Edward Chancellor is an excellent author who wrote a book titled Devil Take the Hindmost. The book is a history of stock market bubbles, and irrational exuberance throughout history. The book discusses the tulip bulb mania, the railway mania in both England and the US, and the bubble in the Japanese stock and real estate market that finally burst in 1989.
If anyone is an expert on bubbles it is Edward Chancellor. Below is a presentation presented by Chancellor on the prospects of a bubble bursting in China. I might be veering off value stocks specifically lately and talking a lot about China, however I believe it is important. Anyone who wants to know value investing has to have some knowledge of irrational human behavior which is a strong refutation of the efficient market theory.
Many pundits claim it is impossible to know a bubble existed until it has burst. I agree that sometimes this may be true. But I emphatically disagree with the assertion that it is impossible to predict any if not most bubbles. In fact, When Chancellor wrote his book in 1998 he alluded to the high valuations in US equities and a coming collapse in the stock market. He was proven right less than two years later as the NASDAQ started to tank and the broader market with it.
Chancellor in this presentation, first identifies the signs of a bubble and then describes why he sees many of these traits present in China. It is definitely a worthwhile read.
