Bubble Cycle

I read a brief article in the WSJ this past week about how there's a cycle of bubbles that investors themselves create. The basic premise is that investors pour financial capital into an industry on the premise that asset prices will rise. As capital is poured in, the asset prices of course rise so it's a self-fulfilling prophecy. Then, when the bubble bursts in that industry, investors make up their losses by pouring their money into a different sector, creating another bubble, more artificially high asset prices, another bust, and the need for yet another bubble. So where's the next bubble? Alternative-energy!

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