The five-year anniversary of the stock-market peak arrived with fanfare in March, but few commentators drew a true picture of why stocks reached the heights they did. Instead, most defaulted to the usual 20/20 hindsight and revisionism that has dominated the post-crash period. An honest look at the 1990s won't stop the boom/bust phenomenon from recurring — history suggests that bubbles are as inevitable as hurricanes — but it might help dispel the notion that it will be different next time.
The 1990s, like other such eras, is now viewed as a bizarre anomaly, a period in which investors "went insane" and markets were dominated by crime, stupidity, and greed.
In some cases, these descriptions are accurate, but they are also symptoms, not causes. The Nasdaq stock market did not hit 5,000 because of fraud or idiocy. Rather, it hit it because the majority of investors did what...
