A GameStop store in Griffin, Georgia, 2014. In January 2021 GameStop stock was a speculative bubble.
29 January 2021
A stock or investment bubble is when the price of a stock, commodity, or other investment vehicle rises sharply because of speculation and then falls precipitously—inevitably because its price has become completely divorced from its actual value. The metaphor underlying the term is that of a soap bubble that expands until it pops.
The word bubble, referring to a literal membrane of liquid that encloses a gas, dates to the fourteenth century. Like its cousins blub, blubber, and burble, it is echoic, imitating the sound bubbles make when popped. An early appearance is in a recipe for making blue ink (azure) written sometime before 1350:
Yef thin asure is fin, tac gumme arabuk inoh, ant cast into a standys with cler watur, vorte hit beo imolten. Ant seththe cast therof into thin asure, ant sture ham togedere. Ant yef ther beth bobeles theron, tac a lutel erewax, ant pute therin, ant thenne writ.
(If your azure is pure, take enough gum arabic and put it into a stand with clear water until it is molten. And then cast some of this into your azure and stir them together. And if there are bubbles in it, take a little earwax, and put it in, and then write.)
But the investment sense took a few centuries to develop. The Oxford English Dictionary divides the investment usage into two senses, that of a fraudulent investment and a later sense of a rise in price due to irrational exuberance rather than deceit. But in practice it is often difficult to parse these two apart, and what caused the bubble, fraud or wild-eyed hopes, doesn’t affect the trajectory or effects of the bubble; they are the same either way.
The 1699 slang Dictionary of the Canting Crew records a sense of bubble to mean a con man’s mark:
Bub, or Bubble, c. one that is Cheated; also an Easy, Soft Fellow.
This sense probably comes from the idea of the mark being soft, easily punctured. It is not the same thing as the investment sense, but since that sense is recorded the next year, this slang sense probably had an influence on the latter.
In his 1700 book Labour in Vain, satirist Ned Ward includes an imagined dialogue between himself and his printer that is an early use of bubble to mean a speculative investment:
A DIALOGUE Between the AUTHOR AND THE PRINTER.
Printer. What Title do you design to give this Book?
Author. Labour in Vain: Or, What Signifies Little or Nothing.
Printer. Then I'm like to make a very hopeful Bargain this Morning; and grow Rich like a Jacobite, that would part with his Property, for a Speculative Bubble.
The first actual investment bubble was the South Sea Bubble of 1720. The South Sea Company, a joint-stock company founded in London in 1711 acquired a monopoly on British trade in slaves from Africa to South America and the South Pacific. Leaving aside the ethical considerations of buying and selling human beings, since Spain controlled South America and Britain was at war with Spain at the time, the chances of reaping profit from such trade were slim to none. Yet, the price of the company’s stock rose sharply, largely due to the company trading in its own stock and giving loans to people to buy shares, all of which drove the stock’s price up before it suddenly came crashing down in 1720.
Ned Ward, again, was one of the first to use bubble in this new sense in his 1720 The Delights of the Bottle, a poem about failed investors seeking solace in booze while creditors pounded at their doors:
When tir’d with intricate Affairs,
Or punish’d with inviduous Cares;
When Disappointment gives us trouble,
In South-Sea, or some other Bubble;
When Duns, by their impatient canting,
Perplex us, cause the Money’s wanting;
When teas’d at Home by Nuptial Dowdy,
Too Fond, too Noisy, or too Moody;
Whither can Man repair to find
Relief, when thus disturb’d in Mind.
The 1720 published version of Ward’s poem also included the lyrics to a song titled “South-Sea Ballad, or, Merry Remarks upon Exchange-Alley Bubbles.”
Since then, there have been many speculative bubbles, the most famous ones in recent years being the dot-com bubble of the late 1990s and 2000 and the real estate bubble that burst in 2008.
Sources:
Oxford English Dictionary, third edition, March 2018, s.v. bubble, n. and adj.
Middle English Dictionary, November 2019, s.v. bobel, n.
A New Dictionary of the Terms Ancient and Modern of the Canting Crew. London: W. Hawes, 1699, 1. Early English Books Online (EEBO).
“Vorte Temprene Asure.” The Complete Harley 2253 Manuscript, vol. 2 of 3. Susanna Greer Fein, ed. U of Rochester TEAMS Middle English Text Series, 2014. London, British Library, MS Harley 2252, fol. 52v.
Ward, Edward (Ned). The Delights of the Bottle. London: Sam Briscoe, 1720, 4. Eighteenth Century Collections Online (ECCO).
———. Labour in Vain. London: 1700. Early English Books Online (EEBO).
Photo Credit: Michael Rivera, 2014, licensed under a Creative Commons Attribution-Share Alike 3.0 Unported license.