Is there a lot of similarity between different cases of market hysteria? It's always the same cycle. When a market is very low, there comes a time when some peope buy it because
it has become undervalued. The market starts to go up and more people buy because it is a fundamentally sound
thing to do or because the charts look good. In the next stage, people buy because it has been the thing to do. My
mother calls me up and says, "Buy me XYZ stock." I ask her, "Why?" "Because the stock has tripled," she answers.
Finally, there comes the magical stage: People are hysterical to buy, because they know that the market is going to
go up forever, and prices exceed any kind of rational, logical economic value.
The whole process then repeats itself on the downside. The market gets tremendously overpriced and it starts
to go down. More people sell because the fundamentals are turning poor. As the economics deteriorate, more and
more people sell. Next, people sell just because it has been the thing to do. Everybody knows it is going to go to
nothing, so they sell. Then the market reaches the hysteria stage and gets very underpriced. That's when you can
buy it for a pop. But for a long-term investment, you usually have to wait a few years and let the market base.
Talking about extreme bull markets, I recently read that Australia sold a l\ acre plot in Tokyo for $450 million that they bought for $250,000 twenty-five years ago. Is Japan the tulipmania of our day? [During 1634-1636, a speculative frenzy in tulips swept Holland, causing such an enormous rise and collapse in tulip bulb prices that the event is still famous today.] I guarantee that the Japanese stock market is going to have a major collapse—possibly within the next year
or two. Many of our stocks are going to go down 80 to 90 percent in the bear market. A lot more of theirs are going
to go down 80 to 90 percent.
