Tulip Mania a classic Example of bubble and bust

                                                                                               .                        Have you heard of tulip mania bubble ?           It is a classic example of how stock market bubbles form and bust. If you analyse the story carefully you will understand how humans behave irrationally during times and how you can take advantage of the situation. The story dates back to 1619-22 and happened in Netherland's. It  was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble). People were so crazy that at one point 12 acres (5 ha) of land were offered for a Semper Augustus bulb. I would say WTF!!!!!!!! ??? This is called peaks of speculation. 

                                                        

                                                               The above image is a graph that shows the price's of tulip's vs time. on Feb 3 is the highest point at which the bubble started bursting and one general trend if you observe the entity comes down at a faster rate than the rate it which it started to move up. It takes long time for the bubble to get built and its gets bust very quickly. this is what I term as crowd behaviour. The same people are buying 2 days before and once the bust happens every one wants to sell and it causes a vicious loop which have cascading effect. And this trend goes on . even in our current economoy lot of bubbles are getting built we don't know when which one will gets bust. Generally the times after bust are the periods where you see some stagnation before an upmove.  I would suggest investors to buy in this period since it offers a signifcant limited downside risk and huge upmove.

                                                      Speculation  is a financial action that does not promise safety of capital investment along with the return on the principal sum.[1] A person or entity that engages in speculation is known as a Speculator. Speculation typically involves the lending of money for the purchase of assets, equity or debt but in a manner that has not been given thorough analysis or is deemed to have low margin of safety or a significant risk of the loss of the principal investment. The more the speculation the bigger the bubble being built.