Is The Era Of Easy Investing Over?

In today’s volatile market, it is difficult even for professionals to understand what fuels market bubbles. contributed almost single-handedly to the Great Recession and the financial crisis of 2008. So is there a chance first-time or beginner investors to anticipate or predict, albeit to a modest certainty, when and how the investment and asset bubbles will pop in the future? Is the era of easy investing over for most beginner or even some of the season retailed investors?

I think the answer is not really. There is still a chance to do well in your investing, but you may need to spend some time and a little diligent effort in analyzing the patterns of previous bubbles. Then there is a fair chance we can avoid making those investing mistakes. Let’s face it; bubbles are here to stay and will continue and is almost guaranteed to happen again – maybe even sooner rather than later.

So for the sake of those looking for easy investing, let’s look at what we can learn from history and what are the lessons we can learn to apply them to our hunt for today’s stock and gold trading market or asset bubble.

A Tale Of Easy Investing And Two Bubbles

The most devastating bubble that posed a major threat to the good times of easy investing is unquestionably the infamous stock market crash between the months of September and November of 1929, when the DOW nose-dived from roughly 380 to 200 points, cleaning slicing off about 50%. But the Dow Jones average managed to crawl back and went up to 300 points again over the next several months, from early November 1929 until sometime in the middle of April 1930.

Everyone started to cheer that the era of easy investing is back. That was quite true until a newly created U.S. Federal Reserve decided to move away from the gold standard towards fiat currency system while the majority of the investing public was still highly in love with the precious metal. Many economists and scholars have concluded that the move from the gold standard caused an artificial world-wide boom in demand and squeeze in supply for gold, bank illiquidity, and the Great Depression, during which the Dow Jones sank back down to 42 points by July of 1932.

The important lesson to learn from this is before, during, and after the catastrophic financial events of the 30’s, gold has been always been considered a safe, hard asset to invest. In times of economic crisis, people will start to invest in gold.

The 1990s has been regarding as a golden era for easy investing, interrupted temporarily by the Asian Financial Crisis. But the next major threat to good times of easy investing happened in 2000 when the dot-com bubble bursted. While the dot-com bubble’s bursting is not powerful enough to bring the entire economy to its knees, it caused the technology-laced Nasdaq Composite index to lose more than 60% and $5 trillion in the market value of the companies listed on the exchange between 2000 and 2003.

According to Wikipedia.org, a bubble is a “self-perpetuating rise or boom in the share prices of stocks of a particular industry.” The lesson to learn from from the dot-com bubble is a reminder when the rise in shre rices of stocks reached an exuberant level that is not supported by sound fundamentals, it is time to exit the market. Therefore, for your individual investment goals, you may want to identify where you think the next bubble could be forming, pick specific price points for getting in and out, and always be ready to let go.

On the other hand, it has certainly been an era of easy investing in the past 10 years or so for those who made their foray into gold investment. Gold has again make big headlines all over the place – in print, media, and the Web. The price of the “yellow metal” is hitting new highs. Why is this so?

In fact, there are parallels between the aforementioned historical bursting of the bubbles and the rise in gold trading prices. In the late 1920′s and early 930′s when financial chaos reigned in the economy, investors who are used to easy investing during the boom times panic. Next, the government and Feds started to pour billions of dollars or fiat currencies into the economy to kick-start growth. The Fed also instituted artificially low interest rates.

What happened next during the 1930′s is also eerily familiar today – investors started to pile into the safe hard asset of gold, driving gold trading prices sky high. Gold has always been a safe haven when people are worried about inflation, concerned about a weakened dollar and turmoil in the stock market.

Why Gold May Not Be An Easy Investing Tool

But if you think that gold is such an easy investing as the gold trading price can only go up, beware of a bubble forming due to a self-perpetuating rise in asset prices. Here are the reasons:

1. Inflation isn’t really much of a concern. In fact, the Fed has recently been talking about deflation becoming more of a concern than inflation. If this is true,could be a fatal blow to gold trading prices.

2. Although the value of the dollar is dropping, the dollar isn’t as weak as it once was going into the most recent crisis. If the event that some Euro-zone countries found their fiscal debt become too much to bear, the Euro may be battered again and the U.S. dollar may strengthen against its overseas currency counterpart.

3. There are signs that the stock market may have finally stabilized. S&P has broken the strong resistance of 1130 and is on an uptrend. Despite some confidence-crushing news now and then that may continue the cause some volatility in all the major indices, September of 2010 has brought significant gains and regained some confidence in the stock market, making some to believe that the era of easy investing is back again.

A beginner investor or even seasoned retail investors may not be able predict or correctly identify and avoid stock market bubbles. A period of easy investing will be followed by turbulence as the bubble burst, so I do believe it’s never too early to start thinking about the next bubble. It’s your money and there’s no limit to how much you can make or save.

The bottomline is market conditions are getting more volatile and it’s crucial you use proven and time-tested strategies to grow and protect your wealth. Click here to get your FREE special report now and learn what the top gurus are doing to build and protect their wealth.