the 20th century you have the 1907 Rich Man’s panic (which led to the Federal Reserve) and the Great Crash of 1929-32 (began the Great Depression). In the 1930’s Congress decided to ban panics and they stopped happening. In the 1990’s they decided to bring them back, and so we started getting them in the 21stcentury: the subprime crash of 2008 and another crash in 2017 or 2018.
The cause of a big crash is a big bubble. This is really a tautology, since the definition of a bubble is a period of high prices immediately preceding a sharp drop in prices. But bubbles can usuallly be detected in advance. Of course, as the adage goes, a bubble can (and usually will) last a long longer than you think it can. Thus, it cannot be reliably "played" through use of options and even buy/hold/sell market timing is very difficult.
Most of those crashes are not important when dealing with the subject Michio Kaku talks about. He also mentions smaller crashes when talking about the first one.