I hope this article is tacked on the bulletin board of the FED and the Treasury because I think it should be required reading. I'll go into this article through my lens of the great comic bubble of the 90s that the industry still hasn't recovered from. This bubble slowly formed from 1985 and finally popped in 1997
1. The biggest bubbles appear to develop during periods of rapid and radical innovation, which may leave us more vulnerable to accepting the bizarre rationalizations that often accompany financial speculation.
The comic book bubble happened during the heady time of the Clinton years when America was growing like a weed due of the collapse of the Soviet Union and pro-investor policies were everywhere. During this time there were great leaps in technology and PCs became fairly ubiquitous. In the case of comics investors were looking for a way to "diversify their portfolios" and comics of the 40s and 50s were certainly a scarce asset.
2. The second, more obvious thing about booms is that lots and lots of people get on board, pushing prices up. Initial skepticism gives way to curiosity and then escalates into a kind of frenzy, a feeling that you may be the only person on the planet who isn't part of the fun, and you'd better scramble to get in.
Yup this is the ramp up when the bubble slowly grows and takes on heady dimensions. In the comic industry it happened around the time of the Death of Superman storyline. This is when the comic industry went from catering to readers to catering to collectors.
So during this time we see all sorts of gimmicks like Tri-fold and metallic foil covers and pre-bagging the comic in a plastic cover to keep them in perfect condition. The black bag copy of the Death of Superman comic is a case-in-point. I remember seeing that thing going for $100 or more and it was not scarce like an a Golden Age title.
3. As prices climb to eye-popping levels, two more things happen: Some experts insist that this time is different—and virtually all warnings are ignored.
This is about the time that X-Men #1 came out to the tune of 8 million copies. Any speculator should have understood that most comic print runs are about 65,000 or so and some really expensive books like Action Comics #1 has only a few dozen known copies in existence. So when Marvel rolled out 8 million of one comic you know the wave had crested. The comic still jumped up in price contrary to all reason.
4. At some point, the bubble reaches a point that is so ridiculous that greed takes over and all common sense must be suspended to continue the myth.
This about the time when anyone says something like "I can send my kid to college by selling a pile of X-Men #1's." In the comic industry this is when there were more speculators then readers. These speculators were buying up multiple copies (sometimes 100s) at once thinking that they will all go up to $100 each like the Death of Superman Black Bag mentioned above.
I think the time when any bubble is about to burst is whenever someone says that they can send their kid through college or retire on the funds that they will get from speculation. This is always the point where greed has passed common sense.
5. The last typical feature of bubbles is a life lesson in itself: The party may be dangerous, but trying to keep the party going—the after-party, if you will—is what really hurts you. You can never predict when a bubble will actually bust. Some of them can continue for a remarkably long time. But when they do, they almost always do so quickly and dramatically.
This comic bubble nearly crippled the industry and caused Marvel to declare bankruptcy in 1997. It also cost the industry most of its independent publishers as well. The comic industry is a pale shell of what it was in the early 90s and if not for movie licensing we might see a comics industry that is very similar to the newspaper industry. An industry that is slowly dying as their product becomes more expensive to produce with little or no return to show for it.