This way, whoever buys shares from a growing company can resell them with profits. That was what many Americans were doing, buying shares and quickly reselling them when the share value was higher.

And in 1929, the value of the companies that had negotiated shares in the New York Stock Exchange (NYSE) was growing by the minute. The United States was a growing country, so it made sense that its companies were also increasing in value. However, they were increasing too fast. With all that optimism, investors were paying very, very high costs for the shares. At the beginning of the 21st century, after a smaller slump called the dot-com bust, the chief economist in the United States called this optimism "irrational exuberance," and that nicely describes the psychological excitement that surrounded trading.

Investors thought they could pay a higher value, because very soon the companies would be worth a lot more. And for a while, that was what happened.

People even started to get large loans to buy even more shares. That's very risky. If the investor is able to sell his shares with a high profit, he will be able to pay the loan and keep the profit. But if the shares lose their value, the investor will have a major loss and would have to pay not only the loan but also the interest (which is the amount banks charge when they loan money).

The companies' values were artificially increasing, reflecting the investors' optimism instead of the companies' actual growth.

Eventually what we call an economic bubble emerged. The value of the shares started to inflate a lot--like a bubble. And what happens when we blow into a bubble too much? It... explodes!

And that was what happened in October 24th, 1929 -- a day that has gone down in history as Black Thursday. The market realized that the value of the shares was much higher than what the companies were really worth. The investors desperately started to sell their shares and the NYSE lost 17% of its value that day.

This was only the beginning. On Friday, many bankers tried to buy shares from traditional companies (called blue-chips) to try to increase their value. But that wasn't enough to stop the disastrous slide. During the weekend, the news spread, creating a feeling of mistrust. Right at the beginning of the week, more and more investors sold their shares, even the ones that hadn't any profit, because they were afraid of loosing even more money (these days were called Black Monday and Black Tuesday). The value of company shares experienced an unprecedented fall in value, which lasted for a whole month and continued to cause more problems.

Many investors lost their money, and those who had asked for loans had no means of paying the banks back. That led many people into bankruptcy and caused lots of problems to the banks. Industry also faced difficulties, because the consumers who still had some money felt safer keeping it than spending it. With fewer people spending money, the companies sold less and less, and were forced to fire employees.

All of that generated a great rolling snow ball that reached its climax in the Great Depression, the economic period that followed. By July 1932, the big companies that economists check to measure the health of the US economy (called the Dow Jones Industrial Average Index) had already lost 89% of their value. That created a world recession that spread poverty and unemployment. Both industrialized countries and developing ones suffered with the crash. In turn, the uncertainty and anger helped populist leaders such as Antonio Salazar (Portugal), Getúlio Vargas (Brazil), and Adolph Hitler (Germany) to get to positions of power. Ultimately it all lead to the World War II.

But recessions and bubbles come and go. The stock exchange managed to recuperate its 1929 value--but only 25 years later, in November 1954. And other crises came, although smaller. For example, in the 1987 stock exchange crisis, 19 of the 23 biggest countries in the world fell more than 20% in one day. That crisis, however, was a lot shorter, and in September 1989 the indexes had already returned to their former value.

Recently, we have had other international crisis. The 1997 Asian Financial Crisis started in Thailand and spread all over southeastern Asia and Japan. In 2001 came the day of reckoning for the Internet companies. Just as in the 1929 crash, the dot-com companies were overvalued. By that time, Cisco Systems, a network equipment manufacturer, was the most valuable company in the world (its stocks were worth US$ 500 billion, approximately the GDP of Switzerland and Finland combined). But when the dot-com bubble exploded, the dot-com companies lost their value at the same speed as they had gained it. Many companies faced bankruptcy and many investors lost the most part of their money.

Bubbles and recessions are a recurrent phenomenon in global markets. Some say the US housing bubble, which created the sub-prime mortage crisis, will cause a new global recession.

Also, there's a lot of talk about a new Internet bubble, considering that companies have great value again. For instance YouTube was,bought for US $1.6 billion by Google, and MySpace and Facebook are valued in billion and billions of dollars even though they're not very profitable.

But quick growth doesn't just cause bubbles; it can also mean great opportunities. For example, in 2007, Apple, Nintendo in Japan, and the Brazilian mining company Vale grew more than 50%. For what is worth, I think they will keep growing, for they have good opportunities ahead of them.

So what differentiates a real growing market from an artificial growth bubble? As in a poker game, we need to pay attention so as to understand when companies really have good opportunities. We should bet on the ones we've researched carefully, and understand when the market's optimism is in fact some kind of bluff