Strike It Rich, Crash Hard: The Rise and Ruin of Australia’s Poseidon Bubble

Sugar,Sugar High

Chances are, you’ve never heard of Australia’s Poseidon bubble of 1969-1970.

But if you're a reader of the Bubble Blog, the story of the Poseidon bubble will resonate with you, as it shares the same underlying dynamics as many other market bubbles.

Same story. Different details.

Today's story is about how one little mining company set the entire nation aflame with nickel fever, only to come crashing down when reality hit.

The Backdrop

Picture this: It’s September 1969.

The Vietnam War is in full swing.

 The Archies are topping the charts with “Sugar, Sugar.”

And a tiny Australian mining company, Poseidon NL, is about to become the hottest ticket in town.

Poseidon’s stock was trading at a humble $0.80.

Then, faster than you can say, “G’day, mate," the company announced a promising nickel discovery in Western Australia, sparking a wave of excitement and anticipation.

The reaction?

Utter pandemonium.

Suddenly, everyone from Sydney socialites to London bankers wanted a piece of Poseidon’s nickel action.

Now, why the fuss over nickel?

It wasn’t just about shiny coins.

Nickel was essential for stainless steel production and military equipment.

With the Vietnam War stoking demand while Canadian nickel supplies faced disruptions, prices shot up faster than a kangaroo on a pogo stick.

Poseidon's stock rocketed to an eye-watering $280 per share in the blink of an eye. That's a gain of 34,900%.

That’s equivalent to Bitcoin going from $1000 to $35 million.

Investors scrambled to buy shares, practically tripping over their boomerangs to get a slice of Poseidon’s promise.

Here's the rub, though: Poseidon had yet to produce a single ounce of nickel.

The company’s value was based entirely on the promise of riches lying beneath the ground.

The entire Australian stock market had put the cart before the horse—or, in this case, the mine cart before the ore.

What drove this nickel-plated frenzy?

Let’s break it down.

Media Hype: The press couldn't get enough of Poseidon. Each day brought breathless reports on the company's potential, shaping the narrative and fueling investors' blind enthusiasm.

Investor Overconfidence: As the stock price climbed, investors became convinced they’d discovered a golden ticket—or, should we say, a nickel-plated ticket. Never mind that many of them couldn’t tell nickel from a hole in the ground.

Fear of Missing Out (FOMO): Nobody wanted to be left behind as Poseidon rocketed "to the moon." The fear of missing out drove even skeptical investors to dive in, pushing the stock higher.

Speculation Gone Wild: As Poseidon’s price soared, investors started betting on any company with “mining” in its name. It became a frenzied game of financial hot potato, with everyone hoping they wouldn’t be the last one holding the bag when the music stopped.

The Poseidon bubble didn’t just inflate one company; it infected the entire Australian mining sector. Even companies with nothing more than a rusty shovel and a pipe dream saw their stock prices soar. The ASX All Mining index surged 44% in just three months.

But here’s a golden rule of investing:

Trees don’t grow to the sky, and neither do stock prices.

 By April 1970, Poseidon’s stock had plunged to $72, and the bubble burst, leaving a trail of financial devastation.

Lessons from Irrational Exuberance.

First, Poseidon offers a textbook example of what economist Charles Kindleberger called the “displacement” phase of a bubble.

 A new development, in this case, a nickel discovery, creates profit potential and attracts investors, leading to a boom.

This is followed by euphoria as more and more investors pile in, driving prices to unsustainable levels.

Second, it’s a powerful reminder of how narrative drives market behavior. The story of Poseidon—a scrappy Aussie company striking it rich—was downright irresistible.

 It shows markets are moved as much by stories and emotions as by cold, hard facts.

Finally, Poseidon’s collapse illustrates how quickly market sentiment can turn. Once reality caught up with the hype, the crash was swift and merciless.

Now, you might be thinking, “Sure, but that was 50 years ago. We’re smarter now, right?” Well, not so fast, mate.

The ghosts of Poseidon still haunt modern markets.

The details may change, but the underlying psychology of booms and busts remains the same.

Bubbles have been part of financial markets for centuries.

So, the next time you hear about a “sure thing” investment, remember the tale of Poseidon.

It could save you from a financial wipeout of Titanic proportions.