The Poseidon Bubble

Submitted by Stock Market News on 10 May, 2011 - 16:47

What happens when a bubble bursts in the stock market.

Apart from the dotcom bubble burst, there was an earlier crash that sent a domino effect through the stock market.

During 1969 there was a huge demand for nickel because of the Vietnam war. Due to the industrial action against Inco which was a major supplier, a shortage happened that eventually lead to record high nickel prices. In September, Poseidon NL discovered a promising site for nickel mining in Laverton, Western Australia. The company's share was trading by $0.80, but as the information about the discovery was released the price soared to $12.30 by October 1. Very little details were released afterward but the price continued to climb as speculation circulated. At one point a broker from UK even suggested that shares were up by $382 each.

The prices eventually became too high for investors. So they turned to other nickel stocks. As mining shares grew many new companies were listed by promoters who want to take advantage of the current market trend. Unfortunately many of these listings were fake – some don't have mining leases, let alone potential mines. Investors lost a lot of money and mining stocks got a lot of bad press. Mining stocks peaked in February1970 but crashed and the bubble finally burst.

When Poseidon started producing actual nickel the prices were rock bottom. Moreover the nickel ore that they found were of lower grade than they thought. Extraction costs and insufficient profits delisted Poseidon in 1976. It was taken over by Western Mining and operated until 1991.

The Rae Committee handed down their report on the Poseidon bubble along with numerous documentation of improper trades. This lead to the regulation of Australia's stock market, and national companies and securities legislation.

The Poseidon Bubble may be far way in the past, but anything can happen in the stock market. With global crisis and world events affecting us left and right, people can get desperate and latch on to the first potential profit that they see. Most often the not mankind lets history get past his common sense and repeat itself, but with money on the line, let's hope we've learned enough.