The revised second edition of Boombustology is an important guide for understanding the history of various booms and busts and the cyclical nature of financial markets. In this updated edition of his popular book, noted academic Vikram Mansharamani outlines a multi-disciplinary framework for identifying financial bubbles before they burst. From the madness of the seventeenth century's tulip mania in Holland to the United States' crippling housing collapse in 2008, the book explores the elements that caused once soaring markets to come crashing down. Boombustology offers a robust framework that helps readers understand the dynamics that precede, fuel, and ultimately reverse financial market extremes. Perhaps most usefully, the book includes a set of indicators that readers can apply to identify future booms that may prove unsustainable.
The book is a comprehensive, information-packed exploration of how bubbles form as well as the causes and circumstances that lead to their demise. Mansharamani eschews the typical view of booms and busts as primarily economic phenomena and adopts a wide-ranging approach that embraces the lenses of microeconomics, macroeconomics, psychology, politics, and biology. The author summarizes his approach in a practical framework for identifying bubbles before they burst. He pinpoints the key indicators of a financial bubble so readers can themselves gauge the likelihood of being in the midst of an unsustainable boom. The author applies the framework to India's currently booming economy. He concludes that the Indian growth story may prove to be unsustainable and that starry-eyed investors should be wary. In addition, the book's addendum contains Mansharamani's thoughts on the highly distortive impact of passive investing. While not strictly an asset bubble, numerous factors indicate the global love affair with passive strategies may be creating highly unsustainable conditions that will prove challenging for investors to navigate when the mania dissipates.
Written in an engaging and accessible style, Boombustology can help investors, policymakers, and analysts better navigate today's turbulent economic environment.
