Alan Greenspan used to believe that bubbles did not exist. One group of economists thinks bubbles can’t be stopped, while others think they can be identified and should be deflated.
In reality, bubbles occur all the time and for all sorts of reasons, some rational and some not. Often bubbles have a fundamental basis originally, followed on by mob psychology at the end. Every bubble is a little different and a lot the same, as this insightful article from the International Herald Tribune points out.
The history of markets is one bubble after another, some large and some small. This is the main reason that we are not concerned about trends disappearing from the markets. Relative strength gives us a way to measure the strength of the trends, in order to pick out the trends we want to participate in—the strongest trends.
