But if we can’t fully prevent the herd behavior that causes bubbles, can we at least hope to detect them while they are occurring? Say you accept Black’s premise that the market is behaving irrationally 10 percent of the time. Can we know when we’re in that 10 percent phase? Then we might hope to profit from bubbles. Or, less selfishly, we could cr

Before 1922, Ivar had raised most of his capital in Europe, particularly from Swedish banks. As Ivar watched the Americans enter a period of buying mania, he saw a new source of funds. Ivar had studied financial history and was aware of infamous periods of mania and later panic, such as the South Sea Bubble of 1720 and the infamous rise and collaps

Bubbles form when the momentum of short-term returns attracts enough money that the makeup of investors shifts from mostly long term to mostly short term.