Excerpt from Barry Ritholtz’s post called "Bubbleology" on the Big Picture blog, recommending reading WSJ’s Bernanke’s Bubble Laboratory.
"First came the tech-stock bubble. Then there were bubbles in housing and credit. Chinese stocks took off like a rocket. Now, as prices soar on every material from oil to corn, some suggest there’s a bubble in commodities.
But how and why do bubbles form? Economists traditionally haven’t offered much insight. From World War II till the mid-1990s, there weren’t many U.S. investing manias for them to look at. The study of bubbles was left to economic historians. . .
Now, the study of financial bubbles is hot . . . Among their conclusions:
"Manias can persist even though many smart people suspect a bubble, because no one of them has the firepower to successfully attack it. Only when skeptical investors act simultaneously — a moment impossible to predict — does the bubble pop."
Its now at the free section of WSJ.com.
