Technology Sector Privite Equity and a New Speculative Bubble Term Paper

applied science Sector Privite Equity and a New Speculative Bubble - Term Paper ExampleGoldman intends to sell many of the shares to high net-worth individuals through its wealth management division. This special investment vehicle get out puzzle out a loophole in securities law regarding private association ownership. According to US securities law, a private company is not permitted to have more than 500 individual investors without making its financial information public. Being a private company, Facebook is not required by the SEC to share financial information with investors at this while. out-of-pocket to these above mentioned conditions surrounding these companies, speculation continues to be a driving force surrounding these investments. In this paper, we will take a look at the history and features of speculative bubbles including the technology bubble of the late nineties (dot com bust) in an attempt to use economic data to analyze todays environment to come upon t he presence of a bubble and its potential impacts. The Origins of Speculative Bubbles Speculative bubbles have long fascinated and flummox economists across many time periods. From the original Tulip Mania of the 1630s to the Dot- Com bubble of the late nineties, these phenomena have kept economists on their toes for centuries, in trying to pin knock down substantive causative agents that are responsible for the fleet increase in the market values of particular assets. Till today, experts have been unable to chalk down exact reasons for the emergence of much(prenominal) bubbles as they can rise up even in the intimately predictable markets where the market participants can very accurately calculate the intrinsic value of the assets and where speculation plays no part in the actual valuation process. What is the origin of bubbles? Simply put, speculative bubbles are caused by set up factors that have the ability to bring about a diverseness in the publics sensing about the v alue of an asset and about the future prospects of that asset, which can have an immediate impact on demand (Shiller , 2000) One of the most famous economists of all time, John Maynard Keynes pointed out in his book The general Theory of Employment, Interest and Money, that abrupt and immediate stock price changes have their roots in the collective crowd behavior of the various market agents more than anything else and that in almost all such scenarios, these rises in prices have little to do with the values that can be derived from careful analysis of throw conditions and future prospects of firms. This seems to be a certainly accurate description of the conditions which surround the emergence and bursting of the speculative bubbles as seen in the past. Kindleberger in his book Manias, Panics and Crashes A History of Financial Crises (1978), presents a summary of his observations regarding the historical mold that these bubbles usually follow. He states that the increase in price s typically starts with the emergence or birth of opportunity, usually in the shape of new markets or cutting edge technology or some major change in the political landscape of a particular region which can pull in investors looking for excellent returns on their investments. This is followed by rising prices of the particular asset. In this phase, more and more people flight after the overpriced commodity, feeding fuel to the bubble, increasing prices further and feeding the mania, and at the same time causing credit