"How do investment crowds get started? There is no single right answer to this question. But I think it is accurate to say that most investment crowds find their genesis in the deaths of other investment crowds. I like to use a very apt cosmological metaphor to help understand this process. Investment crowds are the stars of the financial universe. The stars in the Milky Way and in the much larger cosmos have limited lifetimes, which typically end in a massive explosion called a supernova. But new stars are being born (i.e., starting their own process of nuclear fusion) all the time. What is the source of the material that is the stuff of a new star? Well, it is just the cosmic debris left by the explosions of old stars!
In much the same way, investment crowds burn brightly in the financial universe and are responsible for much of the observed price fluctuation. But they have finite lifetimes (a few months to a few years). The inevitable disintegration of any investment crowd causes a big run-up or drop in prices and lots of commotion and confusion in the marketplace. But the debris associated with the disintegration of a crowd is the stuff from which the next crowd forms. The change in price associated with the disintegration of an investment crowd is powerful advertising. It attracts the attention of investors, especially of those whose portfolios have been directly affected by the rise or fall in asset value."
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