1) What’s the difference between the Firm Foundation and the Castle-In-The-Air theories of investing?
The Firm Foundation theory focuses on an “intrinsic value” and how much something will cost in the future based on current analysis while the Castle-In-The-Air theories relies on trends to predict when the public will be most susceptible towards investing in market stocks.
2) Economist John Maynard Keynes famously once said, “In the long run we’re all dead.” How can this line be understood in the context of the castle-in-the-air theory he popularized?
Although the castle-in-the-air theory relies on predicting speculative bubbles, when stock prices are too highly inflated this bubble will ultimately “burst” and the stock market could potentially crash as prices significantly decrease.
3) In the context of investment theory/economics, describe the concept of manias aka crazes aka speculative bubbles. What are those?
Speculative bubbles are periods of time where people are most likely to highly invest in the stock market game, causing stock prices to rise significantly.
Business Communications 