Financial history provides a vital compass for investors, revealing that market manias and crashes are recurring phenomena driven by human behavior rather than unique, unpredictable events. Jamie Catherwood, a financial history researcher, illustrates how speculative bubbles—from the 17th-century Dutch East India Company to the 1890s bicycle craze—often follow a predictable pattern involving marketability, cheap credit, and intense speculation. While these manias frequently result in significant losses for individual investors, they often leave behind essential infrastructure, such as fiber-optic networks or railway systems, that benefits society long-term. By examining historical precedents like the 1774 creation of the first passive bond fund, investors can better contextualize modern market trends, such as the proliferation of special purpose acquisition companies (SPACs), and avoid being swept up in the latest fads that prioritize short-term hype over intrinsic value.
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