The greater fool theory of finance says it’s sometimes possible to make money by purchasing overvalued assets (items whose purchase price exceeds their intrinsic value) and reselling them for a higher price later.
This theory states that prices go up when people can sell overvalued securities to the “greater fool,” regardless of whether the securities are overvalued. Suppose one “fool” purchased an overpriced asset, hoping that he could sell it to an even “greater fool” who would profit from it. A system like this can only work if new “greater fools” are willing to purchase the asset at ever-higher prices. Continue reading “The Greater Fool”
