A bit more on manias.
Some interesting reading on this phenomena can be found in the book, A random walk down wall street , by Burton Malkiel. (WW Norton & Coy, 1996) Worth buying, even if this author does believe charting is useless. We've taken just a few quotes as follows. You could be forgiven for thinking the latest net mania is something entirely new, or at the very least, bigger than anything before, but you'd be wrong.

A few snippets from our random walk....
page 35
"Sky rocketing markets that depend on purely psychic support have invariably succumbed to the financial law of gravitation. Unsustainable prices may persist for years, but eventually they reverse themselves. Such reversals come with the suddenness of an earthquake; and the bigger the binge, the greater the resulting hangover. Few ..... have been nimble enough to anticipate these reversals perfectly and escape without losing a great deal of money when everything came tumbling down."

Further update to our story on the Tulip mania in Holland, 1630's page 36

"Part of the genius of financial markets is that, when there is a real demand for a method to enhance speculative opportunities, the market will surely provide it. The instruments that enabled tulip speculators to get the most action for their money were "call options" similar to those popular today in the stock market.
A call option conferred on the holder the right to buy tulip bulbs (call for their delivery) at a fixed price (usually approximating the current market price) during a specified period. He was charged an amount called the option premium, which might run 15 to 20 percent of the current market price. An option on a tulip bulb currently worth 100 guilders, for example, would cost the buyer only about 20 guilders. If the price moved up to 200 guilders, the option holder would exercise his right; he would buy at 100 and simultaneously sell at the then current price of 200. He then had a profit of 80 guilders ( the 100 guilders' appreciation less the 20 guilders he paid for the option). Thus he enjoyed a fourfold increase in his money, whereas an outright purchase would only have doubled his money. By using the call option it was possible to play the market with a much smaller stake as well as get more action out of any money invested. The call is one way to leverage one's investment.
Leveraging is any technique that increases the potential rewards ( and risks) of an investment. Such devices helped to ensure broad participation in the market. The same is true today."

On the 1920's; page 44

"Conditions could not have been more favourable for speculative crazes. The country had been experiencing unrivalled prosperity. One could not but have faith in American business, and as Calvin Coolidge said, "The business of America is business." Businessmen were likened to religious missionaries and almost deified. Such analogies were even made in the opposite direction. Bruce Barton, of the New York advertising agency Batten, Barton, Durstine and Osborn, wrote in "The Man Nobody Knows " that Jesus was " the first businessman," and his parables were "the most powerful advertisements of all time."
The euphoric mood of optimism and faith in business that prevailed in the twenties led to widespread enthusiasm about real estate and the stock market. It would appear only natural that Americans, having conquered an entire continent, would succumb to real estate booms. One of the greatest centred on Florida in the middle 1920's. The climate was just right. The population was steadily growing and housing was in short supply. Land values began increasing rapidly. Stories of investments doubling and tripling attracted speculators from all over the country. Easy credit terms added fuel to the speculative frenzy. "This market has no downside risk," the land speculators opined, as Dutchmen undoubtedly said to each other about the tulip-bulb market in an earlier time.
There are reports of Palm Beach land bought for $800,000 in 1923, subdivided, and resold in 1924 for $1.5 million. By the following year the same land sold for $4 million. At the top of the boom there were 75,000 real estate agents in Miami, one-third of the entire population of the city. Inevitably the boom ended, as do all speculative crazes. By 1926 new buyers could no longer be found and prices softened. Then the speculators dumped their holdings on the market and a complete collapse ensued.

On the 1929 year; page 46

"Not "everybody" was speculating in the market, as was commonly assumed. Borrowing to buy stocks (buying on margin) did increase from only $ 1 billion in 1921 to almost $9 billion in 1929. Nevertheless, only about a million persons owned stocks on margin in 1929. Still, the speculative spirit was at least as widespread as in the previous crazes and was certainly unrivalled in its intensity. More important, stock-market speculation was central to the culture. John Brooks, in "Once in Golconda," (Golconda was an ancient Indian city where, it is said, anybody who passed through its gates became wealthy - Ed) recounted the remarks of a British correspondent newly arrived in New York: You could talk about Prohibition, or Hemingway, or air conditioning, or music, or horses, but in the end you had to talk about the stock market, and that was when the conversation became serious."

On the 'tronics' mania; page 57

"Promoters, eager to satisfy the insatiable thirst of investors for the space-age stocks of the Soaring Sixties, created new offerings by the dozens. More new issues were offered in the 1959 - 62 period than at any previous time in history. The new-issue mania rivalled the South Sea Bubble in its intensity and also, regrettably, in the fraudulent practices that were revealed.
It was called the "tronics boom", since the stock offerings often included some gargled version of the word "electronics" in their title even if the companies had nothing to do with the electronics industry. Buyers of these issues didn't really care what the companies made - so long as it sounded electronic, with a suggestion of the esoteric. For example, American Music Guild, whose business consisted entirely of the door - to - door sale of phonograph records and players, changed its name to Space - Tone before "going public". The shares were sold to the public at $2 and within a few weeks rose to $14.
The name was the game. There were a host of "trons" such as Astron, Dutron, Vulcatron, and Transitron, and a number of "onics" such a Circuitronics, Supertronics, Videotronics, and several Electrosonics companies. Leaving nothing to chance, one group put together the winning combination Powertron Ultrasonics.
Jack Dreyfus, of Dreyfus and Company, commented on the mania as follows:
"Take a nice little company that's been making shoelaces for 40 years and sells at a respectable six times earnings ratio. Change the name from Shoelaces Inc. to Electronics and Silicon Furth - Burners. In today's market, the words "electronics" and "silicon" are worth 15 times earnings. However, the real play comes from the word "furth-burners", which no one understands. A word that no one understands entitles you to double your entire score. Therefore, we have six times earnings for the shoelace business and 15 times earnings for electronic and silicon, or a total of 21 times earnings. Multiply this by two for furth-burners and we now have a score of 42 times earnings for the new company."

In a later investigation of the new-issue phenomenon, the Securities and Exchange Commission uncovered considerable evidence of fraudul and market manipulation. For example, some investment bankers, especially those who under-wrote the smaller new issues, would often hold a substantial volume of securities off the market. This made the market so " thin" at the start that the price would rise quickly in the after market. In one "hot issue" that almost doubled in price on the first day of trading, the SEC found that a considerable portion of the entire offering was sold to broker-dealers, many of whom held on to their allotments for a period until the shares could be sold at much higher prices. The SEC also found that many underwriters allocated large portions of hot issues to insiders of the firms such as partners, relatives, officers, and other securities dealers to whom a favour was owed. In one instance, 87 percent of a new issue was allocated to "insiders", rather than to the general public, as was proper."
(Incidentally, in the late 1960's, the US market would close every Wednesday, to allow time to catch up with the backlog of paper work.)

The bio's; page 79

"What electronics was to the 1960's, biotechnology became to the 1980's. This technology promised to produce a group of products whose uses ranged from the treatment of cancer to the growing of food that would be hardier and more nutritious because it had been genetically modified. In its cover story "Biotech Comes of Age" in January 1984, Business Week put its imprimatur on the boom. 'The fundamental question - Is the technology real? - has been settled,' the magazine reported. The biotech revolution was likened to that of the computer. The magazine reported that gene-splicing progress 'has out-distanced the most optimistic forecasts' and projected dramatic increases in the sales of biotechnology products.
Such optimism was also reflected in the prices of biotech company stocks. Genentech, the most substantial company in the industry, came to market in 1980. During the first twenty minutes of trading, the stock almost tripled in value, as investors anticipated that they were purchasing the next IBM at its initial public offering. Other new issues of biotech companies were eagerly gobbled up by hungry investors who saw a chance to get into a multibillion-dollar new industry on the ground floor. The key product that drove the first wave of the biotech frenzy was Interferon, a cancer-fighting drug. Analysts predicted that sales of Interferon would exceed $1 billion by 1982. (In reality, sales of this successful product were barely $200 million in 1989, but there was no holding back the dreams of castles in the air.) Analysts continuously predicted an explosion of earnings two years out for the biotech companies. Analysts were continuously disappointed. But the technological revolution was real and hope springs eternal. Even weak companies benefited under the umbrella of the technology potential.
Valuation levels of biotechnology stocks reached levels previously unknown to investors even during the most pathological phase of the growth-stock boom of the 1960's. Speculative growth stocks might have sold at 50 times earnings in the 1960s. In the 1980s, some biotech stocks actually sold at 50 times sales."