Irrational Exuberance, 2nd edition

Bubbles pop. If you own your home (or would like to), then this book gives you exquisite perspective. In March 2000, Robert Shiller published Irrational Exuberance, a phrase taken from Fed Chairman Greenspan’s 1996 speech describing the stock market “bubble.” That bubble burst in March 2000. That first edition argued that the widely proclaimed “new era” of a permanent “bull market,” with 100-1 “price-earnings ratios” as the norm, was poppycock, and not unlike a Ponzi scheme. This Yale economics professor’s second edition of his book emphasizes the current real estate “bubble.” Hmmmm. Shiller exhaustively examines the structural, cultural and psychological factors that generate bubbles, and the historical context for understanding the dynamics of previous bubbles, in both real estate and stocks, which he feels are still over-valued. The writing, research and thinking are concise, thorough and deep. You also get a fantastic bonus: the “first ever” 2-D chart, created by the author from rare sources, that shows U.S. home prices (in constant dollars), building costs, population, and interest rates, from 1890 to 2004.