Where are we in the roller coaster of investor emotion?

RECENTLY I was asked where we are in the cycle of investor emotion between the extremes of "euphoria" and "depression". This is a good question, as knowing where the investment crowd is at and being wary of it is essential to successful investing.

The late 1980s Japanese bubble, the Asian miracle of the mid-1990s, US tech stocks in the late 1990s, US housing and dodgy credit in the mid 2000s and arguably the commodity boom early this decade all had one thing in common: investors had jumped on a bandwagon, resulting in assets that became overvalued, over loved and ripe for a crash. But how do crowds get into such a muddle and what are they telling us now?

Investor psychology and the madness of crowds