Source: shutterstock.com/Tex vector
I like to say that the bigger the crowd, the lower the IQ – and this is especially true of the stock market.
But don’t just take my word for it…
Charles Mackay’s classic book Extraordinary Popular Delusions and the Madness of Crowds explores this very idea by examining some of the greatest financial manias in history: the Dutch Tulip Mania, the South Sea Bubble and the Mississippi Scheme. Each manic episode reveals how speculative frenzy and herd mentality led to disastrous consequences.
Let’s consider the Dutch Tulip Mania in the 1630s. The flower was seen as a status symbol, prized for its unique patterns and colors. This led to wild speculation that saw ordinary people driving tulip prices to absurd levels… at one point, a single tulip bulb cost more than a house!
Eventually, people realized that tulips had no intrinsic value to justify their skyrocketing prices, and panic ensued, causing the tulip market to collapse almost overnight.
Mackay’s other two examples draw similar parallels. The South Sea Bubble (1720) involved a British company promising immense profits from trade, causing stock prices to skyrocket until the scheme unraveled. Similarly, the Mississippi Scheme (1719–1720), led by John Law in France, inflated share prices based on unrealistic expectations, leading to a nationwide financial crash.
How Manias Can Be Profitable
However, there is a silver lining. Sometimes, the stock market crowd’s manic response can be very profitable. For example, their knee-jerk reactions led to:
- A stunning 24% rally in 2023…
- A massive bull market following the COVID crash…
- The decade-long bull market that followed the 2008 crash…
- The dot-com boom…
In my 40-plus years in the market, I’ve seen my fair share of manias. And what I can tell you that most folks don’t realize is this: These manias don’t just happen overnight. They quietly build in the background, over a period of many years.
I bring this up because I believe we’re on the verge of another mania right now, folks. I’m talking about next-generation AI.
Right now, the rest of the market is still focused on the old story of first-generation AI – the chipmakers and ChatGPT and other new AI apps being rolled out by Big Tech. And don’t get me wrong, as impressive as they are, if there’s one lesson we can learn from the dot-com era, it’s that this is not where the big money will be made.
The reality is this is just the beginning of the story. Just as the second generation of tech stocks after the dot-com era went on to run laps around the first-generation group of tech stocks, we’ll see the same thing happen with AI.
This will be the Real AI Boom. This Real AI Boom will involve companies that use generative AI or reinvent or automate some of the oldest business models around.
This, in turn, will launch the kind of transformational change we only see once every 25 years. And these changes will roll out across society and reshape America on the same historic scale we saw in the late ’90s.
This is a market that’s expected to grow 20-fold… to a whopping $15.7 trillion by 2030. That’s almost the size of China’s entire national output.
Your Last Chance to Profit From the AI Boom?
Bottom line: I believe the next generation of AI will be the Real AI Boom. And if you’re over 50, this could be the last financial mania of our lifetimes, so the time to invest is now.
It’s been 25 years since we’ve seen a crowd-fueled stock market boom truly comparable to this one, with the rise of the internet in the late ’90s.
And so, the next generation of AI I see coming could be your last chance to make a small investment in the right breakthrough stocks and still see huge potential profits.
Luckily, my Stock Grader system has uncovered six companies using AI to shape America, so there’s still time to prepare your portfolio before the Real AI Boom begins.
Click here to learn more about the Real AI Boom and how to get the names of these six stocks now.
Sincerely,
Source: InvestorPlace unless otherwise noted
Louis Navellier
Editor, Market 360