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Using Cute Kittens to Understand Market Bubbles

One of my investing axioms is "never underestimate the short term stupidity of market". A good example is the market bubble:  Speculators buy assets they think are bad investments hoping to sell to those who don't see the bad investment.  This is known as the greater fool theory of investing.  Mostly they sell to those who agree that an asset is overvalued but who are hoping to do the same thing.  This scenario is repeated throughout history: the Dutch tulip bubble , the internet boom, bowling companies in the 1950s, the housing market and mortgage lending are all good examples.

This blog by David Kestenbaum at NPR uses cuddly animals and a polar bear to explain bubbles.

I've been talking about the coming gold bubble , you'll know to sell gold when you hear that gold is going to $5000 per ounce (or some other super high price) because the world is running out and that ALL people will need to buy it.  

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