Soros' Boom-Bust Model

Quoted from Soros:

The boom-bust drama unfolds in eight stages. It starts with a prevailing bias and a prevailing trend. In the case of the conglomerate boom, the prevailing bias was a preference for rapid earnings growth per share without much attention to how it was broght about; the prevailing trend was the ability of companies to generate high earnings growth per share by using their stock to acquire other companies selling at a lower multiple of earnings. In the initial stage (1) the trend is not yet recongnized. Then comes the period of accerlation (2), when the trend is recognized and reinforced by the prevailing bias. That is when the process approaches far-from-equillibrum territory. A period of testing (3) may intervene when prices suffer a setback. If the bias and trend survive the testing, both emerge stronger than ever, and far-from-equillibrum conditions, in which the normal rules no longer apply, become firmly established (4). Eventually there comes a moment of truth (5), when reality can no longer sustain the exaggerated expectations, followed by a twilight period (6), when people continue to play the game although they no longer believe in it. Eventually a cross point (7) is reached, when the trend turns down and the bias is reversed, which leads to a catastrophic downward acceleration (8), commonly known as the crash.

We now are between Stage (2) and (3) according to this model. There are many expressions on this cycle to be picked. But the message conveying is the same.