Jeff Guo

Hindsight's 20-20.

But if you really think bubbles are real, you should be able to call a bubble before it pops.

So it's possible there's a connection between this Planet Money episode and this paper you wrote.

They started by digging through history, looking for everything that seemed suspiciously bubbly in the U.S.

stock market.

They looked at almost a century's worth of data and found all the times where stock prices in a particular industry suddenly doubled or more within two years.

For instance, there was this big run-up in electricity company stocks in the 1920s.

There was also a big run-up in healthcare stocks in the 70s.

They found 40 examples like this.

And about half the time, there was no crash.

Investors were wildly optimistic, sure, but they turned out to be correct about their optimism.

Those high stock prices, they just kept going up and up and up.

But the other half of the time, those stock prices ended up crashing dramatically within a couple of years.

Those were the situations that economists would point to and say that was a bubble.

Oh, so there are some clues.

Yeah.

So they published this paper in 2019, and it immediately made a huge splash.

Because here they were challenging the great Eugene Fama with some evidence that bubbles can maybe sometimes sort of be predicted.

And, okay, here were four of the main clues that they came up with.

Drum roll, please.