Beanie Baby Bubble

Enjoyed reading Karen Blumenthal’s piece in the WSJ yesterday:

In this decade, we have had more than our share of big-time booms and busts: the tech bubble, the housing bubble and, this year, what Warren Buffett has called the Treasury bubble.

For some years now, I have been a student of these extreme financial cycles. In the 1980s, I witnessed firsthand the Texas real-estate bubble and covered companies crushed in the junk-bond bubble. I wrote a book about the crash of 1929. And to my terrific shame, at the top of an inflated market, I once paid $50 for a $5 Beanie Baby named Peace.

In studying what drives bubbles, I’ve come to believe that they follow fairly regular patterns. If we could learn to recognize these, we might be more astute in reacting and adjusting our own behavior. And even if we can’t see beyond the excitement they generate, there are underlying lessons for investors.

The lesson: sell when it’s on the way up.

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