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<p>[QUOTE=&quot;Juan Blanco, post: 1588227, member: 41665&quot;]I&#039;ve seen these excuses before (w/ variation), many many times. I don&#039;t entirely disagree with the gist but each fails on closer scrutiny... &#039;make-believe&#039; </p><p><br /></p><p>1) &quot;Widespread public participation&quot; <b>This is often claimed but rarely proven ...and often FALSE.</b> Manias don&#039;t need lots of participants, in fact.</p><p><br /></p><p>Take for example the famous (and VERY poorly understood) &#039;Tulipmania.&#039; Do you know how many <i>additional bankruptcies </i>were ascribed to Mr. Buffett&#039;s spec asset-class &quot;Tulips&quot; ? ~135. Also there was no certain correlation between <i>those particular bankruptcies </i>and the Tulip trade specifically. At the same time, a plague was decimating the population ... hello, maybe that was a bigger factor in business decline? This puts Doug French much-quoted and hysterical &quot;bankruptcies in Amsterdam doubled with Tulipmania!&quot; in perspective, no? </p><p><br /></p><p>Other articles falsely claim &quot;By 1636, tulips were trading on the Amsterdam Stock Exchange as well as on exchanges in Rotterdam, Harlem, Levytown, Horne and many others in other nearby European countries.&quot; FALSE: tulips were NOT traded on major mkts (&amp; had actually been BANNED FROM major Dutch exchanges.) Futures contracts &#039;traded&#039; in local taverns and affiliated tulip colleges - basically, OTB operations. In fact, tulips were a rare luxe good gambled upon by a very tight social network. <b>There&#039;s no concrete evidence of &#039;widespread public participation&#039; in Tulip spec, period. </b>See <a href="http://www.maurits.net/Research/TulipMania.pdf" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://www.maurits.net/Research/TulipMania.pdf" rel="nofollow">http://www.maurits.net/Research/TulipMania.pdf</a></p><p><br /></p><p>&quot;the total number of active participants in the tulip market appears to have been comparatively small, ranging from several dozen in the smaller towns such as Enkhuizen or Hoorn to several hundred in Haarlem.(62) More than one merchant appears just once in the archival record, purchasing or selling just a single bulb from or for his garden, so the number of regular traders was smaller still. {...} <font face="Times-Roman">A few of the poorer tulip speculators may have faced economic ruin, but most of the active bulb</font>traders remained quite prosperous in the late 1630s, despite losing all of their paper profits from the bubble. (67)&quot;</p><p><br /></p><p>On closer scrutiny, &#039;Tulipmania&#039; looks more like the absurd &#039;Gerhard Richter art-market&#039; than any asset-class Bubble. And which is Powerball, a mania or Bubble?</p><p><br /></p><p>2) Buying on Margin: Markets (great &amp; small alike) can rise &amp; fall WITHOUT margin, so this criteria is &#039;made-to-fit&#039; what someone wants to see as a mania. Buying on credit is idiotic, likewise: aren&#039;t people doing that for those cult sneakers? And with houses, still. I&#039;d cite this as a contextual market inefficiency common to e-z credit cycles, rather than &#039;mania&#039; per se.</p><p><br /></p><p>3; 5) Buying for no &#039;good&#039; reasons: One word for that... COINS! LOL Srsly though, <i>tons of &#039;inessential demand falls&#039;</i> before this highly subjective criteria. If US bonds are doomed, buying US Bonds is INSANE. Who knows? I agree: weird spec is weird but you wouldn&#039;t argue a Billion Dollar market-fad like Beanie Babies &quot;distorted economic activity&quot; in the late 1990s would you? The idea that plushies have &#039;investment value&#039; sure looks idiotic ...when they didn&#039;t, anymore. (That&#039;s what Greenspan meant: you can only confirm a Bubble in hindsight.) I won&#039;t mention numismatic investment value here, either: people WILL believe what they want to believe. </p><p><br /></p><p>4) Parabolic price increases. NO not always, but yes sometimes. Other peculiar aspects of Supply/Demand - and more importantly A DOOMED CURRENCY - can <i>also </i>illustrate this pattern. It depends, but this one fascinates me to no end. &quot;Can <i>Money </i>itself be a Bubble?&quot; That gets terribly philosophical, I suppose. Treatise for other day.</p><p><br /></p><p>6) Media coverage: The silliest excuse yet. Ya, Scott Brown was a Bubble on my computer ... &#039;til he popped! LOL Media = advertising = propaganda. Do people buy it? If it fails to sell to the masses, must it crash then? Honestly, this is pure &quot;make-believe.&quot; I can&#039;t see the US Bond Bubble is hyped (but 99 out of 100 financial advisors would TOTALLY DENY my opinion it could be a Bubble, now.) And yet it grows. A bubble doesn&#039;t always need hucksters - maybe a mania does? There were manias before mass-media, too. Etc.</p><p><br /></p><p>I DO certainly believe manias/Bubbles occur, but those glib, common reasons listed above either <i>fail the sniff-test </i>or obviously need greater refinement/parameters for a start. </p><p>Everything&#039;s relative, after all.[/QUOTE]</p><p><br /></p>

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