The 1920s era and Roger Babson's prediction of the 1929 crash.

Babson predicted the1929 stock market crash - although his logic / theory was flawed (based on Newton's law of Action & Reaction).  It was a time when the stock market epitomized the false promise of permanent prosperity. Everybody was interested in Stocks. Everyone - the barber, tailor, shoe-shine boy, every common man on the street wanted to invest in stocks and get-rich-quick.Every body wanted a piece of the action, easy money. Stock trading had finally come to the reach of the average man on the street. 1921 to 1928 was a great time to live in and people actually believed that the prosperity would last for ever. Nobody had seen a crash coming and nobody wanted to believe it could happen. There was unbridled optimism. The spirit was described in the song "Blue Skies" by Irving Berlin in 1926. At the same time, stocks were manipulated routinely by the big traders. Insider trading was the NORM. Yet, people dreamed of beating the system. People traded on margin, on borrowed money. Only 10% of the money was their own & 90% was borrowed. When the market fell on Black Tuesday, October 29th, 1929, it hit everyone hard. It was too sudden and too much for anyone to realize what had happened and react.

When the crash did happen, banks ran out of money as clients withdrew money while being unable to return their loans. Business went bankrupt. People lost their jobs. Unemployment was almost 25% at the height of the post crash problems in 1933. 

Lesson learned---> As Warren Buffet said "Be greedy when others are fearful and fearful when others are greedy". Public sentiment has time-delay and is not always right.