What is the sardine bubble?
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The term "sardine bubble" refers to a historical market craze involving sardine trading. It is used metaphorically to describe investment bubbles, where asset prices become inflated well beyond intrinsic value due to speculative trading.
In the "sardine bubble," sardines disappeared from Monterey's waters, leading commodity traders to bid up the price of canned sardines. The prices soared as traders bought and sold these cans for profit. However, when someone opened a can to eat, they found the sardines were inedible. A trader responded by stating, "These are not eating sardines, these are trading sardines," highlighting the sardines’ value as a speculative asset rather than a consumable good.
This story was discussed by Sam Parr and in the context of tech company valuations and the crypto market. They likened the sardine bubble to the recent trends in overvalued tech startups and crypto assets, where prices were driven up with the expectation of selling to the next buyer, rather than based on intrinsic value or profitability. When the market corrected, the true (little to no) value of the assets was revealed, similar to discovering inedible sardines 1 2 .
For further details, you can check out the episode "This Hedge Fund Manager Got Away With Insider Trading… Then Made Billions (#509)" .
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