The housing bubble seems to be a pretty good counterexample. Plenty of people were saying that it was a bubble, while others were furiously flipping properties.
Exactly. It's just like the interviews with some of Bernie Madoff's clients. They knew that he had to be doing something not quite legit to be getting the returns that he was getting, but they all figured that they could make some money off of it.
Everyone sees a chance to make some money and convinces themselves that they will get out before the crash so that they won't be the last one holding the bag.
The smart ones realize that it's a bubble, and the dumb ones don't. It's just that the people that know it's a bubble convince themselves that that knowledge shields them from getting burned because they know more than the other guy.
the bubble was in the price of the collaterized debt. having read a few accounts of hedge funds in that time - it seemed preposterous that these things would ever lose value because of the way they were engineered.
some of the big fund managers who made big at the time were embarrassed to tell their peers that they were short CDO's.
David Einhom was probably the only one who came out and said it - the rest, like Poulson and co. were quiet.
Indeed, I was thinking the same thing as I read the comment. Look at google trends for "housing bubble." Peaked in 2005, well before the bubble popped.
