Irrational Exuberance

AsRobertShiller'snew2009prefacetohisprescientclassiconbehavioraleconomicsandmarketvolatilityasserts,theirrationalexuberanceofthestockandhousingmarkets"hasbeenendedbyaneconomiccrisisofamagnitudenotseensincetheGreatDepressionofthe1930s."Asweall,ordinaryAmericansandprofessionalinvestorsalike,crawlfromthewreckageofourheedlessbubbleeconomy,theshrewdinsightsandsoberwarnings,andhardfactsthatShillermarshalsinthisbookaremoreinvaluablethanever.Theoriginalandbestselling2000editionofIrrationalExuberanceevokedAlanGreenspan'sinfamous1996useofthatphrasetoexplainthealternatelysoaringanddecliningstockmarket.Itpredictedthecollapseofthetechstockbubblethroughananalysisofthestructural,cultural,andpsychologicalfactorsbehindlevelsofpricegrowthnotreflectedinanyothersectoroftheeconomy.Inthesecondedition(2005),Shillerfoldedrealestateintohisanalysisofmarketvolatility,marshallingevidencethathousingpricesweredangerouslyinflatedaswell,abubblethatcouldsoonburst,leadingtoa"stringofbankruptcies"anda"worldwiderecession."Thatindeedcametopass,withconsequencesthatthe2009prefacetothiseditiondealswith.IrrationalExuberanceismorethaneveracogent,chilling,andastonishinglyfar-seeinganalyticalworkthatnoonewithanymoneyinanymarketanywherecanaffordnottoread–andheed.