Great Depression Online Archive Issue:

The Greatest Fools of All

Great Depression Online
Long Beach, CA
February 15, 2008

Inside This Issue You Will Discover…

*** The Greater Fool Theory
*** Where Did They All Go?
*** The Greatest Fools of All
*** And More

The Greater Fool Theory

You’ve heard of the “greater fool theory,” haven’t you?

The premise of the theory is that speculators buy an asset – such as real estate – that they know is over priced because they think they can sell it to a greater fool at an even higher price in the future.

Even if you’re not a speculator…you may have experienced the euphoria that accompanies the “greater fool theory” when the real estate market was booming just several years ago.

Maybe a real estate agent or an annoying coworker repeated the mantra…

‘You must get in now…before it’s too late.’

Or…

‘You can’t go wrong with real estate…prices only go up.’

~~~~~~Free Report~~~~~~

How to Use Bar Patterns to Spot Trade Setups: 13 Instructional Charts With Simple Explanations.  This Free Report will show you how to spot specific bar pattern formations, including the Double Inside Day, the Arrow, and the Popgun.  Learn more here: How to Use Bar Patterns to Spot Trade Setups.

~~~~~~~~~~~~~~~~~~~~~~~~~

You may have been a bit suspicious of the insane prices houses were selling at.  Maybe you looked around and thought to yourself ‘something doesn’t feel right about this’.

If you kept your head, in spite of your heart, congratulations – for you are not a fool. 

Because now we are on the downside of the boom…the bust.  The bubble’s deflating and a new succession is playing out.

Where Did They All Go?

Homer Hoyt, in his 1933 book, One Hundred Years of Land Values in Chicago, quoted a Chicago Tribune editorial of April 1890, about a late 19th Century real estate boom and bust in Chicago.

“In the ruin of all collapsed booms is to be found the work of men who bought property at prices they new perfectly well were fictitious, but who were willing to pay such prices simply because they new that some still greater fool could be depended on to take the property off their hands and leave them with a profit.”

The amusing thing about the “greater fool theory” is that it appears right until just the moment that it’s wrong.

Suddenly those who moments before thought they were really smart…aren’t.  And as they look around, like a child left standing in a game of musical chairs, an unsettling question comes to mind.

Where did all the greater fools go?  They ask.

By now it has become acutely obvious that there are no greater fools left.

Alas, in a painful moment of introspection it’s made self evident that, by definition, they are the greatest fools of all.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Don’t miss the Free Report How to Use Bar Patterns to Spot Trade Setups.  This Free Report will show you how to spot specific bar pattern formations, including the Double Inside Day, the Arrow, and the Popgun.  Learn more here: How to Use Bar Patterns to Spot Trade Setups.

 

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