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Market bubbles are common but dangerous from "summary" of A Random Walk Down Wall Street by Burton Gordon Malkiel
Market bubbles are like the sirens in Homer's Odyssey. They sing a song of profit that can lure investors to their doom. These bubbles are created when the price of an asset – whether it be stocks, real estate, or tulip bulbs – becomes detached from its intrinsic value. Investors start buying not because they believe in the fundamentals of the asset, but because they believe they can sell it at a higher price to a greater fool. History is littered with examples of market bubbles. The most famous is probably the Dutch Tulip Mania of the 17th century. At the peak of the bubble, a single tulip bulb could fetch a price equivalent to a luxurious house in Amsterdam. Then, just as suddenly as it began, the bubble burst, leaving investors destitute and tulip bulbs worthless. But it's not just tulips that can become the subject of a speculative frenzy. Stocks, real estate, and even cryptocurrencies have all experienced their own bubbles. The dot-com bubble of the late 1990s saw investors throwing money at any company with a ". com" in its name, regardless of whether it had a viable business model. When the bubble burst in 2000, trillions of dollars of wealth evaporated overnight. The dangers of market bubbles are clea...
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