What Caused The Bubble?

from the greed,-greed,-and-a-bit-more-greed dept

It seems the over analysis of what caused the dot com bubble is in full force. People are trying to explain why otherwise rational, conservative people got caught up in throwing all their money into dot coms with no revenue (and, often, no plans for revenue). One of the theories is the “other people’s money” theory, which says that mutual fund managers invested in the dot com craze because it would get them attention. It was a good career move – and it didn’t really matter, because they were always playing with other people’s money. Following that, many people invested even more money into dot coms because it looked like they were legitimate – because the big mutual funds were putting so much attention on them. Another theory is simply the “gaming” theory, which is that many people invested in these stocks as an attempt to “game” the system with no thoughts of long term investing. The high turnover resulting from this continued musical chairs school of investing kept driving the price up, until only the long term investors were left without a seat.

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