Be careful in this phase when putting your savings !!
Manias are associated on occasion with general ‘irrationality’ or mob psychology. The relationship between rational individuals and an irrational group of individuals can be complex. A number of distinctions can be made. One assumption is mob psychology, a sort of ‘group thinking’ when virtually all of the participants in the market change their views at the same time and move as a ‘herd.’ Alternatively different individuals change their views about market developments at different stages
Speculation often develops in two stages. In the first, sober, stage households, firms and investors, respond to a shock in a limited and rational way; in the second, the anticipations of capital gains play an
increasingly dominant role in their transactions. ‘The first taste is for high interest, but that taste soon becomes secondary. There is a second appetite for large gains to be made by selling the principal.’
The book can be downloaded from :
http://www.nowandfutures.com/large/Manias,Panics,andCrashes.pdf
