A Series of Unfortunate Bubbles

First someone notices a small uptick in tulip bulb sales, so they pour a lot of money into buying tulip bulbs. This causes tulip bulb prices to edge upward some more. As more people notice this, more and more people jump on the tulip bulb bandwagon. Tulip bulb prices start to soar. People start thinking they'd be stupid not to invest in tulip bulbs at this point - it's sheep following sheep. Eventually, the people buying tulip bulbs for investment purposes far outnumber the people buying them to actually use - so it just becomes investors selling to more investors. The people who got in early make a killing - kind of like a pyramid scheme. Eventually the bubble pops and tulip bulb prices take a dive - suddenly there's mass unemployment in the tulip bulb industry - after all, during the bubble's hey-day, tons of people were being hired in the bulb industry.

So now that investors (at least the ones that haven't been wiped out by the tulip bulb crash) have pulled out all their money, what's next? Do they learn their lesson? No, not really. They're just looking for the next "investment opportunity". In fact, bubbles are an essential part of making money in the investment business. The goal is to get in on the next bubble early, and get out before you are burned.

So what's next? Well, how about the dot com bubble? The housing bubble? The rice bubble? The oil price bubble?