Artificial intelligence is a little different, but a lot the same; bubble

It is simply wrong to think a bubble can’t continue to inflate amid widespread warnings. History proves that—and psychology and financial theory explain why.

The dot-com era offers the most obvious case of a bubble that kept inflating amid cries of excess

But there was no shortage of very loud warnings that a bubble was under way. This newspaper (and every other respectable journal) was full of articles in 1999 comparing the boom in internet stocks, many with zero revenue, to tulips and the South Sea Bubble. 

Big fund managers’ warnings about speculative froth were frequently quoted. 

Yet stocks just carried on up—until they didn’t.

The reason is that lots of people were buying shares not because they thought the prospects for the company were good or the clicks would one day turn into revenue, but rather because they saw their friends getting rich and wanted some of it.

Charles Kindleberger, the great historian of financial crises, summed it up neatly: “There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.”

Professional fund managers find it hard to sit on the sidelines. 

Once a bubble develops, it can go on for years. Betting against it, or even just avoiding it, means lagging behind other investors and the benchmark, and risking being fired as clients abandon the underperforming fund.

After all, the only absolute proof of a bubble comes when it bursts.

James Mackintosh Wall Street Journal 24 October 2025

https://www.wsj.com/finance/stocks/why-bubbles-can-keep-inflating-in-plain-sight-a4af6aef


Charles P. Kindleberger

https://englundmacro.blogspot.com/2025/09/one-of-greatest-investors-of-all-time.html


Indexfonder är en fara för aktiemarknaden och gör börsen till ”rena Solvalla”, enligt finansmannen Christer Gardell

Being wrong and alone is what gets asset managers fired.

So NOBODY KNOWS ANYTHING

https://englundmacro.blogspot.com/2024/02/passive-investors-have-fundamentally.html

 




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