October 16 - Economic Bubbles

            Economic bubbles basically describe the trading of products or assets with inflated values.  Economic bubbles are typically only noticed in retrospect, when a sudden drop in prices appear. I'm guessing the word "bubble" is used because bubbles typically inflate very quickly, then suddenly burst into nothing.  So an economic bubble could be when there are many investors who put money into a product or asset, but when the value starts slowly decreased, one by one the investors start selling their stocks.  This quickly created inflation on that product.  Here is a site discussing some previous economic bubble incidents (http://www.businesspundit.com/10-most-bizarre-economic-bubbles-in-history/).  A few noticeable historical economic bubbles have been the 1711-1720 British South Sea Bubble, the Dutch Tulip Bubble, and the Uranium Bubble.  The British South Sea Bubble occurred when a British joint stock company granted exclusive rights to trade with South America, in return for financing the British government's war debt.  Many wealthy investors invested too much money into this company.  The Dutch Tulip Bubble occurred when tulips were brought to Holland from Turkey.  The Dutch people loved the flowers so much that eventually the price of a tulip was around the price of a Dutch house.  Finally, the Uranium Bubble happened in the 70s when the price of a pound of uranium was about $110.  It dropped to about $20 a pound until 2007, when a sharp fall in cost bankrupt for many mining companies.
            Mr. Hallam and I are both very interested in the possibility of opening up an investment account with Vanguard for myself this year.  Being only sixteen, this would be a huge financial advantage in my later years.  In order to create an account, I'd need a minimum current principal of US$1,000.  I am going to try to persuade my parents (Dad is gone for business) into loaning me this sum of money, which I'll be successful at if they see how much money I'll accumulate later on.  In this account, I'd start out investing about 20% in bonds, 50% in International Stock Index and 30% in International Stock Index.  As I get older, my bond index percentage will automatically increase.  For this account I would annually invest $500.  When I'm older and working, I'll be able to invest much more than this per year.
Here is a look at the compound interest calculator for this account:

I'm very excited about this possible account, and I'm hoping my father will be wise and loan me one grand.

          I had a tough time tracking my finances last week during IASAS.  For the majority of the trip, I was at the school (ISB) and I didn't have my phone on me, which I usually use to record my finances.  A few others and I were staying with a host family who cooked us supper every night and gave us numerous snacks.  I didn't want to ask for their grocery receipts so I had to estimate the approximate cost of each meal for myself.  We also got foot massages and I wasn't certain of the price.  I wrote all of my finances down, but only by memory and prediction.  Next time, I'll be sure to keep my phone on me.