How Does a Bubble Economy Collapse?
In December 1989, Japan’s Nikkei stock index closed at an all-time high near 38,900. Land under the Imperial Palace in Tokyo was, by some estimates, worth more than…
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Why Real Estate Bubbles Keep Coming Back
In 1989, a square meter of land in Tokyo’s Ginza district was worth more, on paper, than an equivalent patch of Manhattan. Japanese banks lent freely against property…
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Why Sunk Costs Make It So Hard to Quit
A couple has spent four years and most of their savings renovating a house that keeps revealing new problems. Every contractor tells them the same thing: it would…
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Why Prices Keep Rising: The Hidden Machinery Behind Inflation
A cup of coffee that cost a dollar a generation ago now costs three or four. A house that a young couple could once buy on a single…
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Why Interest Rates Rise and Fall
The Meeting That Moves the World Economy Every six weeks or so, a small group of officials at the U.S. Federal Reserve sits down in a closed room…
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Why a Dollar Bill Is Worth More Than the Paper It’s Printed On
A single sheet of cotton-linen paper, printed with green ink, costs the U.S. Bureau of Engraving and Printing only a few cents to produce. Yet that same sheet,…
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Why Loss Aversion Makes You Lose Money
A woman buys a stock at $50. It climbs to $65, and she feels pleased but does nothing. Then it slides to $45, ten dollars below what she…
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How Confirmation Bias Quietly Sabotages Investment Decisions
In the summer of 2000, some of the most sophisticated investors in the world were still buying technology stocks that had already lost most of their value. These…
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Why Crowd Psychology Wrecks Even Smart Investors
In November 1999, a software engineer with no background in finance sold his index fund and bought shares in a company that had never turned a profit and…
