A Lengthy Quote

...Overtrading is by no means a clear concept. It may involve pure speculation for a price rise, an overestimate of prospective returns, or excessive "gearing". Pure speculation, of course, involves buying for resale rather than use in the case of commodities or for resale rather than income in the case of financial assets. Overestimation of profits comes from euphoria, affects firms engaged in the productive and distributive processes, and requires no explanation. Excessive gearing arises from cash requirements that are low relative both to the prevailing price of a good or asset and to possible changes in its price. It means buying on margin, or by installments, under circumstances in which one can sell the asset and transfer with it the obligation to make future payments. As firms or households see others making profits from speculative purchases and resales, they tend to follow: "Monkey see, monkey do." In my talks about financial crisis over the last decades, I have polished one line that always gets a nervous laugh: "There is nothing so disturbing to one's well-being and judgment as to see a friend get rich." When the number of firms and households indulging in these practices grows large, bringing in segments of the population that are normally aloof from such ventures, speculation for profit leads away from normal, rational behavior to what has been described as "manias" or "bubbles." The word 'mania' emphasizes the irrationality; 'bubble' fore-shadows the bursting. In the technical language of some economists, a bubble is any deviation from "fundamentals", whether up or down, leading to the possibility and even the reality of negative bubbles, which rather gets away from the thrust of the metaphor...

...The object of speculation may vary widely from one mania or bubble to the next. It may involve primary products, especially those imported from afar (where the exact conditions of supply and demand are not known in detail), or goods manufactured for export to distant markets, domestic and foreign securities of various kinds, contracts to buy or sell goods or securities, land in the country or city, houses, office buildings, shopping centers, condominiums, foreign exchange. At a late stage, speculation tends to detach itself from really valuable objects and turn to delusive ones. A larger and larger group of people seeks to become rich without a real understanding of the processes involved. Not surprisingly, swindlers and catchpenny schemes flourish.

As the speculative boom continues, interest rates, velocity of circulation, and prices all continue to mount. At some stage, a few insiders decide to take their profits and sell out. At the top of the market there is hesitation, as new recruits to speculation are balanced by insiders who withdraw. Prices begin to level off. There may then ensue an uneasy period of "financial distress."...As distress persists, speculators realize, gradually or suddenly, that the market cannot go higher. It is time to withdraw. The race out of real or long-term financial assets and into money may turn into a stampede.

-- Charles Kindleberger, Manias, Panics, and Crashes