Boombustology

A multi-disciplinary framework through which to spot financial bubbles before they burst. Based on a popular undergraduate seminar, entitled Financial Booms & Busts, taught by the author at Yale University, Boombustology presents a multi-disciplinary framework for identifying unsustainable booms and forthcoming busts. The magnitude of our recent financial crisis mandates a firm understanding of this phenomenon before the next crisis occurs. Boombustology provides an in-depth look at several major booms and busts and offers a solid framework for thinking about future occurrences.* Examines why booms and busts are not random and can therefore be identified* Focuses upon various theoretical and disciplinary lenses useful in the study of booms and busts* Contains a framework for thinking about and identifying forthcoming financial bubbles including several tell-tale indicators of a forthcoming bust.* Illustrates the framework in action by evaluating China as a potential bubble in the making. If you want to make better decisions in today's turbulent investment environment, understanding the dynamics of booms and busts is the best place the start. Boombustology can help you achieve this elusive goal. Vikram Mansharamani is a Lecturer at Yale University and a global equity investor.

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‘'New MPs should certainly have this book on their reading list'. (Financial World, April 2011). ‘…a valiant attempt to add new perspective'. (Economist.com, April 2011).

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VIKRAM MANSHARAMANI is an experienced global equity investor and a Lecturer at Yale University, where he teaches a seminar called "Financial Booms and Busts." Mansharamani has a PhD and MS from the MIT Sloan School of Management, an MS in political science from the MIT Security Studies Program, and a BA from Yale University. He lives in Brookline, Massachusetts.

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Foreword. Preface: Is There a Bubble in Boom-Bust Books? Acknowledgments. Introduction The Study of Financial Extremes: One-Armed Analysts, Secrets, Mysteries. Secrets versus Mysteries. Different Problems Necessitate Different Approaches. Financial Booms and Busts as Mysteries. Part I Five Lenses. Chapter 1 Microeconomic Perspectives: To Equilibrium or Not? "Random Walks" and Accurate Prices: The Efficient Market Hypothesis. Constant Instability and Inefficiency: The Theory of Reflexivity. Reconciling Efficiency and Reflexivity. Chapter 2 Macroeconomic Perspectives: The Impact of Debt and Deflation on Asset Markets and Prices. The Magnifying Power of Leverage. Collateral Rates and Debt Dynamics. Hyman Minsky's Financial Instability Hypothesis. Debt Deflation and Asset Prices. The Austrian Business Cycle Theory. Integrating the Macro Lenses. Chapter 3 The Psychology Lens: Homo economicus Meets Homo sapiens. The Study of Irrationality Is Born. Heuristics Gone Wild: How Rules of Thumb Lead Us Astray. Our Flawed Brains: Other Cognitive Issues. The Certainty of Uncertainty. Chapter 4 Political Foundations: Evaluating Property Rights, Price Mechanisms, and Political Distortions. Can Anyone Own Anything? Prices: To Guide or Be Guided? Political Distortions of Property and Price. Chapter 5 Biological Frameworks: Epidemiology and Emergence. Revealing the Maturity of an Unsustainable Boom. How Micro Simplicity Drives Macro Complexity. Emergent Behavior in Human Swarms. The Blind Leading the Blind. Part II Historical Case Studies. Chapter 6 Tulipomania: A Bubble in Seventeenth-Century Holland. The Uniqueness of Tulips. Fertile Soil for Bubble Formation. The Boombustology of Tulipomania. The Multilens Look. Chapter 7 The Great Depression: From Roaring Twenties to Yawning Thirties. Castles in the Sand. From Booming Twenties to Busted Thirties. The Boombustology of the Great Depression. The Multilens Look. Chapter 8 The Japanese Boom and Bust: A Credit-Fueled Bubble Economy. Japan(ese) as Different. An Overview of the Bubble Economy. The Boombustology of the Japanese Boom and Bust. The Multilens Look. Chapter 9 The Asian Financial Crisis: The Mirage of a Miracle. Boom Times in East Asia. Thailand Catches the Flu. The Boombustology of the Asian Financial Crisis. The Multilens Look. Chapter 10 The U.S. Housing Boom and Bust: The Homeowner's Society Creates the People's Panic. "Safe as Houses". The Music Stops. The Boombustology of the U.S. Housing Boom and Bust. The Multilens Look. Part III Looking Ahead. Chapter 11 Spotting Bubbles before They Burst: A Method for Identifying Unsustainable Booms. Reflexivity and Self-Fulfilling Dynamics. Leverage, Financial Innovation, and Cheap Money. Overconfidence. Policy-Driven Distortions. Epidemics and Emergence. Conclusions. Chapter 12 Boombustology in Action: Is China Next? Tendencies toward Equilibrium. Leverage, Cheap Money, and Potential Deflation. Conspicuous Consumption and Overconfidence. Rights, Moral Hazard, and Political Distortion. Consensus, Silent Leadership, and Epidemics. The Unsustainable Chinese Story. Conclusion Hedgehogs, Foxes, and the Dangers of Making Predictions. Notes. About the Author. Index.

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