The Biggest Stock Bubble You’ve Never Heard Of: The Souk Al-Manakh Meltdown

fictional movie character Gordon Gekko once said the mother of all evil is speculation and if you study the cause-and-effect relationships underlying any economic bubble you'll probably agree with him consider the housing crisis of o8 the dot-com crash of the early 2000s or perhaps a lesser known bubble the tulip mania of 1637 a time when a single tulip bulb was valued as much as a mansion on Amsterdam's grand canal while each of these bubbles are certainly unique in their own respective ways they pale in comparison to what some would argue was the greatest asset bubble of all time the crash of cue weights sook Alma nah this may come as a surprise considering cue 8 is geographically 551 times smaller than the United States with 153 times fewer citizens in 1982 which begs the question how did this tiny Middle Eastern country once hold the title of the world's third-largest stock market only trailing America and Japan without further delay let's explore the spectacular rise and fall of Kuwait s quarter trillion dollar bubble the aftermath of which resulted in the equivalent of two hundred and forty thousand dollars of debt for every qat man woman and child the infamous sook Alma na this video was made possible by our sponsor Nord VPN as a business casual fan you can save 70 percent on your Nord VPN subscription by using the link in the video description below or by going to go BC TV slash Nord VPN and also be sure to watch the entire video for a special giveaway at the end on February 22nd 1938 Kuwait struck the jackpot of natural resources oil so much so that they still control over 100 billion barrels the discovery of black gold set in motion what can only be described as the perfect economic storm a storm as fascinating as it was devastating after decades of extracting oil Hugh weights production output in the 60s began to Spinelli accelerate leaving many q8 es flushed with cash for the first time an unprecedented phenomenon considering the country's wealth was previously concentrated in the hands of an elite few such as the royal family or high-ranking government officials the rapid rise in the country's wealth can be attributed to its year-over-year increased oil production as well as the unprecedented global rise in the price of oil which quadrupled after Kuwait and other oil-producing Arab nations embargoed the US and other countries in 1973 of a support for Israel during the Yom Kippur War the commodities price was driven even higher after a series of production cuts in the Middle East lowering supply and increasing demand thus increasing the price of oil what followed was an economic catastrophe for nations that depend on foreign oil especially the United States as it aggravated a severe gasoline shortage causing multi-hour lineups at gas pumps nationwide but unlike the West oil-rich Kuwait found itself in its best strategic position in the country's history as Kuwait citizens looked for a place to park their newfound fortunes the government launched its official stock market in 1977 called the Bossa but much to the frustration of q8 citizens the exchange was largely dominated by the country's wealthy who mostly traded amongst themselves in large blocks of stock effectively crowding out smaller investors in addition to being controlled by the elite the heavily regulated Bossa was home to only a short list of qat companies as the nation's royal Sheikh rarely permitted new IPOs based on a fear that out-of-control speculation would capsize the market dissatisfied with the small array of stocks to choose from the souq Almanac was formed the following year in 1978 unlike the heavily regulated and elite dominated Bursa the souq allowed all investors to trade in non qat companies that didn't meet the strict standards of the Royal Sheikh if the bursar was the reliable and regulated market the souk el mana which literally translates to the market at the resting place for camels was the wild west of the Middle East the market for the new world investor as oil prices continued to climb largely thanks to the onset of the Iranian Revolution the souk grew in popularity gaining a reputation for minting millionaires left and right as is always the case with bubbles larger crowds of speculators grew wealthier and wealthier leaving those watching on the sidelines feeling left out only to inevitably join the party as speculation grew more rampant it wasn't long before the souk earned a reputation for being far more exciting than the Bossa becoming more of an entertainment center than an investment platform the growing stock market's rise can primarily be attributed to a curious quirk in qat law which allowed investors to buy near-infinite shares of stocks with post-dated checks which were treated like cash regardless of the investor's income or assets and as a result of using the post-dated checks investors had unlimited margin to purchase as many shares of stock as their hearts desired the reason for this quirk was due to qat culture which prohibited defaulting on a loan because that would be considered unimaginable bringing shame on the defaulters entire family despite the entire stock market being built upon a house of post-dated checks investors weren't worried about losing money after all the last time a small panic occurred on a bull say exchange the government swooped in and purchased chairs so that no investor would suffer demonstrating that the government would always be there to bail out the market investors translated this to mean that they could buy shares on the souk almanach with money they didn't have with a faith that the government would never allow a crash to take place at the beginning of the Suk's trading days post-dated checks were always paid on time because investors were able to lock in profits before their checks came to this unhealthy level of investor confidence mixed with access to unlimited capital meant that no stock price was considered too high in one extreme example a former government employee in his early 20s from q8s passport office borrowed an astonishing 14 billion dollars with his post-dated cheques after 54 companies listed on the suit the average price increase for that first here was 63% some stocks doubled in only a month with others growing 13 to 15 fold within a matter of weeks one of these high-flying stocks was Gulf medical a failed hotel turned hospital which received so much interest from investors that its IPO raised 2,600 times more than the original target requiring forty school teachers just to process the pallets of investment paperwork which arrived by the plane load out of this rampant greed came the exact problem that the Royal Sheik was trying to avoid shell scams masquerading as legitimate companies they did not have any customers or revenues much less profits the lure of near-instant wealth was so great that even q8s own Minister of Commerce who was supposed to be in charge of regulating the over-the-counter market was enticed to try his luck at the soup casino along with several members of q8s Parliament it estimated that by the spring of 1982 some 29,000 checks totaling 94 billion dollars of floating in the market when rumors began to spread that most of the companies on the souq Almanac was simply worthless scraps of paper by the summer of 82 with stock prices commonly doubling on an hourly basis the unofficial qat stock market had risen from 5 billion to over 100 billion dollars making it the third largest equity market on earth but it was short-lived after one qat tried depositing a check early which bounced as investor concerns swirled he waits Finance Minister made real the fears that the government would not step in stating speculators should pay for their sins in accordance with Islamic tradition which when combined with the risk of defaulting on post-dated checks triggered instantaneous and widespread panic historic data is somewhat murky about what followed next but it said the trading didn't just slow down rather it simply stopped altogether leaving creditors holding the bag for nearly 30,000 worthless checks totaling 12 figures of debt or the equivalent of 239 thousand dollars for every qat man woman and child for perspective America's national debt per capita in 2018 was approximately 66 thousand dollars the damage caused by the souq was so catastrophic that the country had no choice but to shut down its official exchange in November of 1984 and rebuild the former Bossa from scratch this time calling its market the Kuwait Stock Exchange unfortunately for q8 it's luck had finally run out as the country was thrust into a recession following an oil glut which slashed the value of oil by some 80 percent over a six-year period following its peak Iraqi forces then invaded the country in August of 1990 further weakening its already damaged economy the epic story of the souk elmina meltdown now four decades old contains a series of valuable lessons for today's investors such as the need for pausing and reflecting when valuations are ignored by other investors or the much-needed practice of due diligence and the necessity of exerting caution during booming times as it can become all too easy to get caught up with the markets hype and the hot stock du jour but of course if there's one thing worse than losing money on the stock market it's getting hacked online which brings us to the sponsor of today's video Nord VPN if you're watching this video on your phone or a computer without a VPN you're basically inviting hackers to steal your IP address who can potentially use that data to pin down your exact location but because you're a business casual fan you can hide your IP address with Nord VPNs technology which will make it look to hackers as if you're in another country entirely like q8 or wherever else in the world you may wish to appear so be sure to claim your free month and save 70% on your subscription by using the link in the video description below or by going to go BC TV slash Nord VPN the link is on screen and in the video description below and thank you so much for watching if you enjoyed please be sure to click the like button and subscribe after subscribing be sure to also click the bell icon and then the all option from the drop down menu so you'll be notified of new uploads just like this and but not least in today's episode we'll be giving away to one lucky business casual subscriber an extremely neat piece of history a rare mint condition 10 dinar qat banknote from 1968 to enter the giveaway just follow us on instagram at business casual dot io and comment on our latest post and don't worry if you don't win today's special prize as we'll also be giving away free business casual t-shirts from our brand new merch shop to 10 lucky fans be sure to comment down below if you love our new designs thank you again for watching and until next time stay smart

Channel: Business Casual

Views: 502,479

Rating: 4.8740983 out of 5

Keywords: biggest economic crash, biggest stock market collapse, boursa kuwait, economic bubbles, economic collapse, economic crash, kuwait bubble, kuwait econcomy crash 1982 kuwait economy collapse kuwait stock market crash, kuwait stock market bubble, kuwaiti crash, kuwait stock crash, market crash, souk al-manakh, souk al manakh, the souk al-manakh, the souk al manakh, stock bubble, stock crash, stock market crash

Id: hk4THbOoho0

Length: 11min 34sec (694 seconds)

Published: Sat Jan 18 2020

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Creators Description:

The Souk al-Manakh was Kuwait’s unofficial over-the-counter stock market, headquartered in an air-conditioned parking garage. But, as you’ll soon learn, miraculously managed to grow to the 3rd largest equity market on earth (only trailing America and Japan) with stock prices that commonly doubled on an hourly basis — only to come crashing done in the most unbelievable way.

It’s a tale of greed, deception, cultural quirks, billions, and perhaps most importantly: lessons you can take away as an investor.

[u/sheeplish_]

Thank you for posting. I didn’t know any of this so it was very informative.

[u/mpwr965]

Thanks for this post. I wish this was talked about and discussed more in educational curriculums..