Quote for the Week
The first thing you need to understand is that bubbles can only come when all the stars align: The economy’s got to be good; the outlook has got to be good. New technological changes are going on. As far as the eye can see, there’s only prosperity. Only in that kind of an environment are you going to get everybody to just throw caution to the wind and say, “I want to be part of it.”
What can we learn from that? First of all, when you have an era of total participation — an era in which people suspend all logic, become part of the crowd and buy things just because they’re going up — you’ve got a bubble. And there’s only one way a bubble goes down — the only way you let air out of a balloon — it either pops, or you just slowly let it out. However, one way or another, the air has to come out of the bubble…
The dictionary definition of a bubble: “Something insubstantial, groundless, or an impractical idea or belief” — in short, an illusion. In other words, stock market bubbles create illusions. But Sigmund Freud had about the best definition of an illusion as to how it affects the stock market… “Illusions commend themselves to us because they save us the pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality, against which they are dashed to pieces.” In other words, bull markets create bubbles, and bubbles create illusions, and illusions eventually lead you astray. — Arnold Van Den Berg (source)
From the Archives
Last Call
- The US Stock Market Has Been Exceptional, but One Region Made It Phenomenal – J. Rekenthaler
- Five Reasons the AI Boom Isn’t in ‘Dot-Com’ Bubble Territory (Yet) – Stansberry
- The Hidden Costs of Passive Investing – L. Swedroe
- Thinking Outside the Box to Build a Better Income Portfolio – A. Roth
- Financial Selection and Investor Herding: Lessons from Evolutionary Biology – Enterprising Investor
- The Art of Understanding What’s Going On – Letter a Day
- The Periodic Table of Cognition – K. Kelly
- The Making of a Market Maker – Colossus
- The 25 Most Interesting Ideas I’ve Found in 2025 (So Far) – D. Thompson