Classical economists have long described human beings as “rational actors.” By this, economists mean that most people try to achieve their best interest by intelligently weighing the pros and cons of their choices, seeking evidence, and behaving in a collected manner. No greater evidence exists to the contrary, however, than market bubbles. While humans are certainly more rational than lower species, the history books are filled (indeed, still being filled) with soaring market activity caused by little more than hype and speculative mania. What makes these bubbles consequential, of course, is that they eventually burst – often with painful consequences. Furthermore, these consequences affect even those who played no role whatsoever in the buildup of the bubble. That makes bubbles a subject worthy of study by us all. Today, Billshrink dissects 12 painful lessons learned from bubbles of the past, including the early to mid 2000’s housing boom.
This is a MUST READ!
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