This World’s a Bubble

Logic:  The art of thinking and reasoning in strict accordance with the limitations and incapacities of the human misunderstanding.  ~Ambrose Bierce

Here’s some bubbly research worth reading and understanding:

Running with the devil – the advent of a cynical bubble

James Montier
Not all bubbles are born equal. To us, the current market environment is largely a greater fool market. Because such markets lack fundamental support, they are liable to precipitous declines. This is exacerbated when everyone seems to be watching the same indicator (earnings optimism). As Keynes noted “ when disillusion falls upon an overoptimistic and over-bought market, it should fall with sudden and catastrophic force.”

Three Australian Asset-price Bubbles
John Simon

There are numerous academic papers discussing whether certain episodes are, or are not, bubbles and there is no consensus in the literature. To answer the question posed I begin with a brief presentation of four famous bubbles; this serves to outline the data underlying this discussion. Section 2.2 then discusses previous academic writing on bubbles and their classification of various bubble episodes. I argue that most of these papers do not provide a satisfactory definition of bubbles. Instead, I propose a slightly different approach to identifying bubbles and provide a definition of bubbles based on that approach in Section 2.3. This definition forms the basis for calling the episodes selected in this paper ‘bubbles’.