The euphoria of rising asset prices masks underlying vulnerabilities in the financial system from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
The euphoria that comes with rising asset prices often leads to a sense of invincibility among investors. As the value of their assets continues to climb, they become more and more convinced of their own financial acumen and foresight. This feeling of infallibility can blind them to the underlying vulnerabilities in the financial system that may be fueling the asset price increases. During times of euphoria, investors tend to overlook warning signs and dismiss any concerns about the sustainability of the market boom. They become caught up in the excitement of the moment and lose sight of the bigger picture. This can create a dangerous feedback loop where rising asset prices only serve to reinforce the euphoria, further masking the vulnerabilities in the system. It is only when the market inevitably corrects itself that these vulnerabilities are exposed. Sharp declines in asset prices can quickly wipe out gains and expose the weaknesse...
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